For the week, the bulls emerged victorious as the major indices positively reversed (opened lower and closed higher) which is a subtle and bullish sign. On the downside, the economy was the big loser after the latest round of "data" showed the economy remains weak. That means the "data-dependent" Fed will likely not raise rates anytime soon (which, for now, is bullish for stocks). History shows us that some of the market's strongest performers occur from big gaps up on earnings and some of the weakest stocks gap down after reporting numbers.The big winners (so far) from earnings season include: Amazon.com ($AMZN), Netflix ($NFLX), Hasbro ($HAS), Domino’s Pizza ($DPZ), Skechers ($SKX), Dunkin (Donuts) Brands Group ($DNKN), Microsoft Corp ($MSFT), O’Reilly Automotive ($ORLY), and YUM Brands ($YUM), Skywest ($SKYW), Web.com ($WWWW), Equinix ($EQIX), Styngenta ($SYT), Nutri System ($NTRI), Brink's Co ($BCO), Teradyne Inc ($TER), Skyworks Solutions ($SWKS), GoPro ($GPRO), Estee Lauder ($EL), Abiomed Inc ($ABMD), Golar LNG ($GLNR), Energizer Holdings ($ENR), RetailMeNot, Inc ($SALE), Herbalife ($HLF), BlueBird Bio ($BLUE), HubSpot Inc ($HUBS), Alibaba Group ($BABA), Qorvo Inc ($QRVO), Visteon Copr ($VC), and Norwegian Cruise Line Holdings ($NCLH).
On the downside: Whole Foods Market ($WFM), Keurig Green Mountain ($GMCR), Kate Spade ($KATE), Lannett Co ($LCI), Nu Skin ($NUS), Terra Nitrogen ($TNH), Tumi Holdings ($TUMI), Noodles & Company ($NDLS), Qualys ($QLYS), Groupon Inc ($GRPN), News Corporation ($NWSA), Vitamin Shoppe Inc, ($VSI), Fossil Inc ($FOSL), Frontier Communication ($FTR), TriNet Group ($TNET), Zulily Inc ($ZU), Weight Watchers ($WTW), Walter Energy Inc. ($WLT), Skullcandy ($SKUL) Twitter ($TWTR), Yelp ($YELP), LinkedIn ($LNKD), Constant Contact (CTCT), Accuray ($ARAY), Cooper Tire & Rubber ($CTB), Abaxis ($ABAX), Texas Instruments ($TXN), Buffalo Wild Wings ($BWLD), Baidu Inc. ($BIDU), Stratasys ($SSYS), Harman ($HAR), Nokia ($NOK), Travelers ($TRV), 3M ($MMM), Chipotle ($CMG), Pulte Group ($PHM), Biogen Inc ($BIIB), Generac Holdings ($GNRC), First Solar ($FSLR), and American Express ($AXP), just to name a few.
Monday-Wednesday's Action: Economy Data Fails To Impress
Stocks opened higher on Monday but closed lower as the market paused to digest the big post-jobs rally. San Francisco Fed President John Williams, a voting member of the FOMC, said he believes Q1 economic weakness was an anomaly and that he is looking forward to a stronger pick up in the economy in the second half of the year. Williams is one of the more Centrist Fed officials, with a slight dovish (more easy money) slant. In other news, drama continued regarding the bailout for Greece but nothing substantial happened as they keep kicking the can down the road.
Stocks fell on Tuesday as more selling hit European equity and bond markets. Before the open, Verizon ($VZ) announced plans to acquire AOL Inc ($AOL) for $4.4B in a strong move to control more content. Stocks ended mixed on Wednesday as investors digested the latest round of economic data. Retail sales for April was unchanged, missing estimates for a gain of 0.2%. Auto manufacturers said sales slid in April and missed estimates. The number of units sold fell to 16.5 million SAAR from 17.1 million SAAR. Separately, import and export prices signaled that the economy remains in trouble. Year-on-year import prices fell a very steep 10.7% with export prices down 6.3%. The small business optimism index rose nicely to 96.9 in April, beating estimates for 96.0. Technically, the S&P 500 found support and bounced nicely off its 50 DMA line on Tuesday and closed near its highs for the day (which was a slightly bullish sign). In other news, gold and silver rallied nicely on Wednesday and look like they want to rally from here.
Stocks Rally In Latter Half of The Week
Stocks rallied nicely on Thursday as the US Dollar continued to fall and the Euro rallied. Before Thursday's open, weekly jobless claims slid to 264k, beating estimates for 276k. Jobless claims slid to a 14 year low which bodes well for the jobs market. The producer price index (PPI) fell -0.4% in April missing estimates for a gain of 0.2%. This suggests deflation remains more of a threat than inflation. The weaker than expected economic data we have seen in recent weeks supports the dovish Fed view and suggests the data-dependent Fed will not raise rates anytime soon. Stocks were quiet on Friday as the latest round of weaker than expected economic data was announced. The Empire State Manufacturing survey came in at 3.09, missing estimates for 5.0. Industrial output fell for a 5th straight month and consumer sentiment experienced its largest decline in 2 years, falling to 88.6, missing estimates for 95.8.
Market Outlook: The Central Bank Put Is Alive And Well
Remember, in bull markets surprises happen to the upside. This has been our primary thesis since the end of 2012. We would be remiss not to note that this very strong bull market is aging (celebrated its 6th anniversary in March 2015) and the last two major bull markets ended shortly after their 5th anniversary; 1994-2000 & 2002-Oct 2007). To be clear, the central bank put is very strong and until material damage occurs, the stock market deserves the longer-term bullish benefit of the doubt. As always, keep your losses small and never argue with the tape. If you want exact buy and sell signals from Sarhan Capital, consider joining FindLeadingStocks.com. Single stock ideas starting at only $20/month.
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