Breaking News

Market Perks Up After Better-Than-Forecast US Economic Data

By JJ KinahanMarket OverviewApr 18, 2019 11:39AM ET
Market Perks Up After Better-Than-Forecast US Economic Data
By JJ Kinahan   |  Apr 18, 2019 11:39AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items

(Thursday Market Open) On the last trading day of the week, investors were greeted with some mixed economic data as earnings season is turning out to be better than expected.

U.S. retail sales for March came in stronger than forecast, notching a 1.6% gain when a consensus showed expectations of a 0.9% rise. Anything pointing to the health of the American consumer can be particularly important given the huge percentage of gross domestic product that is driven by consumer spending.

In other economic data, initial U.S. jobless claims hit their lowest level since 1969, coming in at 192,000 compared to a consensus forecast of 208,000.

The data add to a picture of a U.S. economy that, while not going gangbusters, is still showing signs of health. But in a globally connected economy, health in one place can end up being tamped down by weakness in other jurisdictions.

IHS Markit data showed manufacturing activity in Germany and France, Europe’s two largest economies, continued to contract. This may be feeding continued worries about the health of the global economy, which had eased a bit earlier in the week on a better-than-expected showing for Chinese gross domestic product. The euro has weakened versus the dollar, which is usually a good sign for commodities such as oil.

Morning Roundup: Earnings And IPOs

The data come as earnings season rolls on and investors have seen generally better-than-expected results. Of the S&P 500 (SPX) companies that have reported, FactSet data show more than 78% have beaten analyst expectations, CNBC reported Thursday morning.

In the latest round of earnings reports Honeywell (NYSE:HON) beat analysts expectations on its top and bottom lines and raised its full-year forecast while American Express (NYSE:AXP) and Travelers (NYSE:TRV) reported better-than-forecast profit while revenue fell short of expectations.

In another sign that the IPO market may be heating up this quarter after a slower first quarter, three IPOs are on tap today. Social media site Pinterest (NYSE:PINS) will start trading under the ticker PINS, at $19 per share, valuing it at $12.7 billion. Video conferencing company Zoom (NASDAQ:ZM), which has priced at $36 per share, valuing it at $9.2 billion, will trade under the ticker ZM as one of the first largest tech IPOs of the year. Greenlane Holdings (NASDAQ:GNLN), a company that makes vaping devices and targets the cannabis market, is set to trade under the ticker symbol GNLN, priced at $17 per share.

It will be interesting to see how they trade, especially PINS, which seems to have enthusiasm behind it, compared with LYFT (NASDAQ:LYFT), which rallied on its first day of trade March 30, but then slumped in the wake of Uber’s planned IPO, with shares yet to recover.

Healthcare Weighs

Stocks ended Wednesday in the red amid a marked decline in healthcare shares. With a 2.89% loss, that was by far the worst performing sector of the S&P 500 on a day when other sectors’ percent changes were more muted. See figure 1 below.

The pressure comes as investor and trader worries grow about potential legislative changes that could affect the industry. The concerns ratcheted up after UnitedHealth's (NYSE:UNH) CEO spoke against “Medicare for All” in the UNH earnings conference call and said healthcare price inflation has been slowing.

Still it’s far from certain what, if any changes to healthcare legislation might get passed by Congress. Over the past year, the sector is up more than 7.9%, as of Wednesday. Although that isn’t the best performing sector, it’s not the worst either.

Earnings Season Continues

The pressure from the healthcare industry outweighed some positives for Wall Street as earnings season continues.

Morgan Stanley (NYSE:MS) shares rose 2.6% after its results outpaced third-party consensus estimates for both earnings and revenue.

The banking sector has been struggling lately because of low interest rates and expectations for them to remain low for some time as the Fed has adopted a dovish stance. While the yield curve is back into a position where it could be more favorable to bank profits, the potential for the Fed to stand pat on yields throughout the year is could be a headwind for banks trying to grow their profit margins.

Meanwhile, PepsiCo (NASDAQ:PEP) also gained sharply, rising more than 3.7%, after beating earnings and revenue forecasts, with the company citing strong operating performance from its international divisions and Frito-Lay North America.

Eyes On U.S., China Economies

The strong corporate earnings added to some positive sentiment from overseas economic news, as China’s gross domestic product outdid expectations in Q1, rising 6.4%. Analysts had expected 6.3%, according to Trading Economics.

Wednesday’s data form a counterpoint to concerns about slowing economic growth in the world’s second largest economy as a trade war between it and the United States drags on.

Closer to home, the Fed released its Beige Book, which painted a picture of a U.S economy that, while not going gangbusters still is showing signs of growth. (See more below).

The markets are closed Friday for the Good Friday holiday, so investors might want to consider being on the lookout for possible volatility ahead of the long weekend.

Healthcare Sector Vs. S&P 500 (purple)
Healthcare Sector Vs. S&P 500 (purple)

FIGURE 1: SICK. The healthcare sector (IXV - Candlestick chart) had kept pace with the broader S&P 500 Index (SPX - purple line) for the first three months of the year, but that trend has changed dramatically in recent days. Data Source: S&P Dow Jones Indices. Chart source: Thethinkorswim® platform from TD Ameritrade.For illustrative purposes only. Past performance does not guarantee future results.

Economy Still Growing: The release of the Fed’s Beige Book, which compiles an anecdotal picture of the U.S. economy, provided some interesting reading Wednesday. Beige was perhaps the right color for this report as it showed the economy wasn’t red hot or cold blue. Against a backdrop of increasing worry about slowing economic growth in the United States and abroad, the report showed that overall sentiment remains on the slightly positive side. Economic activity expanded at a slight-to-moderate pace in March and early this month, and the Fed’s contacts in reporting districts expect slight-to-modest growth in coming months, the Fed said. With employment continuing to rise nationwide and labor markets remaining tight, wages generally were on the rise at around the same pace as previously in the year, according to the central bank. The Fed’s contacts often cited rising wages, as well as freight costs and tariffs, as key factors driving a trend of modest-to-moderate increases in input costs.

Rate Cuts Seen Unlikely: Even though prices rose modestly on balance since the previous Beige Book, it seems the Fed isn’t too worried about inflation. There’s been a marked difference between the tail end of last year and the first months of this year when it comes to interest-rate expectations. Last year, the market was under pressure as investors thought the Fed might raise rates too much. Now, there is talk of the possibility of the central bank actually cutting rates. But investment research firm CFRA doesn’t think that's likely. “Investors remain encouraged about the appreciation potential for equities during the rest of the year,” CFRA said. “Yet reasons for this optimism should not include the start a new rate-easing cycle by the Fed, since the difference between rates and inflation remains too narrow.”

Gold Losing Luster: The most actively traded gold futures contract in New York settled at $1,276.80 an ounce Wednesday, its lowest close since December. The weakness appears to be helped by increasing risk appetite, whetted on Wednesday by the stronger-than-expected Chinese GDP figures. Overall, investors and traders seem to have more appetite for riskier stocks this year amid a dovish Fed and expectations for a resolution to the U.S.-China trade war. Gains in the dollar this year also appear to be weighing on gold. As the greenback rises, that makes dollar-denominated gold more expensive for those holding other currencies.

Disclaimer: Charts For illustrative purposes only. Past performance does not guarantee future results.TD Ameritrade® commentary for educational purposes only. Member SIPC. Options involve risks and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options.

Market Perks Up After Better-Than-Forecast US Economic Data
Market Perks Up After Better-Than-Forecast US Economic Data

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
Sign up with Email