Investment Commentary – May 11th, 2016
Market Indices as of Market Close May 11th, 2016
Dow 17,711 (1.64% YTD)
S&P 2,064 (1.00% YTD)
NASDAQ 4,760 (-4.93% YTD)
Global Dow 2,322 (2,033 52 week low /2,644 high)
10-year Treasury 1.73 (1.53 52 week low /2.50 high)
Gold 1,278 ($1,047 52 week low /high $1,306)
Oil $46.08 ($30.79 52 week low /high $65.24)
JPM Weekly Market Recap
The 1Q earnings season is coming to a close, with 88.2% (432 companies) of market cap having reported as of the end of last week. While we are going to see another negative print, there are some positives to glean from 1Q as we head into the second half of 2016. Despite -6.3% EPS growth year-over-year for the overall index, ex-energy growth fared a bit better, down 3.7%. With oil prices showing signs of stabilization, we can reasonably expect a modest rebound in results for the sector in coming quarters. Top line growth was a highlight in 1Q, with 44% of companies beating revenue estimates, the highest rate since 4Q 2014. This was largely FX driven, as the U.S. dollar declined 4.2% relative to its major trading partners in 1Q, resulting in some relief for international sales figures for the first time in over a year. While we are by no means out of the woods yet, we do anticipate these macro headwinds will continue to abate, resulting in a return to positive revenue and EPS growth by the second half of this year, which should support further equity market appreciation.
The week in review
Mfg. PMI fell to 50.8
ISM non-mfg. improved to 55.7
Market services PMI improved to 52.8
Light vehicle sales: 17.3M
Payrolls increased by 160K
The week ahead
Oil jumps on first U.S. drawdown since March; Brent up 4 percent
Oil jumped on Wednesday, with Brent up more than 4 percent for a second day in a row, after the U.S. government unexpectedly said crude inventories fell the first time since March, adding to concerns over supply outages in Canada and Nigeria.
The U.S. Energy Information Administration (EIA) said crude inventories fell 3.4 million barrels last week, compared with analysts’ expectations for an increase of 714,000 barrels and the American Petroleum Institute’s (API) build of 3.5 million barrels in preliminary data issued on Tuesday.