Despite low trading activity and volume, US markets finished this week higher, notching their second consecutive weekly gain. SPX index traded within tight boundaries for the most of the time, rising 1.7% and closing above 2100. The Nasdaq Composite ended the week with a slightly higher increase, 2.2%, remaining less than 1% of its 5,000 mark. On the other side, small-cap stocks as measured by Russell 2000 index lagged from its larger counterparts and closed with a 0.7% gain. Weak ISM Monday data was neutralized by better than expected Thursday Jobless claims and economic data didn’t have a significant effect on the market overall. Investors focus has shifted towards earnings seasons, which officially kicked off on Thursday. Many investor perceive it as the potential growth catalyst. However, earnings growth estimates are not expected to be very good, and this might be a limiting factor for buyers. Until investors see the Q1 results, it is likely that we won’t see equities exposure increase. Additional supportive factor towards growth was the release of the Federal Open Market Committee (FOMC) meeting minutes. Central bank leaders are divided in their consensus when to increase the rate, which will heavily depend on the economic data. NY Fed Dudley gave investors some hint and mentioned the possibility of a rate hike in June.
The VIX index settled at 12.58, at its lowest level for the year, losing 14.25% for the week and 34.5% for the year. The Fear Index at this level assumes investors are confident that there won’t be any negative surprises during the earnings period and market might go up even further. However, if treated as a contrarian indicator, current level might signalize a potential surge in volatility in the near future, as the downside is limited.
Now, on to the charts and numbers.
On the corporate front, industrials and healthcare sectors were among the leaders, gaining 2.8% and 2.9% for the week, lagging the energy sector (3.1%) only. On Friday, General Electric announced to sell the bulk of its GE Capital, beginning with the sale of real estate assets. More importantly, GE announced a $50bln. share repurchase program, sending the stock almost 11% up only on Friday. In healthcare sector, Mylan NV, a Great Britain pharmaceutical company made a proposal to acquire Perrigo Company for about $29bln.
Across the international arena China was unconditional leader, gaining 11.2% for the week. Despite no progress in Greece talks, Europe managed to close the week with a 1.2% increase. In developed Asia, all focus was on Japan, which on Friday shortly touched the 20,000 level for the first time in 15 years, finishing the week at 19,907.63.
Finally, commodities prices finished the week higher as well. Oil gained 4.8% despite larger U.S. stockpiles growth than expected. Additional support was received when it became more clear that Iran nuclear deal might not be achieved in the short-term, meaning international sanctions will remain in place, plus the decrease of operational U.S. oil rigs (the lowest level since December 2010).
Interesting reading I’ve come across the web: