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Market Update

Netflix Delivers and Housing Thaws But Repeat Stock Performance Challenged

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April 16, 2015

It’s been a slow, sometimes painful, grind but bulls got their win—the S&P 500 (SPX) cleared 2100 at Wednesday’s close. By a hair. Bulls will be looking for more but that may not be automatic, considering we’re right back to a hard-fought churn in the early going on Thursday. I mean, there’s little to find fault with in the latest string of earnings but it’s not enough to please this tough, revenue-focused audience. For one thing, oil traded to 2015 highs before pulling lower and early stock indicators tracked that move. Support comes from a couple of upbeat financial earnings reports as that sector dominates this week’s line-up. Well-behaved economic data is also helping, although the Street is on edge ahead of Federal Reserve commentary. Four more Fed speakers are on the slate today, some of them voters and some not. But interest intensified after Wednesday comments from St. Louis Fed’s James Bullard and Richmond’s Jeffrey Lacker both made a case for raising interest rates sooner versus later.

FIGURE 1: VERTIGO? Bulls secured their coveted 2100 but trading turned choppy once again early Thursday. Data source: Standard & Poor’s. Chart source: TD Ameritrade’s thinkorswim® platform. For illustrative purposes only. Past performance does not guarantee future results.

Largely Upbeat News from These Banks. Goldman Sachs Group (GS) reported profit and revenue ahead of forecasts, helping lift shares pre-market. On Wednesday, Goldman shares closed above $200 for the first time since 2008, just before the collapse of Bear Stearns. Rival Citigroup (C) beat industry analyst expectations with its Q1 profit but missed with revenue.

Good Review for NFLX Stock? Investors offer two thumbs up for entertainment streamer Netflix (NFLX). The Street is embracing its latest results including the rosy subscriber number that fed the bulls. NFLX said it added 4.88 million subscribers in Q1, better than the 4.05 million additions it had forecast. Pre-earnings, short-term options trading reflected expectations for a potential 8.5% move in either direction for NFLX around its earnings report. In early trading, the stock extended that view, trading up some 12%

Not Too Hot, Not Too Cold. Now, admittedly it’s hard to know if the collective Street prefers to cheer upbeat economic data these days or sour reports that will slow down the Fed. Today’s numbers offered a little something for everyone, so let’s call them net positive. First, the number of people who applied for U.S. unemployment-insurance benefits rose by 12,000 to 294,000 in the week that ended April 11, hitting the highest tally in six weeks. But continuing claims fell by 40,000 to 2.27 million in the week that ended April 4. This is the lowest level since December 2000. Separately, construction on new U.S. homes rebounded in March after severe weather in February closed down job sites. Housing starts rose to an annual rate of 926,000 in March from a revised 908,000 in February. Permits for new construction, a sign of future demand, fell 5.7% to an annual rate of 1.04 million from February's upwardly revised level of 1.10 million. This follows a 4% gain in February. Apartments have been volatile. Permits of the closely watched single family sector were up 2.1% in March.

Good trading,
JJ
@TDAJJKinahan
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