US Stocks Week Ended March 27, 2014

Bob Carey
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US Stocks Week Ended March 27, 2014

Posted Under: Weekly Market Commentary

Markets traded lower as investors took profits from many names with larger run-ups and moved into safer assets. Russia remained in the forefront of investors' minds as President Obama warned of further consequences for the annexation of Crimea. Economic data was mixed for the week as durable goods orders beat expectations and 4th quarter GDP was revised upward to 2.6% from 2.4%. However, new home sales fell to a five month low as sales languished due to a colder-than-normal winter, higher interest rates and limited supply. For equities, Facebook Inc. fell after announcing the acquisition of Oculus VR Inc. for $2 billion, a maker of virtual-reality headsets. Facebook Inc. is expanding on its mobile presence with the recent acquisitions of What's App Inc. and now Oculus VR Inc. However, many investors are concerned by the potential lack of capital discipline. Another high flying stock, Netflix Inc. slumped following a report that Apple Inc. is in talks with Comcast Corp. to form a streaming partnership. Despite passing quantitatively, Citigroup Inc. capital plan failed the Federal Reserve's stress test as the company planned to quintuple its dividend to 5 cents and initiate a $6.4 billion buyback. The Fed called into question the ability of management to adequately project losses of its global operations. Other U.S. banks received positive news as Bank of America raised their dividend to 5 cents from a penny and JP Morgan Chase increased their dividend and authorized a $6.5 billion buyback. The energy sector was the best performing sector for the week as land service names continued to move higher on increased E&P capital budgets and an expected tightening of supply in the market. Despite the long term upward movement in the stock market, valuations remain in line with long term averages and their remains pockets of opportunity to buy certain sectors at a discount to their historic valuations. Banks look especially appealing with price-to-book ratios well below historic levels and positive results from the Fed stress test coupled with increased capital deployment could provide a catalyst for the industry.

Posted on Monday, March 31, 2014 @ 8:46 AM • Post Link	Share:
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These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.

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