US Stocks Week Ended April 25, 2014

Equity markets ended a seesaw week slightly lower as a mainly positive earnings week and strong durable goods orders were offset by weak new home sales and increased tensions between Ukraine and Russia. With almost 50% of S&P 500 members reporting to date, earnings across all ten sectors have been above reduced expectations due to the harsh winter. Apple Inc. surged after reporting strong sales of iPhones and increasing their buyback program and dividend by a combined $30 billion. Facebook Inc. announced results well above analyst estimates on strength in mobile, an area of weakness in the past, which accounted for 59% of advertising revenue up from nearly zero in 2012. Netflix Inc. gained initially for the week after announcing a price increase on new customers and strong subscriber growth. However, shares fell after HBO announced an exclusive deal to sell older content to Amazon Prime subscribers. Despite growing revenue by 22%, Inc. shares fell nearly 10% on Friday after expenses continued to climb on further investments in content, distribution centers, products and new services. In addition, investors balked at the projected loss next quarter as profits from increased spending have yet to materialize. Gilead Sciences Inc. advanced after blowing out estimates due to strong sales from its hepatitis C drug Sovaldi. The health care sector had an active week with Allergan Inc. receiving an unsolicited bid from Valeant Pharmaceuticals and Novartis AG agreeing to swap businesses with GlaxoSmithKline PLC to better focus on their core businesses. We remain constructive on U.S. equities as profits continue to come in higher than expectations. In addition, with little room for margin improvement, companies are finally starting to increase capital budgets and increase M&A activity, both positives for the market.
Posted on Monday, April 28, 2014 @ 8:13 AM

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.