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US Stocks Week Ended January 30, 2015
U.S. stocks fell, sending the S&P 500 to its fourth loss in the last five weeks, as weaker-than-expected GDP growth and disappointing multinational earnings overshadowed a strong consumer. After posting 5% GDP growth in the 3rd quarter, growth slowed to a 2.6% annualized rate in the 4th quarter versus the 3% estimated by economists. The drop in oil prices caused business investment to fall as equipment orders fell by 1.9%. However, the drop in oil prices benefited personal consumption, which jumped 4.3%, the largest increase since 2006. In addition to strong household spending, consumer confidence reached an 11 year high in January. With earnings season nearly halfway complete, U.S. multinational firms have reported lower-than-expected earnings and guidance due to the strong dollar, which causes earnings to be translated at a lower rate in dollars and U.S. exporters to become less competitive. Procter & Gamble Co. shares fell sharply after management called foreign-exchange rate moves "unprecedented". Sales are expected to be reduced by 5% due to currency headwinds, leading to a potential 4% drop in revenue for the year, while earnings are expected to be reduced by 12%. Microsoft shares lost over 10% after reporting weak software sales in China and lower forecasted revenue due to currency headwinds. Despite already lower expectations, Caterpillar Inc. forecasted sales and revenue below the street as lower oil prices crimp demand for equipment in oil producing regions. Apple Inc. remained a bright spot after posting their largest sales gain in three years on strong sales of larger iPhones. A slew of earnings reports, manufacturing data, and Friday's unemployment rate will be key data points in the week ahead. With earnings estimates declining due to energy profits and currency headwinds, we continue to favor quality names that have business focused domestically. The U.S. economy remains on solid footing, especially when compared to the rest of world.
Monday, February 2, 2015 @ 8:36 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.