After a somnolent week on Wall Street, volume kicked up Friday as traders placed rapid-fire bets on stocks affected by annual changes to the Russell indexes. But the day’s surge did little to lift U.S. stock indexes, which ended the week down slightly.

Stocks also rose—and fell—last week on news about Greece, which had only until June 30 to pay off a loan from the International Monetary Fund and was working with euro-zone leaders to unlock bailout money before the end of the weekend. Greek Prime Minister Alexis Tsipras has called a referendum for July 5 to vote on terms of the latest aid package.

The Dow rose Monday and Tuesday, fell Wednesday, rose Thursday, and fell Friday, ending the week just slightly below where it started.

The Dow Jones Industrial Average fell 69 points, or 0.4%, on the week, to 17,946.68, while the Standard & Poor’s 500 index slipped 8.5 points, also to 2101.49. The Nasdaq Composite fell 36.5 points, or 0.7%, to 5080.51.More than $4 trillion in capital is benchmarked to the Russell indexes, according to Nicholas Colas at Convergex. Inclusion is based largely on market capitalization. When the indexes rebalanced Friday, fund managers who track them bought and sold stocks to match the new weightings. Friday’s volume on the NYSE was the year’s third highest.

Traders tend to play these moves too, with some buying shares earlier in the year of companies likely to be added to the Russell 2000, and selling them just before the rebalancing. It can be a lucrative trade: The stocks being added to the Russell 2000 are up 11% since May 1, according to Colas.

Friday’s flurry of activity came amid a longer lull in the market. With the kickoff of second-quarter earnings season still two weeks away, investors have time to fret about Greece—perhaps too much time. U.S. jobs and wage data are more important factors for the market than Greece, says Quincy Krosby, market strategist at Prudential Financial. But in the absence of new data points, investors are “waiting for a catalyst and hoping for a positive one.”

(Source: Barrons Online)

Stocks finished a seesaw week in which the sizable gains notched by Thursday evaporated Friday. Still, the major indexes finished slightly higher and snapped losing streaks.

After rising nearly 1%, boosted by bullish retail and jobless data, markets were whacked by a breakdown in talks between the International Monetary Fund and Greece over the country’s bailout. The IMF left the negotiating table Thursday. Greece has a June 18 repayment deadline, or it faces default and possible exit from the monetary union. The last nail in the rally’s coffin came from Congress’s vote Friday to defeat an important part of the Obama administration’s proposed fast-track Pacific trade bill.

The Dow Jones Industrial Average rose 49 points, or 0.3%, on the week, to 17,898.84. The Standard & Poor’s 500 index inched up one point to 2094.11. The Nasdaq Composite fell 17, or 0.3%, to 5051.10.

Although Greece is a small country and its economic plight is well known, a default “can scare people,” says Thomas Lee, head of research at Fundstrat Global Advisors. There might be some impact on risk appetite or on a particular bank, says Lee. But, he adds, “it doesn’t pose the same risk it did three years ago.”

Christopher Hyzy, chief investment officer of U.S. Trust Bank of America Private Wealth Management, says big investors are moving money from fixed-income assets to cash. A bullish Hyzy says “…that cash should go into equities once the data show there is no worry over economic growth.”

(Source: Barrons Online)

The U.S. economy is back, chugging ahead with strong job gains and rising wages. People who had given up on ever finding a job decided to try their luck again. Dealers can barely keep the cars from flying off the lots. Factory machines are humming.

Good news, right?

Well, stock investors aren’t quite that predictable. The major U.S. stock indexes traded slightly lower for the week despite positive economic data—or perhaps because of it. Investors had been enjoying the so-so economic growth that persisted through much of this recovery. A week of unequivocally good news, on the other hand, increases the likelihood of higher interest rates in the future. “Investors think that the ideal scenario is for growth to be just sluggish enough for the Fed to stay on hold forever,” says Jim O’Sullivan, chief U.S. economist at High Frequency Economics.

Also weighing on investors’ minds are the uncertain prospects for keeping Greece in the euro zone. Last week the country delayed some payments to creditors, and Greek leaders scrambled to come to a deal before they run out of money.

The Dow Jones Industrial Average dropped 161 points, or 0.9%, on the week, to 17,849.46, its third consecutive weekly decline. The Standard & Poor’s 500 index fell 15 points to 2092.83. The Nasdaq Composite was essentially flat, ending at 5068.46. The yield on 10-year Treasury notes jumped 0.305 percentage point on the week, to 2.402%, the largest gain since June 2013, in anticipation of rising interest rates.

Recent economic data are simply too strong for investors, or the Fed, to ignore. The U.S. economy added some 280,000 jobs in May, and average hourly wages rose 0.3%, above expectations for 0.2% growth. Cars sold at an annualized rate of 17.8 million in May, also well ahead of expectations, and the ISM manufacturing index likewise showed surprising strength.

(Source: Barrons Online)

Equities finished mixed last week in mostly quiet, pre-holiday trading, and slightly off new highs reached earlier. As has been the case all year, the record levels achieved are only just above the previous plateaus. Health-care, tech and financial stocks rose. U.S. financial markets will be closed for Memorial Day observance Monday.

Even with the broad market hitting all-time highs, some investors fret about the continued notable divergence of transportation sector, which has sagged since late December. In particular, investors last week bailed out of the formerly highflying airlines group, which fell a painful 11%.

In a speech Friday afternoon, Federal Reserve Chair Janet Yellen reaffirmed the market’s view that the central bank would probably raise rates sometime later this year if the economy improves as expected. She also said the weak U.S. economic data this year don’t signify there is a sustained slowdown, even if the outlook is “highly uncertain.” The Fed leader expects a pickup from the poor first-quarter growth rate and also repeated that the pace of hikes would most likely be gradual.

The Dow Jones Industrial Average lost 41 points, or 0.2%, on the week, to 18,232.02 after closing at a record 18,312.39 on Tuesday. The Standard & Poor’s 500 index rose 3 to 2126.06, down from the record close Thursday of 2130.82. The Nasdaq added 41, or 0.8%, to 5089.39.

With first-quarter earnings season over and no particularly significant economic data released last week, the market returned to mulling the default factor: the timing and pace of the Fed’s first interest rate hike, now expected in September.

“Investors are a fickle bunch,” says Thomas Stringfellow, president of Frost Investment Advisors in San Antonio, “and they breathed a collective sigh of relief” when Yellen reaffirmed the market’s expectations of a fall hike. Like the Fed chair, Stringfellow thinks the economy will improve later this year.

(Source: Barrons Online)

Undeterred by another round of soft economic data released last week, investors sent the Standard & Poor’s 500 index to an all-time high. This year’s new highs, however, have been modestly above previous records, unlike last year’s sharp moves. Chalk that up to perverse circumstance. In normal times, investors want a growing economy and rising corporate earnings. Today, however, that otherwise rosy scenario almost certainly would mean higher interest rates. Good news would be bad news.

Rates eventually will rise, but the market consensus is that the Federal Open Market Committee, the Fed’s policy-making arm, won’t raise interest rates at its next meeting, scheduled for June 16-17. That helps explain why the market has been scratching its way higher. A September hike remains an open question. While jobless claims last week were decent, the latest figures on U.S. retail sales, consumer sentiment, and industrial production were all weaker than expected.

“There’s nothing out there that’s changing the market narrative,” says Michael Matousek, head trader at U.S. Global Investors. The market range has gotten even tighter in recent weeks, like a spring coiling. “If you get a little trading volume, it could be the start of the next leg higher,” he says.

The Dow Jones Industrial Average gained 82 points, or 0.5%, on the week, to 18,272.56, and the Standard & Poor’s 500 index rose 7 to 2122.73. The Nasdaq added 45, or 0.9%, to 5048.29.

LAST WEEK’S ACTION says “the Fed hike is off the table for June, and perhaps even for September,” says Adam Sarhan, CEO of Sarhan Capital. “The Fed has said its action is data- dependent, and the data [are] weak.”Sarhan says that a catalyst to propel the market out of its range trading could be the growing conviction that a September rate hike won’t happen.

Following a weak first quarter, the economy hasn’t shown much verve, notes Anwiti Bahuguna, a senior portfolio manager at Columbia Threadneedle Investments. There’s no reason for the Fed to tighten, she says.Expectations for earnings growth haven’t improved in the current quarter, and consumers haven’t stepped up their spending, so that doesn’t bode well for second-quarter growth, Bahuguna says, adding, “It might be a rocky period.”

Significant sales gains, and thus profit growth, probably won’t be seen until the fourth quarter. Meanwhile, summer is a traditionally weak season for stocks, with lower trading activity. What’s to get excited about? For the time being, it’s low rates.

(Source: Barrons Online)

After sliding 2% at one point last week, the stock market reversed and climbed within spitting distance of previous highs. Boosted by bullish employment data Friday and a softer dollar, the Dow Jones Industrial Average, made up of mega-caps with lots of overseas sales, rose 167 points, or nearly 1%, to 18191.11. A surprising electoral victory Thursday by the U.K. Conservative Party fuelled gains in Europe, which spilled over to U.S. stocks.

Despite the rally, the market was again unable to break out of a tight range that began last November. Investors aren’t enthusiastic enough about macroeconomic data to send shares to new highs. The Standard & Poor’s 500 index rose 8 points to close at 2116.10, just below the previous high, 2117.69. The Nasdaq finished flat, at 5003.55.

Friday, the Labor Department said the U.S. added 223,000 jobs in April, broadly in line with expectations and much better than the 85,000 in March. The unemployment rate fell to 5.4% from 5.5%.

Those numbers were warm enough to assuage slowdown fears caused by a rise of just 0.2% in first-quarter gross domestic product, reported late last month, says Daniel Morris, global investment strategist at TIAA-CREF. Yet they weren’t hot enough to spark worries that the Federal Reserve will raise interest rates sooner than September, marking the first rate hike in nine years.

There is strong resistance at the 2120 level on the S&P 500, says Yousef Abbasi, a market strategist at JonesTrading Institutional Services. “Investors don’t want to pay more than the market’s price/earnings ratio of 18 times, when the U.S. economy might grow in the range of 1% to 2% in the first half,” he says.

“It’s hard to come up with a scenario where you get a real positive surprise that would boost the market further,” adds Morris.

Brian Lazorishak, a portfolio manager at Chase Investment Counsel, is looking for a correction near-term, although perhaps not a 10% drop. “Valuations aren’t cheap; we’ve gone years without a real correction, and the May-October period is historically a weak period for equities,” he says.

Even a 5% pullback might be good for the bull, as it would “suck out some optimism and bring in enough pessimism” to set up the market for a rally in the back half of 2015, he says.

(Source: Barrons Online)

The stock market lost its mo’ last week. The major indexes fell as previously strong social-media stocks plunged and surprised investors, who hammered the rest of the market. A rally Friday took the edge off a retreat that had reached 2% at one point. Nasdaq and small-cap stocks fell 2% to 3%.

Investors also didn’t like a much worse-than-expected report out Wednesday on first-quarter U.S. gross domestic product. GDP was up 0.2% in the period, compared to a consensus projection of 1%. But the heavy damage to stocks was caused by quarterly profit reports from Twitter (ticker: TWTR) and LinkedIn (LNKD). Twitter, down 11%, missed sales expectations, while LinkedIn, off 20%, lowered guidance for the rest of 2015.

With the market hitting all-time highs the previous week on strong earnings from “old tech” stocks such as Microsoft (MSFT), investors weren’t primed for disappointment.

The Dow Jones Industrial Average lost 56 points, or 0.3%, on the week, to 18,024.26, and the Standard & Poor’s 500 index gave back 9 to 2108.29. The Nasdaq fell 1.7%, or 87, to 5005.39 while the small-cap Russell 2000 index fell 3.1% to 1228.10.

The social-media companies’ struggle to monetize traffic starkly contrasted with the previous week’s set of good earnings from traditional tech concerns, says Peter Kenny, chief market strategist at Clearpool Group. Disappointment in U.S. growth also played a part. People can blame the strong dollar or a weak energy sector, “but the first-quarter GDP was far worse than expected,” he says.

When the Federal Reserve blamed the quarter’s softness on “transitory factors,” investor hopes evaporated that the central bank might delay a rate hike, says Joe Saluzzi, co-head of trading for Themis Trading.

According to Zacks, profits are up 4.7% for the 361 companies in the S&P 500 that have reported first-quarter results so far, but revenue is down 4.1%. Saluzzi expects a continuation of the range trading seen since last November, with the S&P 500 stuck inside 2050 to 2125. “You need something to pull it out, and it won’t be earnings,” he says, because investors know some earnings-per-share growth comes from heavy corporate share buybacks.

It remains to be seen what the crumbling of high-valuation stocks means for the rest of the market. “When you see frothy names weak, it tends to spill over [in the broad market],” says Michael Yoshikami, CEO of Destination Wealth Management, who is also looking for a continuation of choppy and range-bound trading in the near-term.

Monday will see McDonald’s (MCD) announcement of a turnaround plan. Leaks have been few on the proposal. Hedgeye analyst Howard Penney says speculation about the creation of a real-estate investment trust structure or a levering up could miss the mark. Instead, the world’s biggest restaurant chain might sell off some company-owned outlets overseas and shrink the menu. Mickey D’s needs to get “hotter, fresher, and faster.”

(Source: Barrons Online)

U.S. equities moved slightly higher in a short week of quiet trading. The major indexes inched up but airlines fell 5% and biotechs slipped 4%. The Nasdaq also bucked the trend and fell slightly.

Investors continue to be confounded by hot and cold running U.S. economic data, which has kept the market range-bound since late November. Expect markets to be weak Monday after the latest example, Friday’s payrolls data, released when U.S. stock markets were closed in observance of Good Friday. Bond markets rallied Friday, but the dollar and stock futures fell.

The Labor Department said March nonfarm payrolls rose 126,000, far below expectations of almost double that. Earlier in the week saw a mix of lower jobless claims but a softer-than-expected private payrolls number, as well as a weak factory activity report that conflicted with a stronger purchasing managers’ index.

In the game of assessing whether bad news is really bad news, Friday’s data are probably bad news for equities. They indicate slower growth, and investors wonder if the Federal Reserve will move more slowly with anticipated interest-rate increases later this year or keep to the presumed September hike.

The “safe zone” would have been 200,000 to 300,000 payrolls, says James McDonald, chief investment strategist for Northern Trust. Because of conflicting data, investors want to see a better economy before taking on more risk in the form of stocks, he adds.

“Don’t read too much into payrolls, however, as it’s an often-revised number,” adds Jason Pride, director of investment strategy at Glenmede Investment and Wealth Management. Bad weather, a strong dollar, and weak energy prices probably played their part in depressing the numbers, he says. There remain positive economic signs here and in Europe, he adds. Pride points out that the bigger picture for jobs is improving (Source: Barrons Online).

The stock market soared nearly 3% last week, closing just below previous all-time highs. Investors celebrated the Federal Reserve’s go slower policy on raising interest rates. The central bank’s statements suggested hikes would be fewer, and possibly smaller and later than previously expected, given low inflation and less-than-robust economic U.S. expansion.

The market has blown hot and cold in recent weeks, shifting with perceptions about the timing of the first Fed Fund’s rate hike. When a June move was anticipated, stocks fell, as they did in the previous two weeks. Fed projections were “marked to market,” says David Lefkowitz, senior equity strategist at UBS Wealth Management Research, and the “Goldilocks” scenario pleased investors. The Fed’s median remains above the futures market prediction of about 0.5%.

LAST WEEK, the Dow Jones Industrial Average tacked on 378 points, or 2.1%, to 18127.65, while the Standard & Poor’s 500 index jumped 55 points to 2108.10. The Nasdaq Composite gained 155, or 3.2%, to 5026.42, not far below its high of 5048, set back in 2000.

“The Fed moved the goal posts in a substantial way” and pushed out the timing on rate hikes, says Jonathan Golub, chief U.S. market strategist for RBC Capital Markets. Rates will be lower for longer than the market thought, which is attractive for risk assets like equity, he adds.

It lowered the bar on the unemployment rate needed for a hike, to 5%-5.2%, instead of 5.2% 5.5%, he says. With the rate already 5.5%, the Fed gave itself more wiggle room on timing. It also downgraded its forecasts of U.S. GDP growth to 2.3%-2.7% this year, from 2.6%-2.7%.

Partly behind the Fed’s actions, says Golub, is a quiet desire to contain the dollar, which has risen 25% in the last 10 months and will hurt the profits of U.S. multinationals. That’s something investors will be looking at keenly, and soon. For the near term, however, the market will be in limbo, as first-quarter earnings reports don’t begin for three weeks and the economic data calendar is relatively sparse until then.

Oil’s effect is built in, and the bottom up analyst EPS estimates for the first quarter have stopped going down, a potential salutary influence, Golub notes. Nevertheless, the magnitude of the effect of the rising dollar on earnings is yet to be ascertained and could lead to surprises and volatility.

(Source: Barrons Online)

Stocks backpedaled last week, pressured on one side by a strengthening U.S. dollar and on the other by falling energy prices. Shares of large-cap firms in particular—thanks to foreign exposure—suffered most from the downward pressure, while more domestic revenue-oriented small caps bucked the trend and rose sharply.

Some investors lightened up on equities in anxious anticipation of the Federal Open Market Committee meeting this week. No rate hike is expected just yet, but investors fear wording changes in the FOMC’s press release Wednesday that could spook the market.

Oil prices again lost ground, after a few weeks of stability, reigniting worries about energy stocks, which fell 3%, and deflation anxieties. Oil fell 10% to $44.84 per barrel. U.S. economic data ran the gamut from weak, like February retail sales, to good, like weekly jobless claims, but played a background role.

Last week, the Dow Jones Industrial Average lost 108, or 0.6%, to 17,749.31, while the Standard & Poor’s 500 index fell 18 points to 2053.40. The Nasdaq Composite dropped 56, or 1.1%, to 4871.76. The small cap Russell 2000 index gained 1.2% to 1232.13.

A strong dollar is better for Corporate America long term, adds Halliburton, but “in the current world, investors are at most interested in the next 12 months.” The dollar index is on course for a 13.8% gain in the first quarter, the largest quarterly jump since the 1992 European monetary crisis, according to Bank of America Merrill Lynch.

Headlines bemoan the dollar, but the U.S. is a net importer, so the average Joe and Jane see greater purchasing power and lower inflation. U.S. companies have to get leaner and meaner. While U.S. exports cost foreigners more and the translation hurts earnings comparisons in the short term, U.S. firms have more buying power overseas. A stronger dollar makes U.S. assets more attractive to foreigners. The February producer price index released Friday declined 0.5%, weaker than anticipated.

Though the market expects a Fed hike around June, Scott Colyer, CEO of Advisors Asset Management, demurs. The PPI shows no sign of inflation. “The downside to the Fed of doing nothing is pretty minimal, while a hike could threaten the recovery,” says Colyer, who believes the Fed won’t raise interest rates until 2016.

Whether it’s June or January, it’s hard to see the market moving sustainably higher until the Fed drops the veil.

(Source: Barrons Online)