“Push me, pull me” could be the market’s new mantra. Once again, we experienced another week of big gains and big losses, all stemming from the headlines. And most of those headlines were related to the Federal Reserve.
Even though it’s been nearly two weeks since the Fed kicked the interest rate can down the road, many of the market’s big moves this week came from data that could influence the Fed’s next decision or the Fed’s governors themselves.
This week’s economic data was all about industrial activity. Manufacturing activity indexes, construction activity measures, factory orders and factory sales data were released this week, not all of which was terrible. Recent data and estimates from many global trouble spots, such as China, also received cheers.
Janet Yellen, however, received jeers from market participants. The Fed chairwoman managed to send the markets into a tizzy when she spoke this week.
The extra hour of sleep that Wall Street traders received from daylight savings time may have actually been good for them. The market managed to rally on the back of decent manufacturing data. The Institute for Supply Management Manufacturing PMI report came in slightly better than estimates at 50.1 which signals that the manufacturing base in the country is still expanding. Construction spending activity also managed to increase and beat estimates.
With that data in tow, the Dow Industrial Average surged 165.22 points to 17,828.76. The S&P 500 and NASDAQ also leapt higher at 24.69 and 73.40 points, respectively.
- Allstate (ALL ) certainly put investors in good hands. The insurer managed to report a 21 cents per share beat when it reported earnings of $1.52. Also, providing “$920 million in cash to common shareholders through a combination of dividends and common share repurchases” didn’t hurt either. ALL yields 1.9%.
- Church & Dwight (CHD ) was good for a slight beat on earnings as well. CHD managed to report EPS of 90 cents. The maker of soap, kitty litter and Arm & Hammer products yields 1.5%.
- CHD’s rival Clorox (CLX ) did much better. CLX reported a 14 cents per share beat on EPS of $1.32. Clorox yields 2.51%.
- Utility Dominion Resources (D ) did not keep the streak going. The firm managed to miss estimates by over a $1 per share. Recent changes to its business model did not bode well for the firm. D yields 3.7%.
In terms of economic data, Tuesday was a real stinker. The Census Bureau’s month-to-month Factory Orders statistic came in much lower than expected and saw the number of orders turn negative.
However, the markets could have cared less. Prices for crude oil managed to surge after a few issues, both here and abroad, which might impact supplies. That set off a rally in energy stocks and then the major indexes. The Dow Jones Industrial Average gained 89.39 points to reach 17,918.15. Likewise, the S&P 500 rose 5.74 points to hit 2,109.79 and the NASDAQ jumped 17.98 to reach 5,145.13.
- Agribusiness giant Archer Daniels Midland (ADM ) tanked as there was nothing good to report. ADM managed to miss estimates by 10 cents per share. The only positive was that ADM returned plenty of cash to investors, “including dividends of over $2.3 billion.” ADM yields 2.57%.
- Traditional landline phone service might not be dead after all. Frontier Communications (FTR ) managed to beat estimates by a penny when it reported EPS of 3 cents per share. Another positive was that FTR “declared a common dividend of 10.5 cents per share for the fourth quarter of 2015.” FTR yields 8.9%.
- Pet and animal drug specialist Zoetis (ZTS ) is shaping up to be a great dividend stock. ZTS managed to beat estimates by 10 cents per share. ZTS yields 0.7%.
Everything was going just peachy for the markets this week until Janet Yellen decided to speak. Yellen gave her testimony on the Fed’s recent decision and basically spelled out that a rate increase in December was still on the table. That sent stocks slipping. Moderately bearish changes to the ADP Non-Farm Employment Change didn’t help either. The figure came in slightly lower than expected, and was lower than the previously recorded number.
As such, the Dow Jones Industrial Average lost 50.57 points, the S&P 500 sank 7.48 points and the NASDAQ lost 2.65%.
- Health care and scientific research is the place to be as Becton Dickinson and Co. (BDX ) reported another earnings beat. The maker of syringes, tubes and other life science/medical equipment managed to beat earnings by 4 cents on EPS of $1.94. BDX yields 1.6%.
- Midstream and energy logistics giant Energy Transfer Equity LP (ETE ) report earnings of 33 cents per share, a 2-cent beat. As an MLP, ETE passes through much of its cash flows as dividends and yields 5.44%
- Whole Foods Market (WFM ) did not sell enough organic kale and free range chicken this quarter. WFM missed earnings by 19 cents a share. “Whole Paycheck” only reported EPS of 16 cents. Although investors can be happy as WFM, “through [their] strong balance sheet and robust cash flows…self-funded…new store development and strategic growth initiatives and returned close to $700 million to shareholders through dividends and share repurchases.” WFM yields 2.57%.
Six. That’s right. Six Federal Reserve governors gave speeches on Thursday. And while none of the topics were about raising rates, the tone of the speeches was rather hawkish. At the same time, the Fed was overshadowed by a sudden rise in unemployment claims. The Department of Labor released its weekly metric of new filers of unemployment which came in at 276,000 and was much higher than estimates and much higher than the previously recorded reading.
That sent the markets down and erased any positive earnings-related boosts. The Dow Jones Industrial Average slipped 4.15 points to hit 17,863.43, while the S&P 500 dropped 2.38 to reach just under 2,100. The NASDAQ also sank on the day by 14.74 points.
- British drug giant AstraZeneca PLC (AZN ) managed to see some impressive earnings numbers this quarter. AZN managed to beat estimates by 26 cents per share. AZN yields 4.34%.
- Earnings were not “FUN” at amusement park and resort operator Cedar Fair LP (FUN ). FUN managed to miss expectations by 49 cents per share when it reported EPS of just $2.92. Cedar Fair yields 5.7%.
- Margins are juicy at the refiners these days. HollyFrontier Corp. (HFC ) is proof of that. HFC reported EPS of $1.82. That was good for a 10-cent per share beat on the back of lower feedstock and crude oil prices. HFC yields 2.6%.
Friday is all about unemployment data and it might make for another volatile day. The unemployment rate was estimated to tick downwards a bit, however, the recent upswings in the number of unemployed workers could throw that estimation out of whack. Also, the Non-Farm Employment Change number is expected to leap upwards. All of this could spell another down day in the markets.
Already, the premarket trading data is pointing to a 20-point drop in the Dow. Similar decreases are expected for the S&P 500 and NASDAQ.
As for earnings, we’ll get a break as there are no significant dividend-related earnings announcements. Mostly ADRs and smaller-capitalization stocks will report.
The Week Ahead
Despite the shortened trading week thanks to Veteran’s Day it should prove to be another interesting week in the markets. The key informaition will be the rash of consumer data being released throughout the week. That data could be lower than expected given the recent issues with unemployment.
As for earnings, while they are still coming in hot and heavy, the so-called season is starting to wind down. We’ll start to see less “major” reports going forward. That means the markets will mostly be focused on economic data for direction.