With one month down, investors may want to get a case of Pepto-Bismol for the remaining 11 months of 2016. Volatility remains high and the first week of February hasn’t shown any sign of easing that turmoil. It’s the same story that’s basically been going on since October of last year. Each week, it seems that a different cast of players is pulling stocks in either direction, all the time.
This week, the data was all over the place. Key economic metrics like manufacturing numbers and unemployment data were skewed towards the negative. Meanwhile, some consumer figures were actually showing that many consumers didn’t mind the dour economic news, though the ever-present price of crude oil seemed to have a profound effect on the direction of the markets.
As far as earnings go, the numbers reported this week haven’t been exactly bad. However, less-than-ideal guidance projections from several big name firms, especially in the energy sector, helped the volatility grow.
All in all, the story remains the same: the market’s direction is 100% dependent on the current minute’s biggest news story.
Monday started things off with a fizzle following Friday’s huge 400-point gain in the Dow. Both personal income and personal spending came in flat for the last month and showed no gain or loss. The real downer for the day was the latest Institute for Supply Management (ISM), Purchasing Managers’ Index (PMI) number. The measure of manufacturing activity came in at 48.1. This was the fourth month in a row of contracting industrial growth. Construction spending also decreased.
Add these down reports to fresh concerns about growth in China and it’s easy to see how the Dow fought for direction all day. Eventually, the Dow Jones Industrial Average dipped 17.12 points to reach 16,449.18. The S&P 500 was essentially flat, while the Nasdaq gave up 6.41 points.
- Insurance agency Aflac Inc. (AFL ) quacked pretty loudly this earnings report. The duck managed to record a 9-cent beat when it reported EPS of $1.58. The firm also kept its dividend policy and currently yields 2.86%.
- The nonexistent winter proved to be hard for AmeriGas Partners LP (APU ). The distributor of propane managed a big loss when it reported EPS of 77 cents. Analysts had been expecting 94 cents. APU yields 9.45%.
- Apparently, this holiday season was very good for Mattel (MAT ). The toy maker managed to see “global sales rise 2%.” That resulted in a 6-cent EPS beat when it reported earnings of 67 cents. The toy, game and kid’s activities maker yields 4.79%.
- Apparently, people ate out a lot as well. Food distributor Sysco Corp. (SYY ) managed to report a beat as well. SYY earned 48 cents per share in the latest quarter. That was 7 cents better than analyst projections. Dividend investors will be happy to note that SYY’s “cash flows from operations for the first 26 weeks of fiscal 2016 are up roughly 4% from last year.” That’s a positive sign for Sysco’s 2.87% dividend.
Data was light on Tuesday. Total vehicle sales were the only significant figures released. The metric, which looks at all cars and light trucks sold, managed to come in slightly ahead of estimates. However, the positive number had zero effect on the market’s mood.
That’s because falling oil prices, as well as several bearish energy stock earnings reports, took the floor out of stocks. The nearly 6% drop in crude oil prices caused the Dow Jones Industrial Average to fall triple digits, or 295.64 points, to land at 16,153.54. The S&P 500 fell 36.35 points, while the Nasdaq Composite lost a whopping 103.42.
- The agriculture commodities slowdown has hit Archer Daniels Midland Co. (ADM ). The food processor managed to miss earnings by 5 cents per share. The agribusiness giant yields 3.56%.
- Things aren’t good for international integrated energy giant BP (BP ). The low price for crude oil and natural gas helped BP guide to a terrible earnings report for the latest quarter. BP reported profits of just 6 cents per share, missing analyst estimates by 6 cents. BP “already has cut a lot from CAPEX,” which is worrisome for its 8% dividend.
- Not to be outdone, American energy giant Exxon Mobil Corp. (XOM ) also reported earnings today. XOM managed to report EPS of 67 cents, which was good for a slight beat. However, that was one of the lowest profits recorded for the energy giant in recent years. XOM yields 3.79%.
- Pfizer (PFE ) managed a slight beat in its latest earnings report. The drug giant managed to earn 53 cents per share. That was good news, but investors were more concerned with the firm’s merger plans, which are still on track, than its earnings. Shares of PFE yield 4.04%.
Wednesday met the markets in another volatile session. However, this time the bulls won on the back of several good pieces of data. For starters, the number of newly employed people went up for the month. The latest ADP employment numbers continued the trend of surprising higher, coming in at 205,000. Also adding to the day’s good news was the Institute for Supply Management’s (ISM) Non-Manufacturing Purchasing Managers’ Index (PMI). The reading dipped, still in the expansion side of things.
These bullish numbers helped the Dow correct another triple-digit loss and end up way positive on the day. The Dow Jones Industrial Average added 183.12 points and the S&P 500 rose 9.5 points. However, the Nasdaq managed to finish in the red after dropping 12 points.
- Allstate Corp. (ALL ) investors were certainly in good hands. The insurance giant managed to beat estimates by a whopping 25 cents. The firm managed to report EPS of $1.60 per share. However, ALL did miss on revenues. Allstate yields 2.01%.
- In addition to releasing its unemployment report, ADP also managed to earn 72 cents per share. That was in-line with expectations. Automatic Data Processing Inc. (ADP ) yields 2.58%.
- It seems that China is and isn’t a big deal for Yum! Brands’ (YUM ) bottom line. The owner of KFC, Taco-Bell and other fast food restaurants did manage to beat estimates by 2 cents. However, the company reported lower revenue, and weak sales in China was to blame. That’s something to consider going forward with YUM’s 2.54% dividend yield.
- Mondelez International Inc. (MDLZ ) managed to miss estimates by 2 cents when it reported EPS of 46 cents. The global snack food giant yields 1.73% and still has “about $5.5 billion remaining under its current buyback authorization that goes through 2018.”
Unemployment day brought more gloom to the markets on Thursday. The Labor Department’s weekly look at initial jobless claims rose to 285,000. This was more than forecasted and was the third week in a row of higher numbers. That continued climb has some analysts wondering if the job market, and overall economy, is beginning to decline. The decline in factory orders for the previous month didn’t help either.
Even with the poor data, the Dow still managed a gain after whipsawing back and forth all day. The Dow Jones Industrial Average gained 79.92 points to land at 16,416.58. The S&P 500 and Nasdaq increased by 2.92 and 5.32, respectively.
- Bleach, toilet bowl cleaner and salad dressing are big-time money makers, at least for Clorox (CLX ). The consumer products company managed to report earnings of $1.14 per share. That was 9 cents over analyst estimates. CLX yields 2.35%, but since the firm is “throwing off a lot of cash, obviously, as a company” that number could be going up sooner than later.
- The industrial slowdown is starting to crimp Cummins Inc. (CMI ). The maker of engines, generators and other heavy equipment reported EPS of $2.02. That was 9 cents lower than analysts expected. CMI yields 4.30%.
- Even its giant refining operations couldn’t save energy producer Occidental Petroleum Corp. (OXY ). OXY reported a loss of 17 cents per share. That was 5 cents worse than analyst expectations. However, investors shouldn’t lose sleep over the firm’s 4.40% dividend. OXY has “$4.4 billion in cash on the balance sheet and expects to receive another $900 million from the Ecuador settlement and $300 million in proceeds from asset sales in the coming months.” That amount more than covers payouts.
Friday is one important piece of data after another. The Bureau of Labor Statistics will release two major metrics: month-over-month average wage growth and nonfarm payrolls. Both numbers haven’t exactly been stellar over the last few readings. The overall unemployment rate will also be released today; we’ve been holding at 5%. However, the continued uptick in job losses and manufacturing declines could finally move the figure down.
And the market agrees. Premarket trading data has the Dow falling 22 points at the open. Both the S&P and Nasdaq are scheduled to drop by double digits as well.
The Week Ahead
Going into next week, investors do get somewhat of a break from economic data, except on the consumer side of things. Consumer sentiment and retail sales will be released, and those numbers can and will move the markets. Two days of speeches by Fed chairwomen Janet Yellen will also take place; any negativity from Yellen will cause more volatility.
All in all, it should prove to be another volatile week.