A marathon week of earnings from Wall Street’s biggest names is all but over, and what have investors learned?
One big takeaway is that investors have gotten largely what they needed from U.S. results coming in ahead of expectations, says Michael Treherne, portfolio manager at Johannesburg-based Vestact Asset Management.
“These numbers also show just how cheap the market was just before Christmas. The numbers showed us that there is still money to be made by global companies,” added Treherne, in an email.
Another tell for this week? Tech stocks are on fire, thanks to well-received results from Twitter, Microsoft and Facebook. And that brings us to our call of the day, from Bank of America Merrill Lynch, which is telling clients that “the only thing to stop a Nasdaq melt-up is U.S. dollar melt-up.”
A melt-up refers to an unusual market occurrence in which assets are driven up sharply by investors who rush in to buy, based on fear of missing out (FOMO) rather than any genuine fundamentals. Often, all that buying is followed by a sharp selloff, also known as a meltdown,
The fact that tech stocks have led the bulk of this year’s rebound for Wall Street — the Nasdaq is up about 22% so far in 2019, versus a 16% rise for the S&P — has been a worry for some.
In its weekly Flow Show, which tracks money moving in and out of global markets, strategists at Bank of America say the dollar would have to get much stronger before it starts causing problems for earnings by tech companies (As they note, 59% of U.S. tech sales coming from overseas). For example, the euro would have to drop to $1.00 — $1.05 (from a current $1.1144).
Thank BlackRock’s widely followed chief Larry Fink, for stoking the “melt-up” debate after he warned a week ago that the market was risking that phenomenon if investors sitting on a pile on uninvested cash go rushing into the market. Not everyone agrees with that assessment.
Bank of America data did show investors enthusiastically buying tech stocks in the latest week, rotating into the sector to the tune of $1.3 billion, while they backed out of real estate, financials and energy stocks.
The bank remains bullish on the stock market overall, pouring cold water on the old “sell in May and go away” mantra, which dictates that investors should avoid what can often be a less rewarding period for stocks between May and October, by divesting away from those holdings and jumping back into the market in November.
First-quarter GDP revealed stronger-than-expected growth of 3.2%. The University of Michigan consumer sentiment index is due later.
, S&P 500
futures are mixed, with little or no reaction to data. On Thursday, the Dow
lost 134 points, though the action was milder for the S&P 500
The Shanghai Composite
has just logged its worst weekly return of 2019, making for our chart of the day.
The big China index finished down 5.6% amid concerns the government might slow the pace of economic easing. The index hasn’t seen a weekly loss that deep since October 2018, when it fell over 7%, according to FactSet Research.
On the trade front, the Trump administration may reportedly be ready to broker a deal with China that would mean less protection for U.S. pharmaceutical products.
Uber said Friday that it will price its coming IPO between $44 and $50 a share, potentially raising up to $9 billion.
Conglomerate Berkshire Hathaway
could buy back up to $100 billion of its stock over time, says CEO Warren Buffett.
U.K. banks, Lloyds
Halifax and Bank of Scotland
will pay back millions to customers after an interest-payment foul-up. It was also a big reporting day for European banks, with Deutsche Bank
cutting its revenue target, a day after ditching merger plans with Commerzbank
. Royal Bank of Scotland
warned over Brexit uncertainty.
NFL draft day had a few surprises up its sleeve. Grumbling ensued.
North Korea’s Kim Jong Un says U.S. acted in “bad faith” at Vietnam summit earlier this year
Fans who got a first look at “Avengers Endgame” do not seem unhappy
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