Stocks mixed on earnings

It was one of the busiest days of the earnings season, with 25 of the companies in the S&P 500 Index reporting. Results were mixed, but for the most part, the markets focused on the positive.

The Dow slipped 16 points, the S&P 500 Index gained 2, and the Nasdaq rose by 9. Nineteen of the Dow’s 30 components gained ground. Advancing issues outnumbered decliners by about four to three on the NYSE and nine to five on the Nasdaq. The prices of Treasuries weakened. Positive economic news drove the price of gold futures lower by 0.7% to $1,293.90 an ounce, a 1.9% loss for the week. The price of crude oil on the New York Mercantile Exchange rose 0.5% to $104.30 a barrel.

The markets are closed tomorrow for the Good Friday holiday, and the markets ended the week in positive territory. The Dow, the S&P 500 Index, and the Nasdaq each gained 2%.

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Why the eyes are following you (on cereal boxes, at least)

Markets continued to rally, helped by decent housing-starts numbers and better-than-expected reports on U.S. industrial production and Chinese gross domestic product.

The Dow rose 162 points, with 26 of its 30 components gaining ground; the S&P 500 Index increased 19; and the Nasdaq gained 52, helped by surging shares of Yahoo after its quarterly earnings report. Advancers led decliners by 15 to 4 on the NYSE and 5 to 2 on the Nasdaq. The prices of Treasuries were mixed, with the 30-year strengthening and the 10-year weakening. Gold futures rose $3.20 to close at $1,303.50 an ounce, and the price of crude oil gained one penny to settle at $103.76 a barrel.

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What’s bubbling up in bonds? (excerpt)

Jim Kochan: What’s bubbling up in bonds?

Jim Kochan

We’re talking Federal Reserve policy, the rally in municipal bonds, concerns in the high-yield corporate space, and how all this affects investment strategy with Jim Kochan, chief fixed-income strategist with Wells Fargo Funds Management, LLC, in this excerpt of On the Trading DeskSM from Friday, April 11, 2014.

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The Federal Open Market Committee met in mid-March. As you sifted through the minutes of that meeting, what effect did you see it having on fixed-income markets?
From the point of view of a fixed-income strategist, I think these minutes were very bond-friendly. What I mean by that is that there were long discussions as to how the committee should express itself about the terms that they use and the forward guidance they give to convince investors and the marketplace that the federal funds rate is going to stay very low for an extended period of time. They had to change their forward guidance because they were unhappy with the reference to a 6.5% unemployment rate. They wanted something more general than that, and frankly, they had a great deal of difficulty coming up with a consensus. I don’t think they really did come up with a consensus as to what the new forward guidance language should be, but nevertheless, as one reads the minutes, one can’t help but be impressed by how important they feel that the markets understand that short-term interest rates are going to stay low for an extended period of time.

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Tax tips from ABBA

Mixed economic reports and continued pressure on tech shares made for another choppy session. Consumer inflation stayed tame in March and some much-watched earnings reports beat expectations, but a disappointing regional manufacturing report and sagging homebuilder confidence weighed on stocks in the afternoon. The major indexes managed to push solidly higher late in the session.

The Dow rose 89 points, with 23 of its 30 components advancing; the S&P 500 Index gained 12; and the Nasdaq recovered another rough day for tech stocks to close 11 points higher. Decliners led advancers by three to two on the NYSE and decliners narrowly led advancers on the Nasdaq. The prices of Treasuries strengthened. Gold futures dropped $27.20 to close at $1,300.30 an ounce, and the price of crude oil pulled back 30 cents to settle at $103.75 a barrel.

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Extra-strength password pills

Retail sales were surprisingly robust in March, but despite the good news, stocks had a choppy session. The Dow and S&P 500 Index trimmed early gains and the Nasdaq dipped into the red, but all three accelerated toward strong gains at the close.

The Dow rose 146 points, with 27 of its 30 components advancing; the S&P 500 Index gained 14; and the Nasdaq moved 22 points higher. Advancers led decliners by nearly two to one on the NYSE and narrowly led on the Nasdaq. The prices of Treasuries weakened. Gold futures rose $8.50 to close at $1,327.50 an ounce, and the price of crude oil moved 31 cents higher to settle at $104.05 a barrel.

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  • Citigroup’s first-quarter net income rose 3.5% to $3.94 billion, the company said today, ahead of consensus analyst estimates. Trading results were weak, led by an 18% drop in fixed-income trading revenue, but Citi made up for it on lower expenses and 20% lower provisions for bad loans. Revenue fell 0.6% to $20.12 billion, in line with estimates. Citi’s shares (C) gained 4.36%.

 

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Earnings estimates are not earnings expectations

Manley on the Street: Earnings estimates are not earnings expectationsAlthough they are often used interchangeably, I think there is a difference between the terms earnings estimates and earnings expectations.

To me, the former are generated by the sell side, compiled by various services, quoted by the media, and very much in the public domain. The method of compilation is open to criticism, with the estimate of the most obscure analyst counting as much as that of the most popular. There is no attempt to measure the confidence of any of the stated numbers nor is it obvious to what degree they are accepted or believed by the buy side (those who buy research to help them buy and sell securities).

In my opinion, it is the buy side and individual investors who have earnings expectations. These expectations are part of the investment process: the decision to buy, sell, or hold. I think that expectations are much more nuanced than estimates, with varying shades of confidence and significance. An aggressive expectation held with little confidence may cause little turbulence if it is missed. A modest expectation held with great confidence may cause little gain if it is exceeded. In short, while expectations are more pertinent to price performance than estimates, they are hard to measure, improper to average, and thus all but impossible to observe.

So, we will have to make do with earnings estimates and all of their shortcomings. I think that, while they may not be the same as expectations, they probably run parallel to them. Thus, I think that we can infer the course of expectations by observing the path of estimates and placing that in some historical context.

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Bears picnic, bulls bolt

The Dow fell 143 points, the Nasdaq lost 54, and the S&P 500 Index declined 17. Zoe’s Kitchen (ZOES), one of three IPOs today, gained 64% in its first day of trading. Twenty-five of the Dow’s thirty components lost ground, led by JPMorgan Chase & Co. (JPM), which fell 3%. Volume was moderate. Declining issues outnumbered advancers by about two to one on the NYSE and by three to one on the Nasdaq. The prices of Treasuries edged higher, while the price of gold futures lost 0.11% to $1,319.00 an ounce. The price of crude oil on the New York Mercantile Exchange gained 0.33% to $103.74 a barrel.

For the week, the Dow lost 2.3%, the Nasdaq fell by 3.1%, and the S&P 500 Index declined by 2.6%.

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What’s bubbling up in bonds?

Jim Kochan

Jim Kochan

This week we’re covering FOMC meeting minutes and the market’s reaction, the rally in municipal bonds, concerns in the high-yield corporate space, and how all of this affects investment strategy. With us again is Jim Kochan, chief fixed-income strategist with Wells Fargo Funds Management, LLC.

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Bears roar

In spite of a good jobs report, stocks resumed their retreat, with tech stocks leading the way down. The Dow lost 266 points, the Nasdaq fell by 129, and the S&P 500 Index declined by 39. Twenty-eight of the Dow’s thirty components lost ground, led by American Express (AXP), which dropped almost 4%. Volume was moderate to heavy. Declining issues outnumbered advancers by three to one on the NYSE and by six to one on the Nasdaq. The prices of Treasuries strengthened, while the price of gold futures gained 1.12% to $1,320.50 an ounce. The price of crude oil on the New York Mercantile Exchange lost 0.19% to $103.40 a barrel.

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Stocks gain on Fed’s secret meeting

Minutes from the latest Federal Open Market Committee meeting told of a special Federal Reserve meeting held earlier in the month that showed the Fed was concerned about the message it was sending to the markets. Stocks jumped on indications that the Fed would stay accommodative for longer than originally thought, as well as positive news regarding Detroit’s bankruptcy.

The Dow gained 181 points, with 26 of its 30 components advancing; the S&P 500 Index rose 20; and the Nasdaq was the percentage leader, climbing 70 points, or 1.72%. The Nasdaq got a big boost from Facebook, whose shares (FB) jumped 7.25% after COO Sheryl Sandberg denied speculation that she might leave the company. Advancers led decliners by eight to three on the NYSE and three to one on the Nasdaq. The prices of Treasuries weakened. Gold futures fell $3.20 to close at $1,305.90 an ounce, and the price of crude oil rose $1.04 to settle at $103.60 a barrel.

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