April 24, 2017

Global stock markets surged after French election results relieved investors. The Dow is up 191 pts and the SPX is up 1%. Financials are leading the way, up 2%. Tech, industrials and materials are all up over 1% in early trading. Interest rate sensitive sectors like utilities and real estate are lagging. European markets close up 2-4%. Most of Asia was up overnight. The VIX Index is back down to 11.5. WTI crude is down a bit to $49.36/barrel. And by the way, Baker Hughes says the total number of active oil drilling rigs in the US rose by 5 last week to 688 rigs. That’s about 350 more than a year ago. Bonds are falling in price, rising in yield. The 5- and 10-year Treasury yields are back up around 1.82% and 2.29%, respectively. 

Federal Reserve Vice Chair Stanley Fischer was interviewed on CNBC last Friday. He addressed the recent weaker trend in economic indicators. “There is something going on that we don’t quite understand in the data.” But, he quickly added, this is a “transitory” issue, partly due to bad winter weather. So it’s not something to panic about. In addition, he noted China and Europe are doing better. “We’re seeing positive changes throughout much of the world.” He answered questions about the Fed’s approach to monetary tightening this year. The expectation for two more interest rate hikes this year is correct. And over the next few months the Fed will discuss the process of reducing the size of its balance sheet.

First quarter earnings season is coming in better than Wall Street forecasts. So far, 99 of the S&P 500 companies have reported. About 70% of those companies exceeded sales expectations and about 82% have beaten earnings expectations. Sectors with the highest year-over-year earnings growth include materials (+43%), technology (+27%) and financials (+20%). 

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