Until earnings results in the last part of April revealed some disappointments, the blue-chip Dow Jones Industrial Average looked ready to set new records. Mixed earning reports stalled the Dow’s impressive momentum, and the NASDAQ declined following disappointing earnings news from some technology industry giants. Here’s an overview of the news and latest opinions from Wall Street.
- The bull market, which has defied naysayers for many months, logged some significant milestones in April. Coming from an inauspicious start at the beginning of the year – when the Dow logged its worst ever five-day streak – to a rally that has boosted it some 14 percent from its lowest point in February, the Dow almost reached an all-time high with more than 100 stocks reaching new one-year high points.
- Mixed first-quarter results, which stymied the Dow’s run at an all-time high, are expected to take a back seat when the Federal Reserve meets in the last week of April. Most analysts are not forecasting any rate hike, although they anticipate the possibility of an increase in June depending on U.S. economic data in the next month or so.
- The rebound in oil prices also helped retain a positive market outlook. Prices hit their low at the beginning of the year when the sector saw a big sell-off. The uptick has helped, but the debate continues as to where oil prices might go, and the energy sector is not out of the woods yet. Bickering among the world’s major oil-producing countries means that an agreement to freeze production remains elusive.
- The Dow’s surge appears to have made investors more positive, with the Russell 2000 – the benchmark for shares issued by small companies – increasing 19 percent since early February. This outpaced the gains made by the Standard & Poor 500 and Dow indices. Fears of a return to recession appear to have subsided, and a recent survey from the American Association of Individual Investors showed that 27.9 percent of investors were “bullish” – a significant increase from the 17.9 percent who were optimistic in mid-January.
- On the global front, interest rate cuts by several emerging-market countries – Hungary, India, Indonesia, Hungary and Taiwan – helped generate a rally in their respective markets, delivering unanticipated returns to happily surprised investors. According to investment specialists, other nations might adopt similar policies.
- With about a third of S&P earnings reported, both the S&P and the Dow have successfully weathered the push/pull of mixed earnings reports. The NASDAQ index has not fared so well. By the third week of April, it was down 2 percent for the year. Disappointing earnings from major tech companies – including Microsoft – helped drag the index further into the red for the year.
- The unraveling of China’s “shadow banks” continues to create turmoil as angry investors demand their money back from institutions that have halted redemptions of their investment products. Peer-to-peer lending promised Chinese investors high returns and fast redemptions and operates without the same regulation that governs traditional banks. A substantial portion of this money has funded Wall Street deals, as well as Hollywood movie productions.
It remains to be seen how the U.S. markets will fare as we enter the summer months with typically low-trading volumes. As always, the commentary above is intended to be general observations and is not a substitute for professional advice from tax and investment experts.