On Friday, the stock market ended a strong week with a record finish even as economic data remained weak. The S&P 500 settled higher by 0.2% and registered a fresh record closing high at 2,117.69 while the NASDAQ, up 0.7%, outperformed and posted another record close. Unfortunately, the Dow Jones Industrial Average could only add 0.1%, remaining 1.2% below its record closing high from early March.
On the week, the Dow Jones Industrial Average was up 21.45 points to close at 18,080.14 while the NASDAQ was up 36.02 points to close at 5,092.08. The S&P 500 was up 4.76 points, closing at 2,117.69.
However, Amazon and Starbucks were just partially responsible for the relative strength in the NASDAQ. Two technology sector stocks – Google and Microsoft – spiked 2.9% and 10.5%, respectively. Microsoft soared in reaction to better than expected results, while Google missed on earnings and revenue, which may explain why the stock went up 2.9%.
S&P 500 (April 20th – 24th, 2015)
It is worth noting that the handful of giants overshadowed a weak performance from many other NASDAQ components. For instance, chipmakers declined across the board. Similar to chipmakers, biotech names struggled. Most notably, Biogen fell 6.6% after missing earnings and revenue estimates even though the company still reported 20.0% year-over-year revenue growth. However, the bar was set even higher for this large component of an industry group that has made a major contribution to the NASDAQ's rise to record highs, today notwithstanding. For its part, the health care sector, down 0.3%, spent the day in the red as biotech weighed.
Consumer discretionary and technology sectors posted solid gains, which kept the S&P 500 up. Materials (up 0.8%) and utilities (up 1.0%) also posted solid gains, but the two groups account for just over 6.0% of the entire market.
Going back to influential sectors, financials (falling 0.2%), industrials (declining 0.4%), and energy (down 0.6%) spent the entire day in negative territory. The energy sector was pressured by crude oil, which fell 1.0% to $57.18 per barrel.
Moving on, the industrial sector was pressured by some of its large components like Dow member, Boeing which fell 1.0% while transport stocks also declined following disappointing results.
On the international front, representatives from Greece met with the Eurogroup in Riga on Friday, but once again, the meeting ended without any concrete solutions. The prolonged negotiations appear to be getting more tense with a reporter from Bloomberg noting that unnamed euro area finance ministers have called Greek Finance Minister a "time-waster, gambler, and an amateur." There should be more guidance on the situation in Europe in the week ahead.
On Friday, stocks of HSBC increased upon news that it is considering moving its headquarters out of the U.K. HSBC made the announcement to the British government on Friday, citing the tougher regulation imposed on the financial industry in the U.K. since the financial crisis.
Previous moves by HSBC to review its domicile have gone nowhere. However, the banking regulator in Hong Kong, where HSBC started up and which is seen as its most likely alternative home, immediately welcomed the decision to launch a review, lending credibility to HSBC’s threat.
The Hong Kong Monetary Authority said in a statement that HSBC was the largest bank in Hong Kong and had deep historical links to the territory. It would take “a positive attitude should HSBC consider relocating its headquarters back to Hong Kong,” the government said. HSBC’s share price jumped more than 3.4% after the announcement.
HSBC (April 20th – 24th, 2015)
HSBC’s move, less than two weeks before the UK’s general election, comes with the bank under pressure on all fronts. Politicians and regulators have attacked it over the way its Swiss arm helped clients dodge tax, while shareholders have complained about falling profits and an underperforming share price. It suffered a further blow in March when the UK government raised the rate of the industry-wide levy it imposes on British banks.
This is also not the first time the bank has raised the prospect of moving from Britain. It did so in 2006, too, citing the country’s tax regime. HSBC is not the only U.K. bank reconsidering its domicile. Standard Chartered is expected to carry out a review after the election.
Mr. Flint did not indicate where HSBC might move if it did leave the UK. However, the bank has a dominant, historic and profitable franchise in Hong Kong. It originally had its headquarters there, but moved it to London after buying Midland Bank in 1993, four years before Hong Kong’s return to China.
Shareholders welcomed the announcement, saying the bank levy and regulatory reforms had undermined the rationale for staying in the U.K.
For the week, HSBC’s stock reached a weekly high of $635.20 on Friday after it fell to a weekly low of $603.70 on Wednesday.
On Monday, April 27th, technology giant, Apple will be announcing its first quarter earnings – with much anticipation. Then, on Tuesday, April 28th, U.S. consumer confidence data will be released followed by U.S. GDP growth data on Wednesday, April 29th. If U.S. GDP is increasing, this would provide further evidence of the strength of the U.S. economy. As a result, U.S. indices such as the S&P 500 and Dow Jones Industrial Average could increase. On Thursday, April 30th, U.S. economic data releases continue with jobless claims being announced. On the same day, pharmaceutical company Teva Pharmaceutical Industries Ltd will release their first quarter earnings. If the earnings are positive, this would likely cause Teva’s stock to rise in response. Finally, on Friday, May 1st U.S. motor vehicle sales will be announced.
This week was a week full of excellent results with many positive first quarter earnings results being announced. There is still some uncertainty at the moment in Europe due to issues in Greece but these aren’t causing too much concern. It appears that the EU and IMF want to do everything they can to stabilize the Greek economy so it can create a better long-term position for the EU as a whole. As we head into a new week, many in the markets will be waiting to hear more first quarter earnings. If they continue to be positive, this should provide a further boost in U.S. markets and those worldwide.
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