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Weekly market recap: Markets Recover

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Overview

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For the week ending April 19, 2014, the equity markets strongly rebounded making up most of the prior week's losses. Dovish comments from the Fed, better than expected economic data coupled with favorable first quarter earnings, helped the markets gain over 2 percent; the best weekly gain since July 2013 for the S&P 500 Index.

Fed Chair Janet Yellen spoke before the Economic Club of New York on Wednesday. She reiterated her belief that there is more slack in the labor market than is reflected in the unemployment rate, preferring the BLS U-6 measure of underemployment. In addition, Yellen also stated that an increase in rates will be based on qualitative factors incorporating various indicators, and does not expect any change before 2015.

Reported earnings from Citigroup, Coca-Cola, GE, Morgan Stanley, and Johnson & Johnson, that matched or beat estimates, helped boost the equities market. If reported earnings continues beating estimates next week, we can expect the current rally to continue.

The economic news this week was mostly positive. Retail Sales grew 1.1 percent (vs. 1.0 percent expected) with the latest advance in motor vehicles; Industrial Production topped expectations, growing 0.7 percent (vs. 0.4 percent expected); and the Weekly Jobless Claims reported 304 thousand (vs. 312 thousand expected). The spring thaw has certainly provided a boost to the economy.

In The News

The situation in the Ukraine has eased somewhat on Thursday as Russia, Ukraine and the West forged an international deal for the pro-Russian separatists to vacate seized government buildings. This is considered the first step toward easing the Ukrainian crisis. As of Friday, the self-declared leader of the separatists has rejected the deal.

The Keystone pipeline review has been extended on Friday due to litigation in the Nebraska state court. The federal government is awaiting the state decision on possibly rerouting the pipeline. The final decision would likely be delayed beyond the November midterm elections.

Next Week

As a result of the spring thaw, the manufacturing and consumer sectors are making up for lost activity. Manufacturing shipments were up 1.4 percent for February, their highest level since July 2008. And the consumer price index was up 0.6 percent for March.

The focus next week in the U.S. will be on Housing and Manufacturing, with Existing and New Home Sales data early in the week, and Durable Goods Orders later in the week. The focus overseas will be the flash PMI reports for manufacturing and services. China will be reporting its PMI Flash Mfg Index Tuesday night, and the EU will be reporting its PMI Composite Flash on Wednesday morning.

We are expecting volatility spikes to continue next week as the situation in the Ukraine unfolds, and earnings season continues. There is the possibility of testing the highs in the markets if better than expected earnings reports emerge. If this occurs, the potential correction may occur in May (according to the pundits).

Market Gauge

Year-to-date the markets are mixed: Dow -1.0%; S&P500 +0.9%; Nasdaq -1.9%.

The Markets for the past week were: DJIA up 2.4%; S&P500 up 2.7%; Nasdaq COMP up 2.4%.

Commodities (ETFs) for the past week were: Gold (GLD) down -1.72%; Silver (SLV) down -1.62%; Oil (OIH) up 4.20%; Dollar (UUP) up 0.47%; 30-yr Bonds (TYX) rose 4 basis points to 3.52%.

The VIX this past week (a measure of market sentiment and volatility) dropped to 13.36% due to an improving economy, better than expected earnings, and a slightly lowered concern over the Ukraine crisis.

Top Headlines

To view details of headlines, go online to CNBC.

In the U.S.: Obamacare final enrollment hits 8 million; US claims rise modestly amid recovery; Minimum wage boost would cost firms $15B; California's Obamacare wave was big; Home price slowdown leaves millions underwater; Morgan beats; CEO vows to 'reward' shareholders; Monetary policy can't save unemployed: Economist; Fired Yahoo exec gets $58M for 15 months of work; Holy guacamole! Chipotle to raise prices soon; Citi: Mixed signals from the Fed on 'stress test'; Goldman profit falls 11%, but tops estimates; Players should get paid: Kentucky coach Calipari; Home Depot puts a lid on new-store openings; Get used to it: The rich will continue to get richer; Pitfalls to avoid with an inherited IRA; DuPont profit falls 57% after sale of coating unit; GE narrowly beats as transport revenue slides; Why missing Malaysia jet suits may get thrown out; and Google earnings miss Street, shares drop 6%.

In Europe: Russia tries reassuring the West's money; Can Europe steal America's IPO crown?; Capital markets—a problem for Russia; Top bankers strip for a good cause; Who are the separatist rebels destabilizing Ukraine?; Putin: We could cut off the gas in a month; Europe car sales rise; recovery ‘widespread’; Amazon faces fresh wave of German strikes; Publicis CEO: No 'embarrassing questions' on merger; Co-Op Group announces 'disastrous' full-year loss; Russian retailer Lenta undeterred by Ukraine crisis; Putin risks upstaging talks on defusing Ukraine crisis; Russia's economy feels the sting of Ukraine crisis; Russia warns of civil war: What’s next for Ukraine?; Starbucks to relocate European HQ to UK: Report; Euro zone's richest investors cash in on stocks; Scottish independence stirring voters: Poll; UK unemployment hits 5-year low, pay growth upbeat; Ex-Man United boss sells $5 million wine collection; UK food banks report ‘shocking’ rise in demand; Tesco sees tough trading environment ahead; Burberry second-half revenue jumps 19%; Credit Suisse profit down as trading revenue falls; and Ukraine takes action to dislodge separatists.

In Asia: Avalanche kills 12 Mount Everest guides; Why India's elections take so long; South Korea ferry death toll rises; China new home prices rise 7.7% on year in March; Why missing Malaysia jet suits may get thrown out; Hundreds still missing in deadly Korea ferry accident; India kicks off biggest day of voting in huge election; US earnings weighing on Asian stocks: OCBC; Political novice meets gritty reality in India election; China's workforce: smaller, more savvy, more restive; More than 300 people missing after South Korea ferry sinks; Small companies all over China facing credit squeeze; We can operate at low copper prices: Central Asia Metals CEO; Volvo: Ukraine crisis won't hurt our Asia business; Why Japanese bonds look 'terrible': Kyle Bass; India's wholesale inflation hits three-month highs; Diageo launches tender offer for 26% of United Spirits; Infosys Q4 net profit up 25%, beats forecasts; Australia approves second airport for Sydney; China March new bank loans in line, M2 growth slows; and Small China developer goes on a $3.3 billion buying spree.

Weekly Review

To see the week in review, go to the Econoday calendar.

On Monday, with strong results from Citibank and retail sales, the Dow rose 0.9% to 16,173.

On Tuesday, with strong earnings from Coca-Cola and Johnson & Johnson, the Dow rose 0.6% to 16,262. Gold dropped $20 to $1,300.

On Wednesday, with dovish statements made by Fed Chair Janet Yellen and a strong industrial production report, the Dow rose 1.0% to 16,424.

On Thursday, with a good jobless claims report and mixed outlook on the Ukraine, the Dow dropped fractionally to 16,408.

On Friday, the markets were closed for Good Friday.

Next Week's Calendar

To see what's on the calendar for next week, go to the Econoday calendar.

The economic calendar for next week is light: on Monday – nothing; on Tuesday – Existing Home Sales; on Wednesday – Weekly EIA Petroleum Status Report, PMI Manufacturing Index Flash, New Home Sales; on Thursday – Weekly Jobless Claims, Durable Goods Orders; and Friday – Consumer Sentiment.

If the Markets move down, stay on the side lines or consider Contra ETFs. For Option players, selling premium is advised.

To the Charts

The following ETFs (DIA, SPY, QQQ) provide a technical review of the Market (and are also excellent Option trading vehicles). Represented are the Dow Industrials (DIA), S&P500 (SPY), and Nasdaq 100 (QQQ).

The Charts for each include views for Monthly, Weekly (including Price Channels), and Daily (including monthly Pivot Points) with MACD and Stochastic indicators. The Pivots are: white for central pivot point; yellow for R1 and S1; magenta for R2 and S2; red for R3 and S3.

For more information about options, see the 'Suggested by the author' links below.

DIA

The Dow Industrials (DIA) closed up at 163.75. If the DIA drops, then the next level of support will be at 157.13 (weekly chart); the next level of major resistance is 166.06 (weekly chart).

The monthly chart indicates a bullish posture (up Arrow) with the MACD positive but weakening, and the Stochastic moving up above the overbought area.

The weekly chart indicates a bearish posture (down Arrow) with the MACD positive and strengthening, and the Stochastic moving up below the overbought area.

The daily chart indicates a bullish posture (up Arrow) with the MACD just positive, and the Stochastic moving up below the midpoint.

SPY

The S&P500 (SPY) closed up at 186.39. If the SPY drops, then the next level of support will be at 179.21 (weekly chart); the next level of major resistance is 189.70 (weekly chart).

The monthly chart indicates a bullish posture (up Arrow) with the MACD positive but weakening, and the Stochastic moving up above the overbought area.

The weekly chart indicates a bearish posture (down Arrow) with the MACD positive and strengthening, and the Stochastic moving down below the overbought area.

The daily chart indicates a bullish posture (up Arrow) with the MACD negative but strengthening, and the Stochastic moving up toward the midpoint.

QQQ

The Nasdaq 100 (QQQ) closed up at 86.20. If the QQQ drops, then the next level of support will be at 83.28 (weekly chart); the next level of major resistance is 91.36 (weekly chart).

The monthly chart indicates a bearish posture (down Arrow) with the MACD positive but weakening, and the Stochastic moving down above the overbought area.

The weekly chart indicates a bearish posture (down Arrow) with the MACD negative and weakening, and the Stochastic moving down below the midpoint.

The daily chart indicates a bearish posture (down Arrow) with the MACD negative but strengthening, and the Stochastic moving up above the oversold area.

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