Near-term Caution, Long-term Opportunities

May 16, 2016

The S&P 500 fell 0.5% last week, while the Dow and the small-cap Russell 2000 both registered a more significant -1.1% decline.  This marks the third consecutive weekly decline, the longest since the year-opening 10.3% air-pocket.  Commodities were mixed, with gold falling by 1.6% to $1,272/oz., while crude oil rose by 3.5% for the week.

The earnings reporting season was particularly depressing last week. Brick-and-mortar retailers like Macy’s, Kohl’s, and then Nordstrom all reported less-than-expected results, which resulted in double-digit stock declines.  Fortunately, total retail sales [much broader than just department stores] increased 1.3% for the month of April. Autos, gasoline and internet were important upside catalysts.

briefing 051616

We have now had a chance to review ~92% of the S&P 500 corporate results. So far, earnings have declined 7%, and further declines are expected in the second quarter. The good news is that this should reverse in the second half of the year.

“Plus ça change, plus c’est la même chose” – Jean-Baptiste Alphonse Karr