Positive overall quarterly earnings and some encouraging data on the economy protected US stocks this week from tensions over Ukraine and frail enthusiasm for tech stocks.
Markets fought off selling pressure on Thursday to end the holiday-shortened week with solid gains, and a surprise boost for the initial public offering (IPO) star of the week, China’s Sina Weibo (新浪微博), served as an exclamation point for the period.
The edginess of the previous weeks remained, though, as seen in general volatility and the huge amount of online and media discussion about inflation and a tech bubble, and especially in comparisons of the level of margin buying now and prior to previous sharp market falls.
However, with repeated assurances from the US Federal Reserve that interest rates will stay at rock-bottom levels well into next year, signs of firm growth after the winter and no sign of inflation, investors stayed the course.
The S&P 500 picked up 2.7 percent to end at 1,864.85 for the week, leaving it still 0.9 percent higher than it started the year.
The narrower Dow Jones Industrial Average gained 2.4 percent to 16,408.54, as did the tech-heavy NASDAQ Composite. However, the Dow was 1 percent lower for the year and the NASDAQ nearly 2 percent down.
Some big companies disappointed the market with earnings, with Bank of America dragged to a first quarter loss by legal costs, and IBM and Google both also challenged by tougher markets.
However, S&P Capital IQ said that of the 84 members of the S&P 500 to report so far, 53 beat forecasts, 22 missed and the rest were on par with expectations.
“On balance, even though there are some household names that have disappointed, like JPMorgan and IBM, the earnings season has been better than expected,” Wunderlich Securities chief market strategist Art Hogan said.
Even Google, which took a sharp fall on Thursday as investors took note of rising costs and lower-than-expected earnings gains, still ended the week up 1 percent.
The worries and the trading bullishness, at least short term, were on display with the IPO for Weibo, China’s answer to Twitter.
The company hoped to sell 20 million shares at US$19 each, but underwriters could only source demand for 16.8 million at US$17.
“It’s a tough market... The entire IPO market is rather soft,” Sina Weibo CEO Charles Chao (趙廣民) said.
However, when the shares began trading, they quickly pushed higher, topping US$24 before ending the session on Thursday at US$20.24, up 19 percent.
Alan Skrainka at Cornerstone Wealth Management said the focus is still on whether tech stocks are overpriced.
“What still is foremost on investors’ minds is the potential of a continued correction in some of the most frothy stocks, the technology, and small caps,” he said.
“We had a great run with the hot stocks, and investors are viewing these issues with a much more cautious eye than they were a few weeks ago,” he said.
Mace Blicksilver at Marblehead Asset Management remained cautious.
“I’m not so sure the market can make further headway,” he said.
He worries that the Fed would still tighten if the economy strengthens. At the same time, Ukraine “is a very hot issue,” despite the agreement between Russia, Europe, the US and Ukraine on Thursday to try and ratchet down the tensions, he said.
John Browne of Euro Pacific Capital said investors should be taking the Ukraine crisis more to heart.
“Much of the geopolitical balance of power that has been in place for much of the past 25 years will be tested on the banks of the Black Sea,” he said.
“Investors should take a few minutes from their daily technical chart analysis to consider these major developments,” he said.
The coming week will be long on quarterly reports from major companies, but relatively thin on economic data releases: existing home sales numbers and durable goods orders for last month.
Analysts generally predicted tepid numbers for the last weeks of the harsh winter.
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