April showers bring May flowers, and they are blooming today on Wall Street on the first trading day in May. Even though stocks were lower on Friday, the S&P 500 was up 5.6% in April and has been up the past 3 consecutive months. Year to date, the S&P is up 11%. The Nasdaq rose 7% in April and the Dow gained 2.74%.
While many say sell in May and go away, the start of the month is being met with buying. Investor confidence in stocks is being bolstered by good earnings and reopening trades. Berkshire Hathaway reported a 20% gain in operating earnings, to $7.02 billion from $5.87 and net income was $11.7 billion versus a loss of $49.7 billion in the prior year period. And the company has been buying large amounts of its own stock. The company also announced that when the Oracle of Omaha, Warren Buffet steps down, Greg Abel, vice chairman of all non-insurance operations, will take the helm.
The earnings parade continues this week. So far, with 60% of the S&P companies reporting, the results have been great.
- 86% have reported earnings above estimates (above 5yr avg of 74%)
- Highest percentage 2008
Reopening stocks are trading up this morning. Cruise lines and airlines are all higher in the premarket. According to the latest research from @DataArbor, consumers are continuing to want to get out and spend money. There is so much pent-up demand to travel. After over a year of restrictions and lock downs, demand for bicycle, exercise equipment, food/delivery, and even the hot home improvement mania is seeing less demand.
We didn’t add any new position to the Hotline Model Portfolio on Friday. We are adding to Industrials this morning.
Federal Reserve Chairman Jerome Powell is scheduled to speak at 2:20 p.m. ET at the Just Economy conference. Investors will be listening carefully to his comments, especially after Dallas Fed President Robert Kaplan said he thinks the time has come to discuss tapering asset purchases.
On the acquisition front, Apollo Global Management is acquiring Yahoo and AOL from Verizon Communications for $5 billion. Verizon is exiting the media business.
Manufacturing PMI data for April will be out at 9:45 a.m. ET and the ISM manufacturing at 10 a.m. It will be a big week, with all eyes on April’s job report, which will be released on Friday.
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