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Stock Market News For May 17, 2018

Zacks Equity Research
Comcast (CMCSA) is ready to pay more than Disney's (DIS) offer of $52.4 billion for 21st Century Fox's (FOXA) assets.

U.S. stock markets surged on Wednesday reversing previous day’s broad-based decline. In particular, retail stocks have gained on strong sales data of April and Macy’s first quarter earnings report. Moreover, Russell 2000, the benchmark index for small-cap stocks hits an all-time high. All three major indexes closed in the green as investors appeared to ignore concerns regarding rising yield on the U.S. government bonds and geopolitical tensions.

The Dow Jones Industrial Average (DJI) closed at 24,768.93, increased 0.3%. The S&P 500 Index (INX) increased 0.4% to close at 2,722.46. The Nasdaq Composite Index (IXIC) closed at 7,398.30, increased 0.6%. A total of 6.22 billion shares were traded on Wednesday, lower than the last 20-session average of 6.66 billion shares. Advancers outnumbered decliners on the NYSE by 1.92 -to-1 ratio. On the Nasdaq, advancers had an edge over decliners by 1.95 to -1 ratio. The CBOE VIX decreased 8.3% and closed at 13.42.

How Did the Benchmarks Perform?

The Dow gained 0.3%. Notably, 18 of the 30-stocks in the blue-chip index closing in the green while 12 traded in the red.  

The S&P 500 increased 0.4% led by 1.2% increase of the Materials Select Sector SPDR (XLB). Notably, 9 out of 11 sectors of the benchmark index ended in positive territory.

The Nasdaq Composite also increased 0.6% led by a recovery in large tech stock’s prices.

Russell 2000 Achieves a Milestone

Small-cap benchmark index, the Russell 2000 (RUTX) gained 1% after hitting an all-time high of 1620.64 in Wednesday’s trading. Over the last three months, the Russell 2000 is up nearly 8%.

Retails Stocks Gains

The Commerce Department reported that U.S. retail sales rose 0.3% for the month of April, at par with the consensus estimate. Retail sales are up for two straight months and also rose 4.7% year over year. Notably, 9 out of a total of 13 industries witnessed an increase in sales in April.

Macy’s Inc. M surged 10.8% as the retail giant reported strong results in the third quarter of fiscal 2018. Adjusted earnings per share of $0.48 surpassed the Zacks Consensus Estimate of $0.36. Net sales of $5,541 million outpaced the Zacks Consensus Estimate of $5,444 million (Read More).

U.S. Government Bond Yields Continue to Rise

On Wednesday, yield on 10-year Treasury note extended its gain further to 3.10%, after hitting its seven year high of 3.07% yesterday. A yield of 3% on 10-year Treasury note generally regarded as a psychological barrier at which stage flight of capital takes place from risky equities to safe haven bonds.

However, according to several industry researchers, investors are not necessarily to be perturbed as the yield rate crossed the sensitive 3% barrier. At present, both inflation and interest rate are within the target rate of the Fed and stock valuations appeared to be justified.

Geopolitical Conflict with North Koreas Intensifies   

On Wednesday, Kim Kye Gwan, a senior foreign ministry official and a longtime diplomat of North Korea stated that his country will not take part in a summit with the United States which will focus only on denuclearization of North Korea. Notably, President Donald Trump is scheduled to meet his North Korean counterpart Kim Jong-Un on Jun 12 in Singapore.

Trump and Un are likely to discuss about Pyongyang’s denuclearization procedure for an array of economic compensation package. Meanwhile, Kim Kye Gwan stated yesterday that North Korea is not interested to do away with its nuclear weapons simply for some economic benefits.

Economic Data

The U.S. Federal Reserve reported that industrial production for the month of April rose 0.7%. This was the third straight month of industrial output’s expansion. April’s reading of 0.7% was also better than the consensus estimate of 0.5%. Industrial capacity in April rose 0.4% to 78.0.

The Commerce Department reported that the U.S. housing starts dropped 3.7% to a seasonally adjusted annual rate of 1.287 million units in April. This was lower than the consensus estimate of 1.314 million. The data for March was revised from the previous figure of 1.319 million to 1.336 million. Building permit in April were 1.352 million lagging the consensus estimate of 1.355 million.

Stock That Made Headline

Southwest Shares Up on Dividend Hike & New Buyback Program

Southwest Airlines Co. LUV has rewarded shareholders with 28% dividend hike and a new share repurchase authorization worth $2 billion. (Read More)

Walmart's Q1 Earnings & Sales Jump Y/Y, Online Sales Up

Walmart Inc. WMT posted first-quarter fiscal 2019 results, wherein both earnings and revenues improved year over year and exceeded the Zacks Consensus Estimate. (Read More)

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Southwest Airlines Co. (LUV) : Free Stock Analysis Report
 
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