Market update for the second quarter

Strong corporate earnings, results from the French presidential election, and a tax reform proposal combined to propel stock prices higher in April.

The Dow Jones Industrial Average rose 1.34 percent, while the Standard & Poor’s 500 Index added 0.91 percent. The NASDAQ Composite picked up 2.3 percent.*

Stocks began the month flat to modestly lower in the wake of the American airstrike on Syria. General unease over Fed plans for managing the downsizing of the $4.5 trillion portfolio it accumulated post-2008 was another factor.

Rising global tensions, along with President Trump’s comments about the U.S. dollar being too strong, pushed stocks lower as the month unfolded. The price retreat continued with reports of disappointing company earnings, as well as concern that momentum on tax reform initiatives by the White House and Congress was evaporating.

TAX REFORM MOMENTUM

However, after assurances from the Treasury Secretary that tax reform efforts were progressing, markets quickly regained their footing and moved sharply higher.

As the markets entered the final trading week of the month, prices were boosted by the results of the French election, news of an ambitious corporate tax-reform plan, and better-than-expected earnings reports and full-year earnings guidance.

SECTOR PERFORMANCE

Energy was the only sector in the S&P 500 to end lower for the month, falling 0.66 percent. Sectors leading the charge higher included Consumer Discretionary (+4.50 percent), Industrials (+3.65 percent), Materials (+3.38 percent), Technology (+2.65 percent), and Real Estate (+2.35 percent). Also ending higher were Financials (+1.32 percent), Health Care (+1.09 percent), Consumer Staples (+1.01 percent), and Utilities (+0.50 percent).*

Strong first quarter earnings appear to be more than a short term phenomenon. It looks like we’re in the midst of an uptick in economic growth. What’s more, earnings revisions and analyst sentiment are equally as bullish. Around 80% of S&P firms that have reported have beaten analyst’s estimates. This improvement is broad based as the above figures on sector performance show.

Looking forward, all eyes will be on the Fed. In response to the financial crisis in 2008, they aggressively bought US Treasury and mortgage bonds of which they now have $4.5 trillion on their balance sheet. How they fashion an orderly exit is the big issue now. Investors will be focused on comments from Fed members and minutes from future meetings. Coupled with a probable interest rate increase in June, markets will focus on how this market’s will react to these moves.

D. Scott Peterson is CEO and head investment manager for Peterson Wealth Management may be reached at 775-673-1100/775-423-8007 or at Petersonwm.com.