Market Drivers: Earnings, Data and Ukraine

U.S. equity markets rebounded after a weak performance last week and appear to be holding support levels set back in November 2013. Some positive results from financial bellwethers and solid economic data have fueled the positive sentiment. Here are three things that have driven the market this week:   

Earnings Action

Quite a few high profile names announced results this week, particularly in the financial sector. Citigroup shares rallied on Monday after the bank reported better than expected quarterly results which topped estimates on both lines. On Tuesday, Charles Schwab also saw their shares trade higher after beating estimates on both EPS and revenues. Wednesday results painted a different picture, with both Bank of America and Credit Suisse shares trading lower after disappointing EPS misses. Next week we will expect results from a wide range of companies including Halliburton, Travelers, AT&T, and Juniper Networks.

By The Numbers

In addition to earnings news, traders have had some economic data to digest this week, starting on Monday morning with retail sales, which grew 1.1% in March after rebounding 0.3% in February. The rebound in sales could indicate that some pent up demand from the long winter may be starting to flush itself out, though much of the jump was attributed to strong auto sales. There was also a solid advance in furniture, home furnishings, and building equipment which could be a result of the improving housing market having a ripple effect across the broader economy. Consumer spending appears to be playing catch up after consumers were forced to stay inside during the adverse winter weather. The numbers will likely nudge up GDP forecasts for the first quarter, though stronger sales numbers were not enough to put a dent in supply numbers , as February business inventories only rose 0.4%.

Ukraine Developments

After remaining relatively quiet last week, tensions in Ukraine are flaring up. This past weekend the country's army exchanged gunfire with pro-Russian separatists attempting to seize government buildings in the southeastern region. Separately, another group of rebels attacked a police headquarters in the region. Apart from the financial jolt to world markets, this increasing intensity pushes the region closer to a full blown military conflict, creating the potential for an arms race among countries looking to prepare themselves for an escalation. Another effect seems to be the creation of an “East – West” mindset that the world has not seen since the Cold War.   

Weekly Bonus – Banana Shortage Fears

The United Nations warns that the world may face a banana shortage due to the spread of an incurable fungus across the globe. The disease, known as Tropical Race 4 or Panama Disease, has been around for nearly 20 years and has caused major damage to Southeast Asia banana crops. The fear now is that the fungus is spreading into Latin America, which is the world's leading producer of bananas.  Globally, bananas rank as the eighth most important crop and the fourth most important in poor nations. There is hope that countries impacted by this disease will band together to try to stop it before it gets any worse. In the meantime, it may be a good idea to find alternative fruits to put in your Rice Krispies!