U.S. stocks rose as investors anticipated another busy week for corporate earnings and the release of a host of economic data, which had previously been delayed due to the month-long partial government shutdown.
The S&P 500 (^GSPC) rose 0.68%, or 18.34 points, as of market close. The Dow (^DJI) rose 0.7% or 175.48 points, while the Nasdaq (^IXIC) edged up 1.15%, or 83.67 points.
As of Friday, the percentage of companies who beat Wall Street’s expectations on earnings per share totaled 70%, below the five-year average, according to Factset. And the companies on average reported earnings 3.5% above estimates, also coming in below the five-year average. In terms of revenue, however, both the percentage of companies beating expectations (62%) and the average size of the beat (0.8% above expectations) have been above their respective five-year averages.
Analysts are anticipating a decline in earnings for the first quarter of 2019, along with low single-digit growth in earnings for the second and third quarters of 2019, according to Factset.
On Monday, 12 S&P 500 companies will report results. Some of the major names including Google-parent Alphabet (GOOG, GOOGL), Gilead (GILD), Sysco (SYY) and Alexion Pharma (ALXN).
Meanwhile, Congress is nearing a deadline to reach an agreement on border-security spending to prevent the government from going back into a shutdown. A stopgap measure has provided funding to keep an array of agencies operating until February 15. However, congressional negotiators will need to complete their work by the end of this week in order to provide time for votes.
President Donald Trump will deliver a State of the Union address Tuesday amid the ongoing debate among congressional lawmakers over whether to provide the $5.7 billion in border security funding the president has demanded. Trump on Friday told reporters there is a “good chance” he will declare a national emergency to build his wall along the southern border. A declaration of a national emergency would likely “prompt instant lawsuits, but it probably would avoid another shutdown,” Greg Valliere, Horizon’s chief global strategist, wrote in a note.
Elsewhere, a private survey released Sunday from Caixin/Markit showed that activity in China’s services sector softened slightly in January. The Caixin China General Services Business Activity Index edged down to a reading of 53.6 in January from 53.9 in December. Still-solid activity in the country’s services sector helped offset weakness in manufacturing industries: Caixin’s composite purchasing managers’ index, which considers both manufacturing and services sectors, declined more steeply to 50.9 from 52.2 in January.
“The positive momentum in Chinese services carried over from Q4 suggests that Q1 won’t be a write-off, even if manufacturing indicators continue to sour,” analysts from Pantheon Macroeconomics wrote in a note. “The new business sub-index rose to its highest level in seven months, though we’re taking this with a pinch of salt as forward-looking components are susceptible to seasonal noise ahead of Chinese New Year.”
Markets in mainland China and Taiwan are closed for the week in observance of the Lunar New Year.
China’s services sector has continued to outperform the country’s manufacturing sector amid ongoing industry restructuring, pollution crackdowns and trade tensions with the United States.
Last week, Chinese Vice Premier Liu He wrapped up a round of trade negotiations with U.S. officials in Washington, D.C. Few tangible signs of progress have emerged from the latest meeting. However, Trump has said he was optimistic about reaching a deal and suggested he will meet with Chinese President Xi Jinping soon. The current ceasefire on additional tariffs between the U.S. and China ends at the beginning of March.
STOCKS: Tesla to buy energy storage company Maxwell Technologies
Tesla (TSLA) has entered a definitive merger agreement to acquire Maxwell Technologies (MXWL), a San Diego, California-based energy storage company, in an all-stock deal. The deal values shares of Maxwell common stock as $4.75 each – a premium of about 55% based on Maxwell’s closing prices on Friday. The deal is anticipated to close in the second quarter of 2019, according to a statement from Maxwell.
Activist investor Starboard Value has taken a $200 million stake in Papa John’s Pizza (PZZA), with Starboard CEO Jeffrey Smith as chairman. Starboard’s investment involves a convertible stock purchase of 11% to 15% of the shares outstanding of the pizza chain. Smith’s appointment comes more than a year after Papa John’s founder John Schnatter resigned amid backlash after it was found that he used racist language during a conference call.
ECONOMY: Manufactured goods orders declined in November
New orders for manufactured goods in the U.S. declined 0.6% in November, following a 2.1% decline in October, the Census Bureau said in a statement Monday. Consensus expectations had called for a 0.3% increase in manufactured goods orders for the month. Factory orders excluding transportation fell 1.3% in November, following a downwardly revised 0.2% increase in October.
Manufactured durable good orders increased 0.7% in November, falling short of the 1.5% increase anticipated by consensus economists. Transportation equipment helped drive the increase, with orders in this category increasing 3% and rising for three out of the past four months. Excluding transportation, durable goods orders fell 0.4% in November.
The release of November data for manufactured and durable goods orders had been delayed due to the partial government shutdown.
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