Stocks End Week Little Changed Despite Weaker Than Expected Domestic Data

Strategic Insights -

Stocks ended the week largely unchanged as a slew of weaker than expected economic data points failed to significantly move the major averages off their near-record levels. Amidst this backdrop, Federal Reserve Chair Janet Yellen emphasized the central bank's commitment to raising interest rates, citing continued improvement in labor market conditions and a return to 2% inflation over the medium term. Meanwhile, key economic indicators, such as housing starts and jobless claims, revealed mixed signals about the health of the US economy.

Key Takeaways:

  • The National Association of Home Builders' confidence index fell 2 points to a reading of 54 in May, while housing starts surged 20.2% to a 1.14M home annualized rate in April.
  • Initial jobless claims came in at 274K last week, versus expectations for 270K first-time claims.
  • Federal Reserve Chair Janet Yellen remains committed to raising interest rates this year, citing continued improvement in labor market conditions and a return to 2% inflation over the medium term.
  • Markit's flash PMI dipped to 53.8 in May, marking a second straight monthly decline, while HSBC's flash China PMI for May rose to 49.1, indicating contraction in the country's manufacturing activity.
  • The Bank of Japan left policy unchanged, with BOJ Governor Kuroda stating that a "positive cycle is kicking in."
  • Benoit Coeure, ECB Executive Board member, announced that the central bank will frontload bond purchases in May and June ahead of a period of lower market liquidity in the summer.
  • Carl Icahn endorsed Apple's (AAPL) stock, citing potential for the company to enter new markets, such as television production.
  • Time Warner Cable (TWC) rose after reports of potential talks with Altice regarding a deal.
  • Microsoft (MSFT) and Salesforce (CRM) reportedly held talks regarding a potential acquisition, but failed to reach a deal.
  • CVS Health (CVS) announced a deal to acquire pharmacy service provider Omnicare (OCR) for an enterprise value of about $12.7B.
  • Ann Inc. (ANN) surged after agreeing to be acquired by Ascena Retail Group (ASNA) for about $2.15B in cash and stock.

Statistics:

  • The Dow lost about 0.21% to close at 18,232.02.
  • The S&P 500 rose about 0.17% to close at 2,126.06.
  • The Nasdaq advanced about 0.83% to close at 5,089.36.
  • Initial jobless claims came in at 274K, versus expectations for 270K first-time claims.
  • Markit's flash PMI dipped to 53.8 in May, marking a second straight monthly decline.
  • HSBC's flash China PMI for May rose to 49.1, indicating contraction in the country's manufacturing activity.

Sources:

  • TheFlyOnTheWall.com via COMTEX, May 22, 2015.