Market Direction Week of April 18, 2016

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Last Week Review: Stocks rallied on the week, but weekly market performance continues to be choppy, indicated by 5 weeks in a row of alternating positive and negative performance. Better-than-expected Chinese trade data proved to be a catalyst for stocks as investors have feared a "hard landing" in China's economy. Additionally, bank earnings set a positive tone as companies kicked off the first earnings season of 2016. While aggregate first-quarter earnings are expected to be down year-over-year, stabilization in the U.S. dollar and the price of oil could relieve recent earnings headwinds, allowing profits to resume their upward trend through the rest of 2016.

With the SPX less than 3% from a record high and the VIX within a point of its year-to-date low, it would be relatively easy to think that all is well in the marketplace. But Q1 economic data has been coming in pretty weak and while earnings season has barely begun, some estimates indicate that Q1 earnings could decline as much as -8% and Q1 revenues could decline by more than -1%.

How the market finished last week, the S&P 500 up 1.6%, the Nasdaq up 1.8%, and the Dow up 1.8%.

This Week: Speeches from Federal Reserve Bank Presidents, the historic oil producer meeting in Doha and plenty of earnings announcements are likely to set the stage for a volatile week in the markets. Additionally, many estimates are indicating that Q1 GDP could be less than +1%. This would be the weakest since Q1 2015, which came in at +0.6%.

While the economic calendar is rather light next week, earnings season will be ramping up sharply with reports from several high profile, bellwether companies. Additionally, speeches from Federal Reserve Bank Presidents Bill Dudley, Neel Kashkari and Eric Rosengren on Monday, combined with the outcome of the OPEC and non-OPEC oil producers meeting in Doha, Qatar should provide plenty of reason for volatility starting on Monday. 

Economic Calendar: Housing Starts (4/19), Existing Home Sales (4/20), Philadelphia Fed Business Outlook Survey (4/21)

Some of the major earnings announcements on deck: IBM, GWW, GS, JNJ.

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