Stocks began the week with see saw trading before the final bell put the Dow off 55 points on light volume at 17,737. (Sounds like a Boeing order).
Last week’s jobs report was initially touted as “strong” yet a closer look at the guts of the data show that wage growth is being held in check by a loss of manufacturing jobs and a big gain in part time retail jobs. This shift from high wage work to minimum wage work is why the market went up because Fed Chair Janet Yellen sees this data and knows that the economy might not be strong enough to warrant any aggressive rate hikes. One word that is increasingly prevalent in comments by board members of the Federal Reserve is the word “global” meaning that members are increasingly looking at overseas events to help determine fed policy.
Expectations for 1st quarter earnings reports have been paired back. The current consensus shows that Q1 earnings are expected to be down 9.3% from Q1 in 2015. What the gurus will be watching is top line revenue vs bottom line profits. If revenue is soft but profits are good then the implication is that companies are cutting costs (aka layoffs) which again is not healthy for labor. Full year earnings estimates are now pegged at +2.2% which is a significant reduction from just a few months ago. Stay tuned.
Alaska Airlines announced it has won a bidding war with Jet Blue and will purchase Virgin American in an all cash deal of $2.6 billion. The deal gives Alaska more presence in the New York, Washington DC area via direct flight links with San Francisco and LA. Alaska expects the deal to add 27% to revenue plus it also means Russell Wilson’s face will be “big in New York” which should drive Jets fans nuts! Shares of Alaska were lower on the news while Virgin America’s stock shot higher.