Stocks were lower today to close out the week. The Dow closed off 54 to 17,775 on heavy volume. For the week the Dow was down by about 1% and for the month of April is was up about 0.6%.
We may be entering a period of disruption both within markets and industries. The key is to be on the side of the “disruptor” and not on the side of the “disruptee” One disruptor is Amazon and the company reported earnings last night that, like Facebook, came in better than even the most optimistic expectations. Shares shot higher as analyst cheered a 28% revenue gain (highest in two years) and a 992% surge in profits.
Biotech leader Gilead Sciences fell hard after reporting disappointing numbers. The company posted a 3% increase in revenue and a 3% increase in profits. Analysts are saying that Gilead is a victim of its own success because the bigger you get the harder it is to keep getting bigger when you suddenly face competition and price controls as health care costs rise. While shares were lower the gurus are still positive on Gilead long term since many feel that biotech earnings generally tend to be weak in the first quarter.
Between now and July 1st, Puerto Rico could become the first state level default since the great Arkansas rift of 1933. PR muni bonds are trading at 20 cents on the dollar and congress is working on a rescue package to avoid what could be a $70 billion hit to the US municipal bond market. Since Puerto Rico is not a state it does not have access to bankruptcy laws so a special deal will need to be made. The gubment in PR is desperate for revenue in a country where taxes are high, people are leaving, unemployment is over 11% and the labor force participation rate is under 40%. One PR official said of the current situation “it is no one’s fault, yet it is everyone’s fault”.
Gold appears to be breaking out as it surged today thanks to a weak US dollar. Gold broke above resistance at $1,270 and ended the day up $27.80 to $1,294.