We use cookies to personalize content and ads and to analyze our traffic.
We also share information about your use of our site with our advertising and analytics partners. See details.

We use cookies to personalize content, ads, analyze traffic and share information about your use of our site. See details.

Press Releases
Thought Leadership
Product Insight
Market and Economics
Portfolio and Risk Analysis
Companies and Earnings
Shareholder Distributions
Fixed Income
Hedge Funds
M&A and Corporate Activism
Market Summaries
Fact Sheets
Tools and Tips
White Papers

FactSet StreetAccount Summary - US Weekly Recap: Dow +0.45%, S&P +0.31%, Nasdaq +0.89%, Russell 2000 +0.73%

May 15, 2015


  • The major US equity indexes all finished higher this week, while sector performance was mixed. The backup in global bond yields dominated the headlines again, though there were some signs of reprieve. 
  • Stocks remained fairly resilient when considering the broader risk-off implications and the fact that another batch of softer-than-expected global economic data added to the skepticism surrounding the reflation theme. 
  • While the data fit with the risks of a later liftoff, Fedspeak highlighted transitory headwinds and underlying recovery traction. This kept some focus on the divergence between market and Fed policy normalization expectations. 
  • It was a quieter week on the earnings calendar. Retail received most of the attention. Along with another weaker-than-expected retail sales report, results out of the department store space largely disappointed. 
  • Another busy week of M&A and deal speculation continued to drive a number of outsized moves across a broad range of sectors. Activism also remained in focus, though Trian suffered a high-profile defeat. 
  • In terms of sectors, consumer staples, healthcare, industrials and tech were among the standouts. Energy put in the worst performance, while materials, financials and consumer discretionary also finished lower. Global bond yield backup still the big story: 
  • Despite some pockets of reprieve, including most the Treasury curve, the backup in global bond yields remained the big story this week. The debate about the drivers behind the move continued to heat up as there seemed to be an increasing amount of frustration with the extent to which crowded positioning in overvalued Eurozone bonds has been blamed. A somewhat similar dynamic revolved around the liquidity (largely stemming from regulatory constraints) theme. However, none of the more fundamental narratives really gained much additional traction. Mostly disappointing economic data out of the US, Europe and China put a further damper on the recovery trade. In addition, ECB President Draghi reiterated that the central bank will fully implement its asset purchase program through September 2016 or until it sees a sustained adjustment in the path of inflation. While the rebound in oil has helped to ease disinflation fears, this week saw another batch of sell-side commentary highlighting expectations for a renewed downturn in crude. Strong demand at this week’s three- and ten-year Treasury note auctions also contrasted with the notion of a meaningful shift in the macro backdrop. 

Stocks fairly resilient:

  • Stocks remained fairly resilient despite the broader risk-off concerns surrounding the recent backup in global bond yields. There did not seem to be a specific factor behind the lack of equity volatility. A WSJ article, which noted that the S&P 500 has not had a single up or down move of 2% this year (compared with three such swings by this time in 2014 and two in 2013), highlighted some widely discussed factors such as the risk of a later liftoff, expectations for a very gradual policy normalization process, ECB policy support and the rebound in oil. While Credit Suisse said this week that it believes bonds have entered a bear market, it also pointed out that equity valuations are not undermined until 10-year Treasury yields push above 2.8% (vs ~2.15% at the end of the week). It noted that the economics of corporate buying remain compelling at current yields. BofA Merrill Lynch also touched on buybacks. It said that corporate share repurchases have generally picked back up since mid-April after decelerating for much of Q1. The buyback theme has been highlighted as an offset to investor outflows, though this week did see the first net inflows into US equity funds following eight straight weeks of outflows. 

Fedspeak, 2H recovery expectations and complacency concerns:

  • Another batch of softer-than-expected US economic data this week seemed to provide further support for expectations that liftoff may not happen until December, or even get pushed out to 2016. However, there also continued to be thoughts that markets are underestimating the Fed’s desire to begin the policy normalization process. A WSJ Heard on the Street column touched on this topic, highlighting the potential for another taper tantrum-like spike in Treasury yields and selloff in pockets of the market leveraged to high dividend yields if the Fed moves in September. In addition, San Francisco Fed President Williams, a current FOMC voter and widely perceived centrist, expressed some skepticism about the soft Q1 GDP print and said he remains “relatively upbeat” about the outlook for the US economy. He pointed out that for the past four years, Q1 real GDP growth has lagged the rest of the year by over 200 bp, citing weather as one of the higher-profile drags. Similar sentiment was evident in the latest WSJ survey of economists, with expectations for growth to rebound to 2.8% in Q2 and hold around 3% in 2H. 

Tough week for retail:

  • Retail was in focus this week on both the economic and earnings calendars. Retail sales came in flat for April vs consensus expectations for a 0.2% increase. In addition, the key core control group was also flat, while the Street was looking for a 0.5% gain. The report was a big disappointment given expectations that labor market momentum, lower energy prices, some pent-up demand from adverse winter weather and elevated consumer sentiment would finally start to underpin discretionary spending. In terms of the latter dynamic, the University of Michigan Consumer Sentiment index unexpectedly declined to a seven-month low in the preliminary May reading. Earnings out of the retail sector were not particularly well received either, with the department stores getting most of the scrutiny. KSS (11%), M +0.9% and JCP +0.7% (a late-week bounce helped the latter two names) all missed on sales and comps despite the extent to which headwinds such as weather and the West Coast ports slowdown had been hashed out going into the results. In addition, while gross margins helped to provide some cushion for earnings and there was talk of better May trends, it was not enough to dampen concerns about back-half weighted guidance. 

More M&A, activism headlines:

  • This week saw another batch of big movers on M&A headlines. PLL +24.3% agreed to be acquired by DHR +2.9% in a deal with an EV of $13.8B. DHR also announced that it would subsequently split into two separately traded public companies. The Street seemed positive on the strategic rationale, though valuation was cited as a concern. VZ (0.7%) announced that it would acquire AOL +16.6% for $4.4B in a deal that generated a fairly lukewarm reaction from analysts. OI +16.6% was a standout on the favorable accretion takeaways surrounding its deal to acquire Vitro, Mexico’s largest glass maker, for ~$2.15B. In the energy sector, WMB +5.6% agreed to purchase affiliate WPZ +20.5% in an all-stock deal valued at $13.8B. NBL (8.6%) said it would purchase ROSE +25.1% in a deal with an EV of $3.9B. The semi space remained in focus as CY +1.5% offered to acquire ISSI +7.4% for $19.75 a share, slightly better than the $19.25 a share privatization deal the company agreed to back in March. In addition, Reuters reported that AVGO +3.7% had contacted the likes of MXIM +5.1% and XLNX +3.4% about a potential takeover. Elsewhere in tech, CSC +3.8% was boosted by a report that it is in a two-step deal to sell itself valued at more than $10B. Shareholder activism also remained in the headlines as Trian was defeated in its attempt to secure board seats at DD (6.7%). 

Consumer staples outperform, energy lags:

  • The consumer staples sector put in the best performance this week. There did not seem to be anything specific behind the move, though dollar weakness was cited as supportive. Beverage and food names were among the big gainers. Healthcare was another standout with upside leadership from the managed care space (some focus on consolidation speculation). HUM +4.8% was one of the notable gainers. There were relatively few surprises from the ASCO abstracts. Industrials beat the tape despite a sharp pullback in the rail space on continued concerns about volume headwinds. KSU (6.7%) withdrew its full-year guidance. The bulk of the machinery and multi names outperformed. HVAC plays like IR +5.2% and LII +5% fared particularly well. Upgrades at Baird helped JOY +1.9% and CAT +1.3%. Semis helped tech with the SOX +1.1%. M&A headlines provided some support. Financials lagged as the banking group finished little changed with the BKX +0.05%, seemingly losing some recent rate trade momentum. Several life insurers also underperformed. Retail weighed on consumer discretionary with XRT (0.5%). Energy was the worst performer as E&Ps extended their recent selloff with the EPX (3.2%). 

Sector Performance:

  • Outperformers: Consumer Spls. +1.17%, Healthcare +1.06%, Industrials +0.76%, Tech +0.75% 
  • Underperformers: Energy (1.65%), Materials (0.31%), Financials (0.23%), Consumer Disc. (0.07%), Telecom +0.23%, Utilities +0.24%
FactSet StreetAccount provides financial professionals with real-time, equity market intelligence. Request a free trial at
Receive stories like this to your inbox as they are published. Subscribe by e-mail and follow @FactSet on Twitter.

© Copyright 2000 - FactSet Research Systems Inc.