Stock Market News for April 13, 2015 – Zacks Investment Research

Benchmarks ended in the green on Friday after General Electric’s announcement of a restructuring and buyback plan boosted investor sentiment. Friday’s gains also helped benchmarks settle in positive territory for the second straight week.

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The Dow Jones Industrial Average (DJI) gained almost 0.6%, to close at 18,057.65. The Standard & Poor’s 500 (S&P 500) increased 0.5% to 2,102.06. The tech-laden Nasdaq Composite Index closed at 4,995.98; gaining 0.4%. The fear-gauge CBOE Volatility Index (VIX) dropped 3.9% to settle at 12.58. A total of about 5.47 billion shares were traded on Friday, less than the month to date average of 6.22 billion. Advancers outpaced declining stocks on the NYSE. For 58% stocks that advanced, 38% declined.

General Electric Company’s (GE – Analyst Report) decision to divest most of its financial service businesses and its plan to repurchase shares was welcomed by investors. General Electric wants to become a “simpler, more valuable company” by exiting its high-risk GE Capital business. General Electric plans to sell a major portion of the assets of GE Capital Real Estate including $26.5 billion worth of office buildings and commercial real estate debt. Most of this will be bought by Wells Fargo & Company (WFC – Analyst Report) and Blackstone Group (BX – Analyst Report).

General Electric also plans to buy back $50 billion in stock in order to reduce the amount of shares outstanding by around 20%. This is done to offset the negative impact to earnings as a result of reducing the size of the GE Capital business. General Electric expects to return at least $90 billion to its investors by 2018, most of which is expected to come in the form of the share buyback program.

GE expects a large portion of its earnings to come from its industrial business by 2018, a significant change in its outlook that relied on its financial business to boost growth. GE’s focus shifted to its industrial business since the financial component sparked volatility and weighed down the company’s stocks. Shares of GE surged 10.8% to $28.51 on Friday, its highest level since Sep 2008. While, GE was S&P 500’s biggest percentage gainer, it also helped the Dow close above the 18,000 mark for the first time in April.

Friday’s gains were broad based, with 9 out of 10 S&P 500 sectors ending in the green. The Industrial Select Sector SPDR (XLI) gained 1.4%, the highest among the S&P 500 sectors. Key holdings including 3M Company (MMM – Analyst Report), Union Pacific Corporation (UNP – Analyst Report), The Boeing Company (BA – Analyst Report), United Technologies Corporation (UTX – Analyst Report) and Honeywell International Inc. (HON – Analyst Report) increased 0.2%, 1.5%, 0.6%, 0.5% and 0.3%, respectively.

The Health Care Select Sector SPDR (XLV) advanced 0.9% and was the second biggest gainer among the S&P 500 sectors. Key holdings including Johnson & Johnson (JNJ – Analyst Report), Pfizer Inc. (PFE – Analyst Report), Gilead Sciences Inc. (GILD – Analyst Report), Amgen Inc. (AMGN – Analyst Report) and UnitedHealth Group Incorporated (UNH) increased 0.7%, 1.2%, 0.6%, 1.2% and 0.4%, respectively.

Meanwhile, investors kept an eye on first quarter earnings results. Stronger dollar and drop in oil prices are likely to have a negative impact on earnings. Some of the nations’ biggest banks including Bank of America Corporation (BAC), JPMorgan Chase & Co. (JPM), The Goldman Sachs Group, Inc. (GS) and Wells Fargo are poised to report earnings results this week.

For the week, the S&P 500, the Dow and the Nasdaq gained 1.7%, 1.7% and 2.3%, respectively. Benchmarks were helped by gains in energy shares due to rise in oil prices. Oil prices moved north, banking on strong German economic data and uncertainty over Iranian nuclear deal. Expectations on Iran taking longer time to increase oil exports and anticipation that rise in U.S. crude inventories is slowing down also boosted oil prices.

Weak jobs report also had a positive impact investor sentiment as it raised hopes of a delay in interest rate hike. Job additions fell below 200,000 in March, bringing an end to the unbroken run of 12 such successive monthly gains. Adding to the bullish sentiment, New York Fed President William Dudley said the timing of hiking rates “will be data dependent and remains uncertain because the future evolution of the economy cannot be fully anticipated”.

Meanwhile, Fed minutes hinted at a possible rate hike this year. While “several” officials favored a rate hike in June, others opined a rate hike isn’t necessary until later this year as strong dollar and drop in oil prices will keep inflation rate lower.

Separately, new deals between Mylan N.V. (MYL) and Perrigo Company Plc (PRGO), and FedEx Corporation (FDX) and TNT Express boosted investor confidence.

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Stock Market News for April 13, 2015 – Zacks Investment Research