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Investors Embrace Momentum Stocks on Otherwise Slow Day


Today's financial recap and tomorrow's financial outlook.

Risk returned on Thursday despite mixed economics and earnings data.

The S&P 500 (INDEXSP:.INX) rose 0.2% to 1,892.49, but we saw even more optimism in higher-risk areas of the market.

The small-cap Russell 2000 (INDEXRUSSELL:RUT) and the tech-heavy Nasdaq Composite (INDEXNASDAQ:.IXIC) both outperformed, and key sectors like biotech and housing showed relative strength.

We also saw positive action in many of the individual high-beta names that suffered heavy losses in March and April, like FireEye (NASDAQ:FEYE) and Tesla Motors (NASDAQ:TSLA).

In economic news, jobless claims for last week were 326,000, which was above Wall Street's 310,000 forecast. Continuing claims were 2,653,000, below the consensus of 2,675,000.

The April Chicago Fed national activity index read negative 0.32, implying a slowdown in growth. Economists were looking for a flat reading.

Existing Home sales for April came in at 4.65 million vs. the 4.69 million expected.

And finally, the Leading Economic Indicators index rose 0.4% in April, which was in line with forecasts.

Retail stocks were in focus as multiple sector names reported earnings.

Dollar Tree (NASDAQ:DLTR), Signet Jewelers (NYSE:SIG), Stein Mart (NASDAQ:SMRT) and Williams-Sonoma (NYSE:WSM) all rose sharply after meeting or beating Wall Street's profit expectations.

Best Buy (NYSE:BBY) beat analysts' first-quarter earnings estimates by a wide margin, but its sales were weak and it issued disappointing guidance for the next two quarters. The stock was volatile following the report, but finished 3.4% higher as expectations were fairly low.

Sears Holding (NASDAQ:SHLD) and Bon-Ton Stores (NASDAQ:BONT) both staged impressive rallies despite significant earnings misses, supporting the low expectations theme surrounding the retail sector.

On the international front, Thailand's army declared a coup following the institution of martial law on Tuesday. The iShares MSCI Thailand Index Fund (NYSEARCA:THD) fell 1.1%.

China's May HSBC Flash PMI reading was 49.7, beating the 48.3 expected. However, PMI numbers for the eurozone, Germany, and France were all weaker than expected.

Tomorrow's Financial Outlook

Retailers Foot Locker (NYSE:FL) and Hibbett Sporting Goods (NASDAQ:HIBB) will report earnings ahead of the open tomorrow.

April New Home Sales will be reported at 10:00 a.m. ET.

Though the calendar is light, we may see some interesting action tomorrow as momentum traders could make an attempt to send the S&P 500 back above 1,900, perhaps to a new all-time high. With small caps and biotech regaining footing, the bears have their work cut out for them. 

Twitter: @Minyanville

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No positions in stocks mentioned.

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