Market Matters…
|
Market/Index |
Year Close (2012) |
Qtr Close (03/31/13) |
Previous Week (04/12/13) |
Current Week (04/19/13) |
YTD Change |
|
Dow Jones Industrial |
13,104.14 |
14,578.54 |
14,865.06 |
14547.51 |
11.01% |
|
NASDAQ |
3,019.51 |
3,267.52 |
3,294.95 |
3206.06 |
6.18% |
|
S&P 500 |
1,426.19 |
1,569.19 |
1,588.85 |
1555.25 |
9.05% |
|
Russell 2000 |
849.35 |
951.54 |
942.85 |
912.50 |
7.44% |
|
Global Dow |
1,995.96 |
2,110.73 |
2,144.69 |
2097.50 |
5.09% |
|
Fed Funds |
0.25% |
0.25% |
0.25% |
0.25% |
0 bps |
|
10 yr Treasury (Yield) |
1.76% |
1.85% |
1.72% |
1.71% |
-5 bps |
The end to another tax season; a hectic week on the earnings calendar; a number of key domestic economic releases; and ongoing developments on the global economic front…and yet, much of the country (and world for that matter) was focused on the events in Boston and the aftermath of the bombing that led to a massive manhunt and a shootout with police. Early in the week, the celebrated Boston Marathon came to an abrupt halt as terror again reigned throughout the country and nearby residents were sent into lockdown mode. Thoughts and prayers are with the victims and to all affected by this tragic and senseless action…with hopes for a fast and safe resolution.
Financials and techs highlighted the latest earnings as Citigroup and Goldman Sachs reported decent results which helped ease some of the pain of last week’s related announcements. Bank of America, on the other hand, posted disappointing growth in core lending and Morgan Stanley struggled from weak bond trading (though still bested expectations). Intel and Microsoft suffered with the ailing PC market with much of the latter’s successes coming from its videogame biz. Similarly IBM recorded lower earnings on weaker services and hardware sales as its operations continue to be hindered by an uncertain economy and a general hesitancy of companies to upgrade technology. Though ad prices have been on the decline, Google experienced a decent quarter of steady revenue growth. On the whole, earnings appear to be a mild disappointment for investors as S&P 500 companies are on track for a second year-over-year drop over the prior three quarters and some analysts expect the current period to depict even slower revenue growth. Shifting to the transaction world, Dish Network expressed interest in muddying the waters in the Sprint Nextel – Softbank (Japan) deal with a $25.5 billion bid (for Sprint) of its own.
The week began on a very sour note as equities suffered their worst day of the year with the Dow Jones declining over 250 points. Stocks plummeted following some disappointing economic news out of China (see below) as well as significant losses in commodities prices. Gold continued its downward spiral and prices plunged to a two-year low as inflation fears have died down on expectations that the Fed may soon begin to taper its bond buying stimulus. The volatility continued throughout much of the week as earnings numbers were lackluster at best and news from Europe gave little hope that its long-time woes could be nearing an end. Nervous investors engaged in a flight-to-quality during the week and the yield on the benchmark 10-year briefly fell below 1.7% to the lowest rate of the year. By week’s end, each of the major equity indexes had fallen over 2% as stocks experienced their worst week of 2013.
Similarly oil prices dropped to a four-month low as weakened demand for motor fuel sent “contagion” throughout the energy markets. After seemingly primed to push beyond the $100/barrel level just a few weeks ago, crude has dropped below $88/barrel, another positive development in the “war on inflation.” For much of the week, folks completed their taxes, worried about earnings, and digested news on the domestic and global economy. But, for many, their thoughts were in Boston.
Economic Calendar
|
Date |
Release |
Comments |
|
April 16 |
CPI (03/13) |
Overall energy prices fell |
|
Housing Starts (03/13) |
Huge gain in the multifamily-home segment |
|
|
Industrial Production (03/13) |
Better-than-expected increase |
|
|
April 17 |
Fed Beige Book |
Economy grew at a moderate pace (again) |
|
April 18 |
Jobless Claims (04/13/13) |
4-week average at highest level since mid-February |
|
Leading Eco. Indicators (03/13) |
Declined for the first time in 7 months |
|
|
The Week Ahead |
||
|
April 22 |
Existing Home Sales (03/13) |
|
|
April 23 |
New Home Sales (03/13) |
|
|
April 24 |
Durable Goods Orders (03/13) |
|
|
April 25 |
Jobless Claims (04/20/13) |
|
|
April 26 |
GDP (1st qtr) |
With energy prices on the decline, the CPI actually fell last month, while core (excludes food and energy) barely budged. Manufacturing received some good news as industrial production gained 0.4% in March and the Federal Reserve of NY posted regional expansion. New residential construction jumped again with activity on multi-level projects hitting its highest level since early 2006. Jobless claims remained volatile as the number of workers applying for benefits rose for the fourth week out of the past five and the four-week moving average jumped to its highest level since February. Finally, leading economic indicators fell for the first time in seven months, raising concerns among some analysts that the current (and next) quarter will bring weaker activity as has been the case for the past few summers.
The Fed Beige Book depicted an economy growing at a moderate pace with home construction and auto manufacturing contributing to much of the activity. Though payroll taxes increased at the beginning of the year, consumer spending rose in many regions and the lower gas prices bode well for future retail purchases. Even the labor market experienced slight improvement despite some of the recently sluggish unemployment figures. A couple of Fed policymakers believe that major financial institutions need to adhere to higher capital requirements as “too big to fail” still may be alive and well and regulations have done little to reduce risks of another debacle.
On the global front, the International Monetary Fund reduced its outlook for the world economies and now expects 3.3% overall growth this year with China and other emerging nations leading the way. Europe remains a challenge with France, Italy, and Spain all staring at contraction. The German ZEW sentiment index fell in April; the British unemployment rate rose more than expected; and the euro-zone’s overall construction output dropped for the fourth consecutive month. While the IMF expects 8% growth for China, last quarter’s GDP rose by a mere 7.7% and its industrial production declined to its lowest level since August 2012; now some analysts fear the economic superpower will not be able to fully lead the global recovery. (Most nations – emerging and developed - crave such a “depressing” GDP.)
On the Horizon …Can equities bounce back from the worst showing of the year? Has the investment mindset turned negative with memories of prior summer collapses fresh on everyone’s mind? Will next week’s economic numbers depict more strength in housing and manufacturing and bring investors back in search of bargain shopping? Key earnings releases could set the tone as energy giants Exxon-Mobil and Chevron make their announcements, though the reports will not reflect the latest decline in energy prices. Online retail giant Amazon.com gives another glimpse into the mind of the consumer in the aftermath of the payroll tax hike. Additionally, analysts get their initial look at the 1st quarter GDP data and investors hope to see a sizable jump from the poor (+.4%) showing of the 4th quarter. And hopefully the weekend will bring peaceful closure to the latest tragedy facing Boston, the country, and the world.
© Brounes & Associates
