Archive for April, 2011
Weekly Update – April 29, 2011
After a slow start, both the Dow and S&P 500 finished higher in April. In fact, the Dow closed the month just shy of a 4 percent gain. More than half of the monthly gain was recorded this week alone, with the Dow gaining 2.4 percent and the S&P 500 gaining 2 percent.
The market rally of the last two weeks has been driven by stronger corporate profits even in the face of lackluster economic news. Q1 GDP, released yesterday, was 1.8 percent, a far cry from Q4 GDP growth of 3.1 percent. Weekly unemployment claims were worse than expected for the second straight week, coming in at 429,000. Personal spending in March had a nice increase, but most of the increase was related to higher gas and food prices.
Investors looked past this data and instead focused on strong earnings from Caterpillar, Amazon, and Ford. That companies have been able to generate good results despite murky economic data is a good thing. However, the outlook going forward is unclear as consumers will be squeezed by higher prices and stagnant incomes. This is a big part of why the Fed, on Tuesday, reiterated its policy stance to keep interest rates low for an “extended period”. The economic recovery is not quite strong enough to stand on its own.
Next week, watch for auto sales, manufacturing data, and the March jobs report, which is released on Friday. Analysts expect growth of about 200,000 new jobs. More earnings reports are also on tap, many from energy companies.