“When good men die their goodness does not perish, but lives though they are gone. As for the bad, all that was theirs dies and is buried with them.”
Euripides
As news in the popular press goes, it was certainly a stunning week. As for news in the financial press, it was even better.
Yes, Kate and William were married. Pope John Paul II was beatified, perhaps in preparation for sainthood. Osama Bin Laden met his end.
And….Reuter’s reports that nearly 75% of the S&P 500 companies reporting earnings last week beat their estimate. CNBC reported that Gold closed at yet another all time high, and silver was up 28% for the month (best month ever). The Dow Jones Industrial Average and the S&P 500 closed at their highest level since mid-2008. In the next few paragraph’s we’ll tell you more.
Finally, April marked the 35th year in business for JL Davis, and, interestingly, was the best month in all 35 years, thanks to you, our friends and clients.**
The Markets
Onward and upward: In a week of tornado carnage and wedding bliss, domestic equities reached new year-to-date highs. The Dow hit a level not seen since May 2008, and the small-cap Russell's gains since March 2009 have now pushed it past its October 2007 high to a new record. Despite solid earnings reports from several major tech companies, the Nasdaq had the weakest weekly performance. Meanwhile, the S&P 500 ended the week north of the trading range it's been in since February.
Last Week's Headlines
- In a first-ever press conference as well as its regular announcement, the Federal Reserve reaffirmed its plan to end its QE2 bond-buying program as scheduled at the end of June. However, it will continue to support the economy by keeping interest rates low for an extended period despite rising food and gas prices. Fed Chairman Ben Bernanke said the Fed will continue to reinvest the proceeds of existing Treasury holdings for the time being. The Fed also raised its inflation forecasts for 2011 to 2.1% -- 2.8%, closer to its historical average, though it anticipates the inflation rate falling once again in 2012 and 2013. It also forecast an unemployment rate of 8.4% -- 8.7% by the end of 2011, slightly lower than the current 8.8%.
- Bad weather conditions and higher gas prices helped slow the nation's economic growth during the year's first quarter. Though gross domestic product (GDP) didn't flatline, the Bureau of Economic Analysis' initial estimate of a 1.8% annualized growth rate was lower than the 3.1% seen in the previous quarter. The BEA said reduced governmental spending at all levels and higher imports were major factors in the decline; consumer spending, private inventory investments, exports, and business fixed investment, though weaker than in Q4, were the most positive factors.
- Better weather helped sales of new homes improve in March. The Commerce Department said sales were up 11.1% from February's dismal number, though they were still down almost 22% from the previous March.
- Home prices fell 1.1% during February in the 20 cities tracked by the S&P/Case-Shiller index. That left the index down 3.3% from the previous February, almost exactly where it was at its low in April 2009.
- Durable goods orders rose 2.5% in March. It was the third consecutive month of increases, and much stronger than February's 0.7% rise. According to the Commerce Department, transportation equipment such as planes accounted for roughly half of the gain. Shipments and inventories also were up.
- Though better than in 2009, Greece's 2010 budget deficit was higher than previously estimated, according to Eurostat. The European Union's official statistical agency said the €24.1 billion deficit represented 10.5% of the country's gross domestic product (GDP), ranking just behind Ireland's 32.4%. Total government debt represented 142.8% of GDP, the worst ratio in the EU. However, the budget deficit of the 17 eurozone countries as a whole decreased from 6.3% in 2009 to 6%, though the ratio of government debt to GDP was up from 79.3% to 85.1%.
- It was Japan's turn for a negative credit outlook from Standard & Poor's. Though it did not change Japan's AA- credit rating, S&P downgraded its outlook from stable to negative, which suggests the likelihood of a downgrade if financial conditions deteriorate in the wake of the recent multiple disasters.
- After the Fed's announcement, the dollar continued its recent decline; by week's end it had hit roughly $1.48 versus the euro.
Eye on the Week Ahead
In light of recent weakening in the weekly unemployment figures, the April figure due on Friday will be of interest. Continuing earnings reports will arm-wrestle a heavy load of economic data for investor attention.
Key dates and data releases: U.S. manufacturing, construction spending (5/2); auto sales, factory orders (5/3); services sector (5/4); productivity and labor costs (5/5); unemployment/payrolls (5/6).
Data source: Includes data provided by Brounes & Associates. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results. Equities data reflect price change, not total return.
The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indexes listed are unmanaged and are not available for direct investment.
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