The Week Ahead

February 28, 2011

02.28.11
Global markets were faced with geopolitical unrest out of the Middle East, sending all US equity indices lower for the week. These concerns also drove crude oil markets higher, raised inflation concerns and caused US GDP forecasts to be trimmed.
This week we will keep an eye on how far the unrest spreads and if increasing oil supply out of Saudi Arabia will calm oil prices. So far, we do not believe the recent spike in oil is great enough to derail our economy, especially given last week’s reading of consumer confidence, back at levels not seen in 3 years:
As we said last week, corrections will likely be bought by investors, who will be moving out of cash and bonds and into equities.  This week could be a bumpy ride for equities as investors shift their focus to Friday’s employment report.

The Week Ahead

February 22, 2011

02.22.11
The markets edged higher last week on continued positive economic news.  We saw improving ISM and labor market data.  A sharp increase in farm prices has not yet reached the retail level, and we suspect that margins at US companies will begin to compress as they are not able to pass along higher input costs.
Sentiment remains fairly strong, and we see the markets moving higher after a brief pull-back that is due any day now.  Perhaps the unrest in the Middle East along with higher oil prices will be the catalyst for a market pull-back.  Any sustained correction will likely be bought by investors moving out of cash and bonds and into equities.  This week could be a bumpy ride for equity investors.

The Week Ahead

February 14, 2011

02.14.11
The stock market climbing a wall of worry is a term we often hear to describe a market that is going up despite a number of fundamental problems.  While we agree that there are serious issues to deal with, the basic health of the U.S. economy has improved significantly in the last eighteen months.  Forecasters now see the US growing 3-4% in 2011 with corporate profits up 12-15%.

The market is now at 13.8 times those earnings, not unreasonable historically.  We would urge you to focus on these basics and not be overwhelmed by the national debt problem, food inflation and the continuing bad news we hear about global unrest.  Keep the focus on the U.S. economy and the market’s valuation relative to those corporate earnings and you can feel comfortable on the wall of worry.  Remember too that unemployment is a lagging indicator that will improve later in the cycle.

The Week Ahead

February 8, 2011

02.07.11
Markets continued to power ahead last week, with the Nasdaq advancing 3.1%, while the S&P was up 2.7% and even the DJIA was up 2.3%.

Earnings reports, led by firms like Exxon Mobil and Pfizer, are still providing positive surprise.
Egyptian unrest continues, but meetings with protest groups [including the Muslim Brotherhood!] and the Egyptian vice president Suleiman seem to be defusing the situation [for now].
The payroll survey produced conflicting numbers [weather and data restructuring].  We’ll have to wait for next month’s numbers for a clearer employment picture.

The Week Ahead

January 31, 2011

01.31.11
We ended the week on a volatile note as the Middle East, namely Egypt, rattled the markets. Taking Friday’s action into consideration, the markets are still mostly positive year-to-date with the DJIA, the Nasdaq, and the S&P 500 up 2.1%, 1.3% and 1.5% respectively. The Russell 2000 is down 1.1%.  The U.S. appears to be in a more self sustaining expansion as we saw GDP growth accelerate in the fourth quarter to 3.2%.

 Earning season continues this week however most major companies have already reported. Friday’s employment situation is in focus as the jobless claims continue to improve, albeit with a lot of noise in the weekly claims.

The Week Ahead

January 24, 2011

01.24.11
Markets last week were mixed, with the DJIA advancing 0.7%, while the Nasdaq, the S&P 500 and the Russell 2000 all declined by –2.4%, -0.8% and –4.3% respectively.  Earnings reports were mixed, with GE’s positive surprise only partially offsetting disappointments registered by BAC and FFIV [reining in the cloud computing euphoria].
The week ahead includes earnings and non-earning events of note.  The earnings calendar includes MCD MMM AXP EMC JNJ VZ BA T CL MSFT CVX and Ford.  The State of the Union and the Federal Reserve meeting on Wednesday will also be important.
Finally, manufacturing activity in the US is quietly expanding.  Capacity utilization rose by 0.6% in December to 76%.

This is producing manufacturing employment increases, and has plenty of runway ahead of it [the average since 1972 is 80.6%].

The Week Ahead

January 18, 2011

01.18.11

Last week the DJIA rose 0.96%, for the seventh consecutive weekly gain, to close at a 2½ year high.
Look for a blizzard of earnings reports this week starting with Apple on Tuesday, although Apple’s earnings maybe overshadowed by the announcement that Steve Jobs is taking a second medical leave, and finishing with GE’s earnings on Friday. 4th quarter earnings reports should provide further support for the stock market this week.
The chart below illustrates the current quarterly year over year estimated earnings growth rate of 30.7% for the S&P 500.

The Week Ahead

January 10, 2011

01.10.11
We read with interest today a survey of 140 institutional money managers that was conducted by Morgan Stanley Smith Barney.  While it is unsettling to be part of a consensus, many of their conclusions dovetail with our findings.
Earnings are expected to be up in 2011 by 11% versus bottoms-up forecasts of 13.4%. S&P 500 go ahead is projected at 9%, with more participants expecting 20%+ up versus down.
Large-cap stocks are projected to outperform small and mid-size companies, and growth stocks to outperform value(this by a very wide margin).  Finally US stocks are projected to outperform international.  It’s not a bad way to approach the market as we enter 2011!

The Week Ahead

January 4, 2011

01.03.11
Last week marked the end of 2010 with all the major US equity indices posting double digit returns for a second year in a row:

The week ahead gathers steam as the world returns to work following the holiday season. In focus will be updates on the following: US Manufacturing, US Non-Manufacturing (Service sector), the state of the consumer (Consumer Credit outstanding) and minutes from the recent FOMC meeting.
Also Friday’s US employment situation will certainly be headline news given that weekly unemployment claims appear to have broken out to the downside:

The Week Ahead

December 28, 2010

12.27.10
Last week the Standard & Poor’s 500 finished at 1256.77 … reclaiming the level it held before the collapse of Lehman Brothers.  Perhaps the markets have moved a bit too far too fast, but we see the markets moving higher after a brief respite that is long overdue.

The week ahead should be fairly quiet due to a lot of traders and investors on vacation and the New England blizzard.  The S&P/Case Shiller report on Tuesday will likely disappoint due to cash-strapped consumers pulling back major purchases.


Initial jobless claims and pending home sales on Thursday may create some buzz, but we expect a fairly quiet and low-volume week of trading.  Remember, the markets are open on Friday (12/31).

Best wishes for a Happy, Healthy and Peaceful New Year!