The week in review: April 16-20, 2012
It’s earnings season and an ongoing stream of spectacular reports pushed stocks higher over the week, trumping worries about Europe (see below) and ho-hum economic reports. Of the more than 100 S&P 500 companies that have reported this quarter, better than 80% have beat expectations, including blue-chips Coca-Cola, Microsoft, Goldman Sachs, Johnson & Johnson, American Express and the New York Times.
In economic news, an increase in jobless claims points to a stalling of recent improvement in the jobs market; March existing home sales came in softer than expected although the median sales price bumped up. The bottom line is that tight credit and a sluggish labor market are keeping a lid on home sales. Separately, retail sales were strong with a big gain in auto sales.
- FRANCE. Nicolas Sarkozy, the President of France and one of the chief architects of the euro zone’s anticrisis strategy may find his job in jeopardy. Deep scars on the French economy as a result of the euro-crisis wounds have pushed unemployment there to 10%. On Sunday, France’s 40 million voters will take to the polls to vote for 1 of 10 candidates. If there is no majority winner, there will be a run-off.
- SPAIN. Further south, Spain’s ability to reduce its budget deficit has been met with investor skepticism pushing debt yields there briefly above 6% and fanning bailout fears.
- THE NETHERLANDS. In the Netherlands, the government has begun another round of uncomfortable austerity measures as the economy there has tripped deficit levels required for Eurozone countries. The AAA-rated economy has long been considered one of the strongest in Europe, but economic weakness in its neighbors, a big banking sector and high levels of personal debt, have hit the Dutch hard.
- IMF Chief Christine Lagarde reiterated her warning that “dark clouds” loom and she is expected to request more funds for emergency loans from the euro zone.
Market/Index 2011 Close Prior Week 4/20/2012 Week Change YTD Change DJIA 12217.56 12849.59 13029.26 1.40% 6.64% NASDAQ 2605.15 3011.33 3000.45 -0.36% 15.17% S&P 500 1257.6 1370.26 1378.53 0.60% 9.62% Volatility (VIX) 23.4 19.55 17.44 -10.79% -25.47% Russell 2000 740.92 796.29 804.05 0.97% 8.52% MSCI EAFE 1412.55 1506.27 1511.15 0.32% 6.98% Euro/USD 1.2961 1.3079 1.322 1.08% 2.00% 10 Year Treas. 1.89% 2.00% 1.97% -3 bps + 8 bps Oil (WTI) 98.83 102.83 103.32 0.48% 4.54% Gold 1563.7 1662.7 1642.6 -1.21% 5.05%
Next week will be busy with Republican primaries in 5 states and a continued slew of earnings reports. High profile companies on the docket include Apple, AT&T, Pepsico, Procter & Gamble, Amazon, Merck, Chevron, to name just a few. The Federal Reserve will hold a two-day meeting on benchmark interest rates, which are not expected to change. Important economic reports due out next week: new home sales and their prices for March, durable goods orders (cars, computers, appliances) and a look at Q1 GDP growth – look for 2.5% growth.
Sources: Wall Street Journal, Bloomberg, Barron’s, Schwab, BBC, Reuters, MSNBC, Labor Department, LA Times, National Association of Realtors, Census Bureau, CNBC.