AND THAT’S THE WEEK THAT WAS…

For the Week Ended April 16, 2010

 

Market Matters…         

                           

Market/Index	Year Close (2009)	Qtr Close (03/31/10)	Previous Week (04/09/10)	Current Week (04/16/10)	YTD Change
Dow Jones Industrial	10,428.05	10,856.63	10,997.35	11,018.66	5.66%
NASDAQ	2,269.15	2,397.96	2,454.05	2,481.26	9.35%
S&P 500	1,115.10	1,169.43	1,194.37	1,192.13	6.91%
Russell 2000	625.39	678.64	702.95	714.62	14.27%
Global Dow	1,984.48	2,021.70	2,054.70	2,052.54	3.43%
Fed Funds	0.25%	0.25%	0.25%	0.25%	0 bps
10 yr Treasury (Yield)	3.85%	3.83%	3.89%	3.77%	-8 bps

 

The three certainties in life…death, taxes, and protests over taxes.  Another April 15 has come and gone, but the demonstrations over taxes, spending, socialism, bailouts, and stimuli continue.  Over the past few days, “Tea Party” rallies have sprung up across the country and the protesters’ collective anti-Obama voice has grown louder over the course of the year.  (Wasn’t the TARP bank bailout enacted under W’s watch?).  In reality, Prez O would seem to be a great candidate for the Tea Party movement based on his annual tax expenditures.  His family wrote a $1.8 million dollar check to Uncle Sam for 2009 and another $163,000 to the state of Illinois.  (Can’t you find a few more deductible biz and charitable expenses, Mr. President?  Please tell me you are withholding taxes on your babysitting mother-in-law?) 

 

A fourth certainty…Goldman Sachs will always be controversial.  Late in the week, the SEC initiated fraud charges against the financial behemoth over disclosures (or lack thereof)  regarding marketing practices for derivative subprime mortgage-related securities.  (Say it ain’t so…its former Chair was only the Treasury Secretary at the time so surely no monkey biz was going on, right?)  In other corporate news, Apple delayed its international launch for the iPad due to the incredibly high domestic demand and its share price hit an all-time high.  Meanwhile, Toyota’s problems continue as Consumer Reports offered a “don’t buy” rating on its Lexus GX 460 SUV.

 

Alcoa kicked off another earnings season to pretty lackluster results on the revenue side.  Before investors could panic, Intel saved the day by reporting income that quadrupled over last year’s level.  Both JP Morgan-Chase and Bank of America posted strong quarters as the banking sector continued to pick itself up from the doldrums.  (What are those previously disgruntled BofA investors saying about the Merrill Lynch deal now?)   Economic bellwether UPS beat consensus and even raised its outlook, a promising sign for the domestic recovery.  GE suffered a sizable earnings reduction, though still topped analysts’ expectations and issued an upbeat forecast for 2010.  Finally, Google experienced another stellar quarter as online advertising continued to pick up momentum, though investors grew concerned about its rising cost structure. 

 

The Dow shot through 11,000 early in the week and didn’t look back (until late in the week).  Investors looked past Alcoa and instead focused on Intel, JP Morgan, and UPS.  The S&P 500 pushed beyond 1,200 for the first time in a year-and-a-half and the small-cap Russell continued to outperform.  The late-week news (and shocking revelation…not really) about Goldman took much of the wind out of the equity market’s sails and the indexes gave back most (if not all) of the earlier gains.  Bonds were among the primary beneficiaries as many investors took the opportunity to book some profits from riskier assets after the sizable rally of the past two months.  Likewise, oil plunged on the news and fell below $83/barrel on concerns about the impact on the financial sector and overall economy.  So, how’s your personal investment portfolio looking these days, Mr. Prez?  After that sizable tax bill, you can surely use all the help you can get. 

Economic Calendar

Date	Release	Comments
April 13	Balance of Trade (02/10)	Decline due to TARP adjustment
April 14	CPI (03/10)	Inflation continues to be non-factor
	Retail Sales (03/10)	3rd consecutive month of gains
	Fed Beige Book	Economic improvement in 11 of 12 Fed districts
April 15	Jobless Claims (04/10/10)	2nd consecutive weekly increase
	Industrial Production (03/10)	Strength in manufacturing offset by utilities’ weakness
April 16	Housing Starts (03/10)	Rose to highest level in 16 months
The Week Ahead
April 19	Leading Eco Indicators (03/10)
April 22	Jobless Claims (04/17/10)
	PPI (03/10)
	Existing Home Sales (03/10)
April 23	Durable Goods Orders (03/10)
	New Home Sales (03/10)

 

With individuals scrambling to make those tax payments (or patiently waiting for refunds), Uncle Sam may also feel the pinch of the tighter labor market in terms of lower tax revenues.  But help may soon be on the way.  The White House Council of Economic Advisors claimed that 2.5 million jobs have been created (or salvaged) through March 2010 and the government enacted stimuli will impact a total of $3.5 million workers by the end of the year.  In fact, several companies that announced earnings during the week implied that they will be contributing to a more favorable labor environment.  Intel may be adding up to 2,000 new workers and opening two new factories; JP Morgan-Chase plans to hire 9,000 more employees; and Google increased its workforce by 800 last quarter as the company looks to expand into other biz segments.  The Fed even reported an increase in temp hiring across the country, another nice sign that the labor market is beginning to recover. 

 

Speaking of the Fed, its latest Beige Book report showed that manufacturing and retail activity increased throughout most regions of the country.  Dr. B. addressed Congress again and reiterated his intent to leave rates low for an “extended period.”  He remained optimistic about the encouraging signs seen in the recovery, but cautioned about the continued pace of jobs growth in the near future.  On the data front, inflation still remains a non-factor (for now) and retail sales rose in March for the third straight month as weather improved across the country and automakers pushed those incentive deals.  Multi-family (apartment) construction contributed to a nice increase in March housing starts (its best showing in 16 months) and higher building permits brought renewed optimism for the future of the single-family market as well.  The Thomson Reuters/U. of Michigan sentiment index surprisingly fell this week as consumers grew concerned about certain government programs (like healthcare) and their impact on the overall economy. 

 

Looking abroad, the EU and IMF finally came to terms with the $54 billion in available aid for Greece (if needed) and the ailing country appeared to be heading in that (bailout) direction after asking its potential creditors for a “discussion” next week.  Meanwhile, China’s experienced an 11.9% growth rate in the first quarter (from last year), though bank lending declined in March as the country took measures to prevent its economy from overheating. 

 

On the Horizon…The Goldman story moves forward as investors determine whether the SEC charges have any legs or simply turn out to be “much ado about nothing.”  (Bear in mind, the company has friends in pretty high places.)  Earnings season, week 2 brings reports from such prominent newsmakers as IBM (4/19), Citigroup (4/19), Apple (4/20) and Amazon.com (4/22).  Home sales data highlights the economic releases and analysts hope to see some continuation of this week’s positive news on the housing sector front.  (How long have they been saying that?) 

 

Brounes & Associates is a Houston-based consulting/marketing firm that performs research, marketing, and education projects for financial services companies and other professionals.  “And That’s the Week That Was” is a weekly market/economic commentary that is distributed each Friday afternoon.  Any financial professionals who have interest in rebranding the piece and sending to their investors should inquire to:

Ron Brounes

713-962-9986 (Direct)

ron@ronbrounes.com

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