March 26, 2012

The Big Picture

Spring is here, according to the calendar and the trees, so-end-of-quarter window dressing can’t be far behind.

And this spring may see a bit more activity than usual from money managers and hedge-fund operators.  The economic recovery has finally spilled over into the labor market and the nay-sayers are starting to take notice.  So far this year, the S&P 500 index is up 11% and up a stunning 23.5% since September 30, 2011. 

Those who shunned Apple stock as being too pricey at $500/share are going to have to pony up.  With the announcement of its first quarterly dividend since 1995,  investors looking for income will be drawn to the $2.65 per share per quarter and will have to pay $600/share if they want to get in on the next incarnation of the tech giant.

Even those who chose to avoid stocks altogether are taking a second look.  With the recovery taking hold, those parked in U.S. Treasury securities are moving out of safety and into risk.  The yield on the 10-year note rose from a record low 1.8% to 2.28%, violating its 200-day moving average, as investors sold T-notes and bought stocks.

It’s not too late to jump on the equity band wagon.  Most certainly there will be pullbacks as investors digest more economic data and the start of earnings season.  Companies such as Baker Hughes, an oil services supplier, have lowered their first-quarter outlook as the shift from low-priced natural gas towards higher-priced crude oil occurs.  More warnings and pre-announcements are to be expected before the start of the earning parade, but that will only lower the expectations bar, setting up a rally on better-than-expected reports.

Finally, the economic calendar will continue to bolster the recovery argument.  Today’s release of pending home sales should show the effects of an unusually warm winter across much of the United States.  Tuesday’s release of March consumer confidence data may point to a pick-up in consumer spending, with the Easter holiday right around the corner.  February durable goods orders, due out this Wednesday, should show a bounce from January readings which were the lowest in three years.  An increase in aircraft orders along with appliance and auto purchases may be more in line with anecdotal evidence not captured in surveys.  The final fourth-quarter GDP report will take a back seat to weekly jobless claims on Thursday, while Friday’s personal income and consumption data for February will set the stage for the final University of Michigan’s measure of consumer  confidence and the Chicago purchasing manager’s March index.

The following week, April 2-6, is dominated by the March employment report.  The unemployment rate stands at 8.3% while the economy has enjoyed 24 consecutive months of job growth.  Will this report show a more robust labor market as the weekly jobless claims fall to four-year lows?   Last month’s report showed a broad-based gain in employment and recent layoff figures are at the lowest level since the start of the recession.

I, Investor

Technical indicators are looking positive for a continuation of the recent NASDAQ rally.  The tech-heavy index was the only major market average to close in the plus column last week.  The  reading over 3,000 is the first since late 2000,the year the tech bubble burst.  While the S&P 500 failed to close over 1400 last Friday, the index is near its 52-week high of 1414.  The Dow Jones Industrial Average is also flirting with not just 52-week highs but levels not since since before the financial meltdown of 2008.  Barring any black swan events, the first quarter should end on a high note, an encouraging sign for the rest of the spring season. 

I look forward to your comments.  Please comment or click “like me” on Facebook.










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