March came in like a lamb, and is leaving like a Bull by Ken Mahoney
The bulls charged again last week, marking the 4th week of gains in a row for U.S. stock markets, and the longest streak of weekly wins since August. The winning run came even as daily gains largely dissolved on Thursday and Friday amidst continued jitters about a bailout plan for Greece and rising U.S Treasury yields which have highlighted concerns that the federal government is digging itself into a deep deficit hole.
In early trading on Thursday, the Dow flirted with 11,000 when it hit 10,995 – a new high for the bull market that began in March 2009 – but quickly retreated in a dramatic reversal when the day only closed with a 5 point gain. According to the standard definition, this is known as a “key reversal day” which generally has bearish implications for the stock market. At the same time though, signs of an impending bear market are negligible. Said Richard Bernstein, head of Richard Bernstein Capital Management, "To have a bear market, there are certain things you'd see: profitability start to slow, fiscal restraint. That's not really happening.
Profitability is ramping up and monetary policy is accommodative." Investors in general also feel optimistic about the future of the U.S. markets. Ned Davis Research reported on Wednesday that their so-called "Crowd Sentiment Poll," which is a composite of a number of separate sentiment indicators, has just risen into the "Extreme Optimism" zone. It’s good to see that some of the market’s skeptics are finally putting a portion of their sidelined cash reserves back to work.
In spite of mixed news, the markets have experienced wonderful momentum lately. With only 3 trading days remaining, it looks as if the first quarter of 2010 will be fondly remembered by the history books.
Key things we’ll be watching this week:
Tuesday – S&P/Case-Shiller Home Price Index, Consumer Confidence Wednesday – Factory Orders Thursday – Initial Jobless Claims, ISM Manufacturing Index, Construction Spending Friday – Stock Market Closed for Good Friday
HIGHLIGHTS: With projections of millions of foreclosures over the next five years, the Obama administration announced Friday it would make major adjustments to its $75 billion mortgage-modification program, aimed at assisting a greater number of unemployed and other troubled homeowners in modifying or refinancing their mortgages.
Regarding health reform: If your earned or investment income exceeds $200,000: In about two years, the Medicare payroll tax will rise nearly 1 percentage point to 2.35% on wages of individuals with earnings greater than $200,000 and married couples earning more than $250,000. A new 3.8% Medicare tax will be levied on investment income including interest, dividends and capital gains that exceed those thresholds.
Regarding health reform: If you itemize deductions for income tax: Starting in 2013, medical expenses have to reach 10% of your adjusted gross income to qualify for a tax deduction, as opposed to today's 7.5% standard. But seniors age 65 and older would be able to claim an itemized deduction at 7.5% of income through 2016. Congress passed a bill Thursday to make Washington the one-stop shop for cheap student loans and to boost need-based scholarships. Starting July 1, nearly all federally backed student loans, like Stafford loans, will come directly from the federal government.
Sources: Marketwatch The Wall Street Journal Online http://www.marketwatch.com/story/what-health-reform-means-for-you-2010-03-22 http://www.marketwatch.com/story/white-house-to-expand-mortgage-relief-program-2010-03-26 http://money.cnn.com/2010/03/25/news/economy/student_loans_senate/index.htm The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the Nasdaq. The DJIA was invented by Charles Dow back in 1896. The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) that serves as a benchmark of the performance in major international equity markets as represented by 21 major MSCI indexes from Europe, Australia and Southeast Asia. The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market. Google Finance is the source for any reference to the performance of an index between two specific periods. Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. Past performance does not guarantee future results. You cannot invest directly in an index. Consult your financial professional before making any investment decision.
