Will the Markets bring May Flowers? By Ken Mahoney
U.S. Stocks fell sharply on Friday, ending the week on a sour note, but still finishing positive for April – the third straight month of gains. For the week, the S&P was down 2.5%, the Dow 1.8%, and the Nasdaq 2.7%. For April, the S&P rose 1.5%, the Dow 1.4%, and the Nasdaq 2.6%.
Last week’s slide was led by the financial sector as investors became increasingly concerned about how the SEC’s probe into Goldman could eventually affect other large banks. Naturally, this is an area where the public is especially skittish right now considering all the turmoil wrought on the world economy from the financial crisis that began in 2007. The technology sector also performed poorly, in part due to some disappointing earnings reports.
These stock declines come on the heels of a relatively strong first quarter of economic growth. The Commerce Department reported on Friday that the U.S. economy grew at a 3.2% annual rate during the first three months of the year. Although this slightly missed expectations, consumer spending accelerated, consumer confidence declined less than projected, and the core inflation rate slumped to its lowest number in over 50 years. Overall, we can be very thankful for a strong start to 2010, both for the U.S. stock markets, and for the economy.
On average, since 1990, May has been the best performing month of the year for stocks. And while we certainly don’t know what the future will hold, the general consensus is that things are still looking up. "We're living in a world of good growth, no inflation pressures and good earnings. That's a pretty good mixture for equity markets to do reasonably well.” said Jeff Applegate, CIO at Morgan Stanley Smith Barney. Many other industry veterans echo the same sentiments.
There are a number of key economic reports that could affect the markets next week, as well as the ongoing development of the Goldman probe, and Fed Chairman Bernanke’s address on Thursday. As always, we’ll be watching and keeping you informed!
Key things we’ll be watching this week:
Monday – Motor Vehicle Sales, Personal Income and Outlays, ISM Manufacturing Index, Construction Spending
Tuesday – Factory Orders, Pending Home Sales Index
Wednesday – ADP Employment Report, ISM Non-Manufacturing Index
Thursday – Ben Bernanke Speaks at 9:30 AM ET, Jobless Claims
Friday – Employment Situation, Consumer Credit
HEADLINES:
The Gulf of Mexico oil spill could cost BP $3 billion or more. Under current law, an oil well's owner is responsible to foot the bill for the entire cost of cleanup in the event of a disaster. In this case that includes BP and minority partners Anadarko and Mitsui. Cleanup costs are currently running about $6 million a day, according to BP.
Your next trip to the barber could trim a little more than usual from your pocketbook, depending on where you live. In an attempt to balance their budgets, states like Michigan and Nebraska are considering taxing luxury grooming services. And while you might not think a haircut is a luxury item, they argue that you could always do it cheaper or at home.
Greece will face additional austerity measures as part of the price for a massive, multi-year loan package from its euro-zone partners and the International Monetary Fund. News reports on Friday said the Greek government has agreed to implement an additional 23 billion to 24 billion euros ($31.8 billion) worth of cuts in return for the aid.
More Americans expect to lean more heavily on Social Security for retirement, and fewer are optimistic about the equity they've built up in their homes, a new Gallup poll shows.
Sources:
Marketwatch
The Wall Street Journal Online
Barrons
CNN Money
http://money.cnn.com/2010/04/30/news/economy/bp_gulf_oil_spill_cost/index.htm
http://money.cnn.com/galleries/2010/news/1004/gallery.wacky_state_taxes/index.html
http://www.marketwatch.com/story/more-austerity-on-way-as-greece-aid-talks-near-end-2010-04-30
http://www.theatlantic.com/business/archive/2010/05/what-the-future-of-retirement-looks-like/39763/
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