Ken’s Market
comment’s on CNBC
http://video.cnbc.com/gallery/?play=1&video=3000163102
Slower Growth Ahead?
Markets
ended positive last week despite a disappointing GDP report, erasing losses
endured the previous week. As of Friday’s close, the S&P 500 gained 1.74%,
the Dow climbed 1.13%, and the Nasdaq increased 2.28%.[1]
Earnings
data and a handful of economic reports drove most of the market action last
week. According to our first peek at preliminary first quarter GDP data, the
economy grew at an annualized rate of 2.5%, which is up significantly from the
0.4% gain in the fourth quarter of 2012, but still below consensus expectations
of around 3.0%.[2]
While the data is preliminary, a deeper look suggests we may face slower growth
in the second quarter. Let’s break down the numbers to see why:
Nearly all the gains in Q1 came from consumer spending and inventories. Consumer spending is expected to drop in the spring as Americans continue to feel the effects of the 2% payroll tax increase. Inventory growth, driven by farmers stocking up their silos after last year’s drought, made a strong contribution to last quarter’s growth; however, the activity was unusual, and unlikely to continue into Q2. Furthermore, government spending, which accounts for a significant part of economic activity, is declining rapidly – dropping 4.1% in Q1 alone. Most analysts expect government spending to continue to slide as the effects of sequestration become more pronounced.[3]
On
the earnings front, more than 30% of the S&P 500 has reported and, while
results are uneven, the news is mostly good. Blended earnings are up 2.4% in
the first quarter, which is great since most analysts had low expectations. Two
standout sectors thus far are technology, which benefited from strong consumer
electronics sales, and building materials, which is getting a boost from the
housing sector. [4]
On
the downside, there are a lot of revenue misses happening; so far, only 39% of
companies have beat revenue expectations, which is far below the historic
average of 61%. This indicates that demand is still soft and companies are
achieving their results by cutting costs. Anemic revenue growth seems to be
tied to slow global demand, which is a particular problem for large
multinational corporations that do a lot of business abroad. Demand in Europe
is essentially flat, and sales volume is down across the board, making it
difficult for companies to improve their margins.[5]
Next
week will see the release of a slew of economic data, along with the steady
march of more earnings reports. Analysts will be closely watching consumer
spending and consumer confidence data, as well as the jobs report to see
whether more market upside is possible. As always, we’ll continue to monitor
earnings reports and economic data and keep you updated.
HEADLINES:
Durable goods orders dropped in March. Orders for long lasting manufactured
goods recorded their largest drop in seven months, falling by 5.7% in March,
following a 4.3% increase in February. The drop was nearly double what
economists had expected, and indicates factory activity may be cooling off.[6]
Unemployment claims drop. The number of Americans filing
jobless claims fell by a surprising 16,000, showing a possible improvement in
the job market. The four-week moving average, a less volatile gauge, also fell,
easing concerns of deterioration in labor market conditions.[7]
Oil, gasoline prices fall. The price of crude oil slipped last
week as first quarter GDP growth came in under expectations. Coupled with
disappointing economic growth in China, this report left analysts wondering if
global demand for oil will soften in 2013. At the pump, the average price of
gasoline dropped to $3.51, down 32 cents from a year ago.[8]
Spain delays deficit targets. In an admission that its severe
austerity measures had failed to control its finances, Spain slashed its
economic forecast and extended its deficit targets by two years. Economists
warned that Spain’s economy would contract by 1.3% in 2013, but might grow by
nearly half a percent in 2014. As anti-EU sentiment grows in core nations like
Germany, these delays may make it politically difficult to continue to bail out
countries like Spain.[9]
QUOTE OF THE WEEK:
“In virtually every area of your
life, the more you give away, the more you get back.” – Dr. Wayne Dyer
Share the Wealth of
Knowledge!
Please share this market update with family, friends, or colleagues. If you would like us to add them to our list, simply click on the "Forward email" link below. We love being introduced!
Please share this market update with family, friends, or colleagues. If you would like us to add them to our list, simply click on the "Forward email" link below. We love being introduced!
If
you would like to opt-out of future emails, please reply to this email with
UNSUBSCRIBE in the subject line.
.
Securities offered through Aurora Capital Member
FINRA/SIPC.
Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.
Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.
Diversification
does not guarantee profit nor is it guaranteed to protect assets
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 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 Nasdaq Composite is an index of the
common stocks and similar securities listed on the NASDAQ stock market and is
considered a broad indicator of the performance of stocks of technology
companies and growth companies.
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.
Fixed income investments are subject to various risks
including changes in interest rates, credit quality, inflation risk, market
valuations, prepayments, corporate events, tax ramifications and other factors.
Broker dealer or Investment Advisor, and
should not be construed as investment advice. Neither the named representative
nor the named Broker dealer or Investment Advisor gives tax or legal advice.
All information is believed to be from reliable sources; however, we make no
representation as to its completeness or accuracy. Please consult your
financial advisor for further information.
By clicking on these links, you will leave
our server, as they are located on another server. We have not independently
verified the information available through this link. The link is provided to
you as a matter of interest. Please click on the links below to leave and
proceed to the selected site.
[1]
http://briefing.com/investor/markets/weekly-wrap/weekly-wrap-for-april-22-2013.htm
[2]
http://www.reuters.com/article/2013/04/27/us-usa-economy-idUSBRE93P04P20130427
[3]
http://www.reuters.com/article/2013/04/27/us-usa-economy-idUSBRE93P04P20130427
[4]
http://www.cnbc.com/id/100668291
[5]
http://www.cnbc.com/id/100673553
[6]
http://www.reuters.com/article/2013/04/24/us-usa-economy-goods-idUSBRE93N0NH20130424
[7]
http://www.reuters.com/article/2013/04/25/us-usa-economy-jobless-idUSBRE93O0KC20130425
[8]
http://news.yahoo.com/oil-slips-us-growth-lags-expectations-161728254.html
[9]
http://news.yahoo.com/spain-slashes-forecasts-delays-deficit-targets-165237261.html
