How long can this Stock Market Rally
continue?
Stocks rallied for the fourth week
in a row on positive economic data as both the S&P 500 and Dow Industrials
hit new highs. For the week, the S&P 500 gained 2.07%, the Dow increased
1.56%, and the NASDAQ added 1.82%.[1]
Markets experienced some volatility
as stocks pulled back early in the week amid worries that the Fed may be
tapering off its bond-buying program soon. However, investors soon regained
their positivity after realizing that the Fed would not slow its quantitative
easing activities without a simultaneous improvement in economic growth. In
other good news, data showed that consumer sentiment is on the upswing,
reaching its highest level since July 2007, according to the Thomson/Reuters
University of Michigan index.[2]
The rate of economic growth has been
expected to fall in the second quarter as sequestration and higher taxes
continue to bite; however, improvements in the labor market, housing market,
and retail sales show that the recovery is still ongoing. While a measure of
volatility is expected, many analysts are upbeat about the year’s market prospects.
JP Morgan raised its year-end target for the S&P 500 to 1,750 from 1,500,
indicating that their analysts expect additional upside this year.[3]
Although we don’t want to dwell too much on technical indicators, preferring a
long-term strategy driven by research and quality investments, we like to see
that analysts are remaining optimistic about market performance this year.
This week will see the release of
important housing and manufacturing data, which will hopefully give additional
support to the market rally. Ben Bernanke will speak about the economy before
the Joint Economic Committee of Congress on Wednesday. Analysts will watch
carefully to see whether he believes the economy is strong enough to justify
paring back the Fed’s bond-buying activities any time soon.
Overall, we’re pleased with how
equity markets have been performing this year and we’re glad to see the
economic recovery advancing. Even so, we are determined not to become
complacent, but rather, to remain alert for both risks and opportunities. Thank
you for allowing us to serve you. We hope you have a great week!
ECONOMIC
CALENDAR:
Monday:
Ben Bernanke Commencement Speech
Notes 8:00 AM ET
Wednesday:
Existing Home Sales, Ben Bernanke Speaks 10:00 AM ET, EIA
Petroleum Status Report, FOMC Minutes
Thursday: Jobless Claims, PMI Manufacturing Index Flash, New Home
Sales
Friday:
Durable Goods Orders
HEADLINES:
Soft CPI suggests inflation remains in check. Consumer prices slipped in April due to a decrease in gasoline
prices. The CPI, a measure of inflation, rose just 1.1% in the last 12 months,
the smallest increase since November 2010. The decline in prices is good news
for consumers and shows that policymakers should focus on jobs creation, not
inflation.[4]
Housing starts drop in April. Housing starts, a measure of new home construction, fell
16.5% in April, driven by a large drop in the volatile apartment sector.
However, starts are still up 36% from one year ago and building permits, a much
less volatile measure of housing construction, increased 14.3% to the highest
level since June 2008.[5]
Slovenian
credit rating cut. Fitch Ratings downgraded Slovenia’s
sovereign credit rating to BBB+, citing a weak economic outlook. The Eastern
European EU member has struggled with banking overhauls and high levels of debt
and may be forced to seek a bailout.[6]
China’s housing inflation accelerates. China’s April housing inflation rate soared to a two-year
high, driven by high prices in Beijing and Shanghai. Average new home prices
rose 4.9% from a year ago, reigniting concerns about runaway property inflating
and complicating the task of policymakers struggling to contain inflation while
boosting economic growth.[7]
“Always remember that every obstacle
is a test and an opportunity.”
– Dr. Wayne Dyer
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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.
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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.
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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.
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Treasury Note as a benchmark for the long-term bond market.
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[1] http://briefing.com/investor/markets/weekly-wrap/weekly-wrap-for-may-13-2013.htm
[2] http://www.cnbc.com/id/100746158
[3] http://news.yahoo.com/stock-futures-rise-ahead-umich-leading-indicators-data-120747073.html
[4] http://finance.yahoo.com/blogs/daily-ticker/weak-cpi-reading-means-fed-keep-foot-gas-163938484.html
[5] http://www.usatoday.com/story/money/business/2013/05/16/april-housing-starts/2165269/
[6] http://www.foxnews.com/world/2013/05/17/fitch-ratings-agency-cuts-slovenia-sovereign-credit-grade-on-economy-banking/
[7] http://news.yahoo.com/china-april-housing-inflation-quickens-two-high-082802362.html
