Apr 16, 201210:11 AMBlog: Alaska's Eye on Wall Street
Week in Review, April 16
The markets have been volatile of late with 100 point daily swings in the DJIA not uncommon. The S&P 500 lost -2% last week while bonds rallied. Yields on 10 year Treasuries fell 20 bp to 1.98%.
Overseas, Spanish yields have jumped over 100 bp to 5.90% on ten year bonds recently and European bank stocks are down about -16% from their recent highs. The Economist notes the "sugar rush" from ECB loans is wearing off.
China reported first quarter real GDP up +8.1% YoY, which was below the consensus estimates. It was the weakest since 2Q09.
Goldman Sachs expects first quarter earnings for S&P 500 companies to be up +6% YoY. Apple remains a key driver for the market with an anticipated +53% EPS growth. Without AAPL, S&P 500 EPS growth would be +4%.
Bellwethers ALCOA, Google, J.P. Morgan and Wells Fargo all reported Q1 earnings and beat expectations. Wells Fargo originated 30% of all U.S. mortgages in Q4, the highest share ever posted by a single lender and nearly three times the nearest competitor according to Bloomberg.
The U.S. budget deficit for the first half of 2012 is running at a -$1.4 trillion rate. This is particularly troubling for being the 3rd year of a recovery.
Natural gas futures in New York dropped below $2 per MMBTU for the first time in a decade on a growing supply glut caused by record production and mild weather. About 51% of U.S. households use gas for heating and demand this winter was 18% below normal.
Speaking in NYC, Federal Reserve Vice Chairwoman Janet Yellen said the outlook for the U.S. economy remains highly uncertain and the central bank is "quite willing" to implement new measures if the recovery weakens. I read the speech - it was very dovish.
Yet Stone McCarthy notes the Beige Book survey released Wednesday showed that each of the Fed's 12 bank districts grew steadily from mid-February through April 2. And the survey noted that hiring was stable or increased in most of the country.
On Thursday, the headline PPI was unchanged in March. The core PPI rose +0.3%. This puts the YoY change for both the headline and core reading at just below +3.0%.
The CPI was out Friday and up +0.3% in March and +2.7% over the last year. Consumer confidence fell to 75.7 in April from 76.2 in March. The decline was probably due to higher gasoline prices.
Next week, Retail Sales (Monday) look to be up about +0.4% after rising +1.1% in February. Other data to watch includes various housing numbers (Housing Starts and Existing Home Sales) and leading indicators on Thursday are expected to gain +0.2%. Earnings season will be in full swing with a plethora of companies reporting.
Jeff Pantages
Chief Investment Officer
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