The Markets:
Last week was a rough one for U.S. stocks. The markets started off
the week positive, pushed upward by positive corporate earnings, but retreated
the last three days to close at a low point, hammered by a disappointing jobs
report and renewed fears about a stuttering economic recovery. The S&P lost
2.44% - its worst weekly performance this year, while the Dow lost 1.44% and
the Nasdaq fell 3.68%.[1]
The week's sell off began on Wednesday when the latest ADP
Employment Report - usually released before the official Labor Department
report - suggested that employment had improved by less than expected. The news
was confirmed on Friday when the official numbers showed that employers had
added just 115,000 jobs in April, falling well short of the expected 170,000
new jobs. Although the unemployment rate dropped to 8.1%, we can't get excited
about it because the fall is primarily due to job-seekers giving up their job
search. If we see continued slowness in the job market, it is possible
that the Federal Reserve will step up efforts to boost the economy again. Since
inflation is still well below the danger zone, the Fed still has room to take
action.
Solid corporate earnings have provided a breath of fresh air,
showing that business is still humming along. First-quarter earnings among
companies in the S&P 500 are currently at 7.8%, well ahead of expectations.
However, companies are forecasting a much slower second quarter, a sign that
executives are bracing for declining sales.[2]
Analysts believe that a warm March and an early Easter may have shifted sales
to March, cutting into second quarter revenues. Please also keep in mind that
companies often sandbag their forecasts in order to artificially beat
expectations when the official earnings are posted.
Headlines:
I'll Have Another beat Bodemeister at the 138th Kentucky Derby I'll Have
Another chased down Bodemeister in the stretch to capture the win with a finish
time of 2:01.83, while pre-race favorite Union Rags finished seventh.[3]
Gas prices fall for 18 straight days and oil drops below
$100/barrel. The precipitous drop in gas prices will likely continue as global
demand weakens, providing much-needed relief during peak summer driving months.
Nationally, gas averaged $3.80 a gallon, nearly 20 cents below 2011's $3.99 a
gallon.[4]
April retail sales fall short of predictions, but
retail analysts say it is not necessarily a sign of weakened consumer spending.
Same-stores sales grew just 0.8%, missing a predicted increase of 1.5%,
according to Retail Metrics, Inc.[5]
Mortgage rates fall to near-60 year lows. 30-year
mortgage rates fell to 3.84% this week, potentially spurring a round of
refinancing and encouraging housing purchases. However, with mortgage standards
remaining tight, it may be difficult for some buyers to qualify for ultra-low
rates.[6]
The Housing Market Index (HMI) is a weighted average of separate
diffusion indices based on a monthly survey of NAHB members designed to take
the pulse of the single-family housing market. Each resulting index is then
seasonally adjusted and weighted to produce the HMI.
The BLS Consumer Price Indexes (CPI) produces monthly data on
changes in the prices paid by urban consumers for a representative basket of
goods and services. Survey responses are seasonally adjusted and weighted to
produce a composite index.
The Conference Board Leading Economic Index (LEI) is a composite
economic index formed by averages of several individual leading economic
indicators, which are weighted to produce the complete index.
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performance of an index between two specific periods.
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