Monday, April 30, 2012 9:10 a.m. ET
S&P 500: 1403.36
Nasdaq Comp.: 3069.20
Russell 2000: 825.47
Manufacturing and employment reports will hog the spotlight this week. It was the disappointing March Employment Situation report that triggered a sharp break in stock prices in early April.
However, last week’s sudden rebound came just in time to cut short the final stages of a Head & Shoulders top formation that stood to result is a nasty correction (but not a bear market).
The reason is unclear. Q1 earnings have been upbeat, and Fed chief Bernanke said last week that the Fed would do more to stimulate the economy if necessary.
Perhaps some big hitters got wind of good news this week on the economic front.
Worth noting, last week’s rally lacked heavy volume, so some backing and filling is possible this week.
Spain is less of a negative today as its Q1 data suggests its economy is shrinking less than forecast, though it has officially slipped into recession
Europe’s sovereign debt problems are real, even more scary now that it’s Spain (4th largest economy of the 17 euro-area countries) on the ropes. Even so, the Street is not now as paralyzed with fear of a meltdown as it was when Greece was on the verge of default. My guess – Europe is better prepared now to head off a crippling default than last year. That doesn’t however preclude some scary moments at times.
TODAY: I expect some “wait and see” by investors this week, at least until the ADP Employment report Wednesday at 8:30. The Chicago PMI report 9:45 and ISM Manufacturing report at 10 o’clock tomorrow may drive the market one way or the other, but the real driver will be the Employment Situation report at 8:30 Friday.
Some investors will front-run that report, others will wait.
Meanwhile earnings reports will flow. To-date, 75% of the earnings for S&P 500 companies have “beat” projections in Q1 by an average of 7.1%. The “beaters” averaged a gain of 1% after their earnings reports this time vs. a five-year average gain of 1.3%.*
One risk you cannot protect yourself from is a change in the ranking of a stock by a brokerage analyst. It doesn’t have to be from buy to sell, just to “neutral” to crunch the stock and just one analyst can do it.
Corporate earnings will help prop the market, however this week it will be the economy that calls the tune.
Personal Income (8:30a.m.) – Rose 0.4% in March vs a revised increase of 0.3% in February following a 0.2% . Personal Spending rose 0.3% in March vs. a gain of 0.9% in February. Personal Consumption Expenditures (PCE) increased 0.2% vs. February’s plus 0.3%.
Chicago PMI (8:30a.m.) – March’s Index was down to 62.2 from February’s 64.0, but well above the “50” threshold that signals growth. New orders were 63.3 down from 69.2. The survey reflects manufacturing and n0n-manufacturing business in the Chicago area.
ISM Manufacturing Index (10 a.m.) – That short for Institute for Supply Management Index which says little in itself, but its is a survey of a wide spectrum of business including employment, production, new orders, supplier deliveries, and inventories. March was up one point to 53.4.
Construction Spending (10 a.m.) –Dropped 1.1% in February after a 0.8% drop in January.
ADP Employment Report (8:15 a.m.)– Private payroll employment gained 209,000 in March. Investors will be watching this in hope of getting an early read on Friday’s critical Employment Situation Report which hammered the market in late March.
Factory Orders ( 10 a.m.) – rebounded 1.3% in February vs. a 1.1% decline in January.
Jobless Claims (8:30) – Decline a ho-hum 1,000 claims for the week ended Apr. 21 to 388,000 from a upwardly revised 389,000 the week before bringoing the 4-week moving average up to 381,750.
Productivity and Costs (8:30 a.m.) – final estimate for Q4 was up to an annualized rate of 0.9%. Unit labor costs were up 2.8% vs. a Q3 rate of3.9%.
ISM Non-Manufacturing Survey of 375 + firms (10 a.m.) fell 1.3 points to 56 reflecting a slowdown in new orders to 58.8 from 61.2. The Index encompasses agriculture, mining, construction, transportation, communications, wholesale and retail trade.
Employment Situation (8:30 a.m.) – new hires increased a very disappointing 120,000 in March vs. a rise of 240,000 in February and 275,000 in January. Included is the Unemployment Report which dropped in March to 8.2% from 8.3% in February.
The writer of Investor’s first read, George Brooks, is not registered as an investment advisor. Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. Readers are expected to assume full responsibility for conducting their own research pursuant to investment decisions in keeping with their tolerance for risk.