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3/30/2012 2:16 PM
My Special Guest on Payne Nation Tonight: Herman Cain & Katrina Campins
By Charles Payne, CEO & Principal Analyst
Question of the Day
The last two quarters have been strong for the market though a little misleading when you strip out Apple. Be that as it may, do you think the S&P could make a double digit gain in the second quarter?
Post your answer below.
The market fended off early weakness as more and more economic data keeps coming up short. I marvel at how the street can shrug it all off, but I don't want to fight it—just be cognizant of what's going on.
I had fun with words created by Shakespeare and now want to follow on those words and how they related to the market:
ACCOMMODATE- BEN BERNANKE AND THE FED
AMAZEMENT-THE MARKET RALLY IN RESPONSE TO CENTRAL BANK MONEY-PRINTING
BASELESS-HOW BEARS FEEL ABOUT SAID MARKET RALLY
COUNTLESS-THE ADVICE FROM EXPERTS TO BUY THE DIP
CRITICAL-THIS YEARS ELECTION AND ITS POTENTIAL IMPACT ON ECONOMY
DWINDLE-AMERICA'S SAVINGS RATE
EVENTFUL-NEXT FRIDAY'S SESSION AFTER JOBS REPORT IS RELEASED
EXPOSURE-YOU HAVE TO BE INVESTED IN SOMETHING-
FITFUL-WALL STREET TRADERS REACTION ONCE THE FED REMOVES PUNCH BOWL
GNARLED-STOCK MARKET'S INITIAL REACTION ONCE PUNCH BOWL REMOVED
OBSCENE-WALL STREET PAY IN THE EYES OF MOST
Then there are words not associated with the Street: Frugal, Generous, and Pious. Shakespeare also coined the words "laughable" but I can't think of anything funny when it comes to the markets, the economy and its key players.
A Run to the Finish Line
By Carlos Guillen
As we come to the end of the fiscal first quarter, it is apparent that fund managers are making a run to the finish line, getting into equities that have been making strong gains in an effort to appear as not having "missed the boat." However, while this may be helping lift stocks today, rather encouraging consumer data is also helping to provide support for equities during today's trading session.
Perhaps a bit mixed, consumer sentiment data did come in better than expected, although the outlook for the short term turned a bit pessimistic. The University of Michigan Consumer Sentiment March result landed at 76.2, which was higher than the Street's expectation of 74.3, increasing from the 75.3 reached last month and representing the seventh consecutive month of improvements. On the other hand, the index of consumer expectations for six months from now, which more closely projects the direction of consumer spending, declined to 69.0 from the 70.3 posted in February. The main driver of consumer sentiment at the moment continues to be jobs. Consumers have continued to brush off threats of higher gas prices and have continued to be motivated by stories that more and more people are getting jobs; in fact, according to the survey, the number of consumers that reported hearing improved employment conditions increased to a record high this month. In addition, the number of households that claimed to have experienced an improvement in their financial situation increased to the highest level since March 2008. Nonetheless, consumers' outlook turned a bit pessimistic, with just one-in-four anticipating that their finances would improve during the year ahead, as expected inflation will likely offset any income gains.
Also encouraging today was data from the Commerce Department that indicated that the American consumer increased their spending by the most in seven months. Consumer spending rose 0.8 percent month-over-month in February, landing higher than the Street's estimate of 0.6 percent and increasing from the 0.4 percent posted in January. However, while spending increased, it is apparent that the increase came at the cost of a dwindling savings rate, as the saving rate fell to its lowest point in more than two years. As it stands, the saving rate dropped to 3.7 percent of after-tax income in February, lower than the 4.3 percent achieved in January. Income grew 0.2 percent, lower than the Street's estimate of 0.3 percent, matching January's weak increase. However, taking inflation into account, income after taxes fell for a second straight month by 0.1 percent, after falling 0.2 percent in January. So while it is encouraging that consumers are spending, rather stagnant incomes do not bode well for consumption in the near term; the hope at the moment is that jobs will support further consumer spending.
Overall, despite some rather mixed economic data, equity markets have demonstrate resilience so far during this session, with the Dow Jones Industrial Average up over 60 points and trending higher. While anything is possible as we approach this upcoming earnings season, we see the macroeconomic fundamentals still strong enough to support further gains in equities for the rest of the year.
By David Urani
Surprise, surprise, after what has been a lackluster month of economic data, we rounded out the regional manufacturing reports today with a soft Chicago PMI. The headline fell to 62.2 from 64.0 and was below the consensus, although the Street had already been looking for a drop to 63.0. Looking into the details, it didn't look pretty as new orders were down to 63.3 from 69.2, employment was down to 56.3 from 64.2, and prices paid were up to 70.01 from 65.6.
Given the latest Chicago reading, the outlook isn't great for the ISM manufacturing report on Monday. Dallas, Richmond and KC also dropped this month. Philly and Empire State did manage to increase slightly, but we should also note that these two reports come out early midway through the month, so they only account for half of the activity in March; it's possible conditions slid in the back half of the month.
I also mentioned yesterday that early spring hiring and revisions to jobless claims data could be bearish for the March employment report. I broke out the employment components of each of the regional manufacturing indices as follows and the picture is similar:
Consumers Spending on More than Just Gas?
Check out the readings on personal income and spending, which showed consumer incomes rising by a modest 0.2% (below the 0.4% estimate), but also showed a 0.8% increase in spending (above the 0.6% estimate). And then the real kicker is the personal savings rate which at 3.7% was the lowest since August 2009. One's initial reaction is to say high gas prices are digging into our savings.
Yet I found the University of Michigan Sentiment index to be impressive in the face of the gasoline headwinds, as the 76.2 reading (up from 72.5) was the best since February 2011. Could it be that we are in a butter zone where consumers are forking out more for gas but feeling better about their situation anyway?
|If there is great weather for planting crops, government decides to build/rebuild roads, and Obama capitulates on Keystone XL Pipeline, S & P could easily have another 10% quarter. The clean-up from the storms, especailly the tornados, could probably give it a 0.5 - 1.0% boost coming out of the gate.|
Pete on 3/30/2012 2:31:17 PM
|I think the market will continue to rally through the beginning of May. But at some point the reality of our deficit, the weak recovery, high oil prices and a lackluster housing recovery will catch up to it and the downtrend will continue through the summer. I believe the only reason we are currently defying gravity is the actions by the Fed and the ECB to flood the market with liquidity. At some point in the near future, the Fed/ECB will have to unwind all of that and the consequences will be severe.|
Michelle on 3/30/2012 3:05:01 PM
|Double digit gains? That means $1550 for The S&P before July. That would be a reasonable multiple of earnings IF they were to stay high. But, earnings are not looking to remain at 1Q levels, and investors are definitely showing they do not have full confidence yet. So, I can't see much more than 1450 by July. I don't see full confidence coming before at least 2 more earnings seasons are in the books.|
Bob G on 3/31/2012 12:26:38 PM
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