Good news and bad news lead my thinking this morning. The bad news is the market is still doing the up and down thing. The good news is the up and down thing suggests a lack of fear in the market, a potential set up for a solid breaking of the resistance levels now in place. All the market wants is some solid earnings and some more positive economic data to march past recent historic highs. Both might be in the offing.
- Before earnings season started, analysts were expecting the S&P 500 to earn $25.49 for the first quarter. After a rough start to earnings season two weeks ago, that projection was dialed down to $25.40. As of last week though, with about 62% of the S&P 500’s constituents having posted Q1 numbers, the index is likely to report per-share income of $26.14 for the quarter.
According to the source of the data above, “that’s 2.5% better than estimates and 7.8% better than the year-ago number. Oh, by the way, that’s also a record-breaking earnings figure for the S&P 500.”
On the economic data front, there is still a mixed bag out there. Much like the market itself, there is good news and bad news.
- Consumer spending unexpectedly rose in March as benign inflation supported households’ buying power, but the growth momentum was unlikely to be sustained amid higher taxes.
Of course, it is a fact that consumer spending rose in March and supposition that it will not continue into April and beyond because of the 2% return of the payroll tax. It is also a fact that the US housing industry is still steadily climbing out its hole.
- U.S. home prices rose in February compared with a year ago by the most in nearly seven years, as a growing number of buyers bid on a limited supply of homes.
Now, just about 16 months ago, the breathless media spotlighted those that told us that 2012 would be a disastrous year for the housing industry, a swell of foreclosures would swamp the already too high inventory of homes. Oops!
Across the pond, Europe is still struggling, but as I wrote three years ago, two years ago, and last year, its recovery would take time. Politics is a fine art when practiced artfully, and the Europeans do it better than anyone, certainly better than the US. The politics in Europe are shifting to the next stage of its recovery, which is lightening up on the austerity and finding ways to stimulate economically.
- New Italian Prime Minister Enrico Letta won a final confidence vote in his broad coalition government on Tuesday before setting off on a European tour to push his agenda of growth rather than austerity to revive the recession-hit economy.
As it is here in the US, overseas markets look to the future. If the current movement in the European market is any guide, investors worldwide are seeing a brighter future.
- The German DAX broke its 50-day moving average with a 4.6 percent gain last week. Markets in Italy, France, and the UK also registered gains in the 4 percent range.
When I say worldwide, I include Asia, as it, along with the US and Europe, is the global market place. In that group is Japan, the almost forgotten child because of her years in economic decline.
- Japan’s household spending surged in March at the fastest pace in nine years in a sign that Prime Minister Shinzo Abe’s bold efforts to end two decades of stagnation are lifting consumer confidence and setting the stage for an economic revival.
“Setting the stage for an economic revival” is an interesting turn of phrase, given that Japan, despite its years of stagflation (lack of growth), is still the third largest economy on the planet. If it does realize an economic revival, what will that mean for Asian and global stock markets? Do you want to have exposure to that possibility? Just asking …
Speaking of exposure, a short time ago, I wrote about following the money from one sector to another. It is not an original idea, but it is one that has worked for many over time.
- A strong but somewhat uneven stock market rally in the first quarter has strategists looking for underperforming areas to overweight, and overheated areas where exposure needs to be pared back.
Simple enough, but what clues do we have about where the money will flow? Perhaps a chart that shows which sectors are doing what might help with that.
Finally, years ago, before the US in its questionable wisdom outlawed online poker, I played online tournament poker for money. I used to write about my “adventures” as they related to playing the market. The similarities are remarkable and helpful for those learning to trade the markets. In any case, I just might get a chance to revive my poker playing and comparative commentary.
- Poker devotees will soon be able to skip the smoky casino and legally gamble their dollars away on the couch — at least in the state of Nevada.
One final thought about the above – take a look at Zynga.
Trade in the day; Invest in your life …
