Friday, March 25, 2011
Favorable news on the domestic front, in the shape of continued momentum in the economic recovery and corporate earnings, has helped stocks shrug ominous-looking reports from abroad. This trend should remain in place today as well.
Helping the postive mood is this morning’s final read on the fourth quarter 2010 GDP report. Though a backward-looking number, it is reassuring to see that the growth number was revised upwards to 3.1% from 2.8%. The fourth quarter GDP growth rate represents a material acceleration from the preceding quarters. The economy had grown 2.6% in the third quarter and 1.7% in the second quarter of 2010. The report’s internals are largely in-line or modestly on the positive side, with consumer spending growing at a 4% pace, the fastest rate since the start of the Great Recession.
Reports on the corporate earnings front have been favorable as well. We had a better-than-expected earnings report from Oracle (ORCL) after the close on Thursday. The company provided an upbeat outlook, with the disaster in Japan not expected to have any material negative impact, as had been the case with Adobe Systems (ADBE). Research In Motion (RIMM) also reported solid results for the quarter after the close yesterday, but they provided a soft outlook. Stocks in the tech sector should remain focus today.
With the first quarter 2011 earnings season just days away now, the focus in the coming days will decidedly shift that way. But before we reach the reporting season, we will get the all-important non-farm payroll report for March on Friday next week. A positive number on that front will be a major boost for stocks.
Sheraz Mian
Director of Research
Zacks Investment Research
