The group “Smart401” offered up a summary of market trends for this week. If you’re ever wondering just how international news affects your portfolio, this is a great summary of the cause and effect relationship.
A look at some of the market movers from the week:
- Fighting continued in Libya and the week closed with the government turning down a cease-fire offer
- Advantest agreed to buy Verigy for $1.1 billion
- General Electric agreed to buy most of Converteam for $3.2 billion
- The Supreme Court heard a gender-discrimination case against Wal-Mart
- Managers at BP may face manslaughter charges stemming from the explosion that led to the Gulf oil spill
- eBay agreed to buy GSI Commerce for $2.4 billion
- Republicans introduced a bill that would begin shrinking Fannie Mae and Freddie Mac
- The TARP program is expected to show a $24 billion profit
- Potential Warren Buffett successor David Sokol resigned and questions were raised about his ownership in Lubrizol stock prior to Berkshires buyout
- Johnson & Johnson announced the reorganization of its consumer unit after protracted struggles with recalls
- The Federal Reserve released names of the banks that used its discount window during the credit crisis
- Congress appeared to be nearing a deal on the U.S. budget
- Nasdaq OMX and IntercontinentalExchange made an $11.3 billion bid for NYSE Euronext, topping the bid from Deutsche Boerse
- The job market sparked optimism as more jobs were created in March than was expected
- Japan continued its recovery process after the massive earthquake and tsunami that rocked the country
The market posted gains again this week, though the advance was more muted than the jump of the previous week. At week’s end, the S&P 500 index showed a 1.4% gain as moderate advances Tuesday, Wednesday, and Friday offset smaller losses on Monday and Thursday. March closed out with a 0.1% loss, but the first quarter showed a 5.4% gain. Year to date, the S&P 500 has climbed 5.9%.
Form the economic desk, the week started out on a relatively good note as personal income grew in line with estimates, while personal spending jumped more than expected. Pending home sales were much stronger than anticipated and home prices from the Case-Shiller index fell less than expected. Consumer confidence took some of the wind out of those sales though as the reading was 63.4 versus the estimated 65 and 72 in February.
From mid-week on, the economic focus was almost wholly on employment. On Wednesday, ADP reported that 201,000 jobs had been added, slightly lower than the 208,000 in February and short of the 210,000 that were expected. At 388,000, the weekly initial unemployment claims measure was in line with estimates.
The government’s numbers were able to spark more optimism though, as total nonfarm payrolls increased by 216,000, well above the 185,000 that were expected. Excluding government employment, payrolls expanded by 230,000. The job gains helped further push the unemployment rate down — to 8.8% from 8.9% in February. The average workweek came in in-line with estimates, but hourly earnings stayed flat despite the expectation of a 0.2% increase.
Disappointing employment numbers in previous months helped set the stage for particular excitement over this month’s positive release. However, the headline numbers do still mask the extent to which the labor market is still suffering. The employment-population ratio — which is a broader measure that doesn’t solely focus on those actively seeking work — remained low at 58.5%. Additionally, 45.5% of the unemployed are considered “long-term unemployed,” which is much higher than the norm. Certainly, March’s numbers show that the labor market is showing signs of life, but it has significant ground yet to cover.
In Washington, lawmakers appeared to be approaching a deal on the Federal budget. The agreement between Republicans and Democrats looks to include $33 billion in spending cuts — more than what Democrats had hoped for, but well below the $61 billion that Republicans were pushing for. Both sides’ backers are likely to agitate for a harder line, but Congress currently faces an April 8 deadline after which they could face a government shutdown.
Overseas, turmoil continued. Rebel and government forces continued to clash in Libya, and after the government rejected a rebel-proposed ceasefire at week’s end, it appears that violence will continue into next week. Workers continued to wrangle with the damaged nuclear station in Japan as the rest of the country continued regrouping efforts after the twin natural disasters hit three weeks ago. And the financial situation in Europe dragged on and Portugal continued to fight against taking a bailout from the European Union and International Monetary Fund. In the U.S., though, these issues remained somewhat on the backburner for the week as investors focused on the domestic economic situation.
It will be another relatively quiet week on the earnings front next week, but it will likely be the last for a while. On April 11, aluminum giant Alcoa is expected to kick off first-quarter earnings season with its report after the close of trading. With earnings season bearing down though, we could hear some pre-announcements next week from companies that want to prepare investors for better- or worse-than-expected results.
After a busy economic week last week, the calendar will be much quieter next week. On Tuesday, the Federal Reserve will release minutes from its most recent rate-setting meeting. Thursday we’ll get the weekly reading on initial unemployment claims along with February consumer credit.
On the political front, the budget could dominate the news next week if lawmakers aren’t able to agree to a middle ground on spending cuts. The deadline for reaching a deal hits on Friday and the White House has already expressed reluctance on passing another stop-gap measure. If no compromise is reached, the week will likely end with the government entering its first shutdown since late 1995.
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