Friday, April 1, 2011
Stock Market Commentary:

Stocks enjoyed their best quarterly advance since 1999 which bodes well for the current 2-year bull market. It was encouraging to see a slew of leading stocks and the benchmark S&P 500, Dow Jones Industrial Average, Nasdaq composite, and small cap Russell 2000 index all close and stay above their respective 50 DMA lines in late March. The 28-week rally, which began on the September 1, 2010 follow-through day (FTD), ended on Thursday March 10, 2011 when all the major U.S. averages plunged below their respective 50 DMA lines in heavy trade. However, the correction was short lived when a new rally was confirmed on Thursday March 24, 2011′s healthy action. Since then, the action remains healthy which suggests the bulls are back in control of this market.

Monday & Tuesday’s Action: Stocks Look Past Weaker Than Expected Economic Data

Before Monday’s open, consumer spending in the U.S. rose more than forecast as incomes rose. The Commerce Department said purchases rose +0.7% in February which was the strongest increase since October 2010 and bodes well for the economic recovery. Meanwhile, U.S. income rose +0.3%, less than forecast, as the Federal Reserve’s preferred measure of inflation rose. Elsewhere, according to Bloomberg, U.S. corporations are beginning to spend the record $940 billion in cash they have accumulated after the credit crisis. Out of the U.S. corporations that have tapped their cash reserves the lion share have decided to pursue strategic mergers and acquisitions. M&A’s topped $256 billion in Q1 2011 which is the highest level since the collapse of Lehman Brothers Holdings Inc. in September 2008. So far in Q1 2011, companies in the S&P 500 have authorized +38% more buybacks in han the same period in 2010 and dividends may increase to a record $31.07 a share in 2013, according to data complied by Bloomberg.
Before Tuesday’s open, the S&P/Case-Shiller index of home prices in 20 major cities slid -3.1%from January 2010 which was the largest year-over-year decline since December 2009. The decline was the latest in a series of weaker than expected data from the ailing housing market. After the open, the latest reading on consumer confidence missed estimates. The Conference Board’s consumer confidence index fell to a three month low of 63.4 which was lower than the Street’s forecast of 65. The down tick in consumer confidence was largely attributed to surging energy prices.

Wednesday-Friday’s Action: Best Q1 Since 1999 & Healthy Jobs Data:

Before Wednesday’s open, ADP, the country’s largest private payrolls company, said U.S. employers added 201,000 jobs in March. The report was just shy of the Street’s 205k estimate but bodes well for Friday’s official non farm payrolls report. Elsewhere, Portugal’s five-year bond yield jumped above +9% for the first time since the euro’s inception in 1999! Keep in mind, that the first quarter will end on Thursday and a lot of last minute “window dressing” is likely occurring. Before Thursday’s open, the Labor Department said initial jobless claims fell by -6,000 to a seasonally adjusted 388,000 last week. This was better than the Street’s estimate for a decline of -2,000 but the prior week’s numbers were revised up to 394,000 from an originally reported382,000. Stocks rallied on Friday after the Labor Department said U.S. employers added 216,000 new jobs in March and U.S. manufacturing topped estimates. For the quarter, the small cap Russell 2000 index topped its peers, rallying +7%. Elsewhere, the Nasdaq composite rose +4.5%. The benchmark S&P 500 and the Dow Jones Industrial Average both rose +5.5% and +6.6%, respectively.

Market Action-Confirmed Uptrend

The market is back in a confirmed uptrend after a modest (and healthy) -6% correction from its post-recovery highs. We find it very bullish to see the mid cap S&P 400 index hit a fresh all time high and the small cap Russell 2000 index flirt with its all time high. in addition, the Dow Jones Industrial Average vaulted to a fresh post-recovery high and the S&P 500 and Nasdaq composite are just shy of fresh 2011 highs! Finally, we are very happy to see a slew of high ranked stocks trigger fresh technical buy signals in recent weeks which suggests higher, not lower prices lie ahead. If you are looking for specific help navigating this market, please contact us for more information.

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