STOCK MARKET COMMENTARY:
FRIDAY, April 04, 2014
MON-WED: SPX Breaks Out of 5-Wk Base
Stocks closed higher on Monday as March and Q1 officially came to a close. In the morning, Fed Chair Janet Yellen spoke at a conference in Chicago and basically said easy money is here to stay for “some time.” She said the Fed still remains short of its employment and inflation targets and that the economy requires ‘considerable support for some time.’ Her comments were intended to repair the damage from her 6-month gaffe in March. On average, stocks were flat to slightly negative for the quarter as the market digested last year’s very strong rally. The Chicago PMI for March fell to 55.9 from 59.8, missing estimates for an increase to 60.1. Of course, the severe weather was “blamed” for the miss.
Stocks rallied on Tuesday helping the benchmark S&P 500 index to break out of its bullish 5-week flat base and hit a new fresh record high. Growth stocks bounced from deeply oversold levels. Economic data was mixed. February construction spending rose 0.1% after falling from a downwardly revised 0.2% in January. The ISM manufacturing index rose to 53.7 in March from 53.2 in February and was just shy of the 54 forecast.
Stocks edged higher on Wednesday after the ADP, the largest private payroll company in the country, said private business employment rose by 191K which missed estimates for a gain of 215k. Meanwhile, Feb’s reading was revised up to 178K, from 139K. Separately, factory orders rose by 1.6% in Feb beating estimates for a gain of 1.1%. Briefing reported that Durable goods orders were unrevised from the advance report, up 2.2% in February after falling 1.4% in January. Excluding transportation, durable goods orders increased 0.1% in February, down from an originally reported 0.2% gain in the advance report.
THURS & FRI’S ACTION: SPX Negates Breakout
Before Thursday’s open, the European Central Bank (ECB) held rates steady and said they will continue to monitor the economy and deflation in Europe. The euro fell hard on the news as many people were looking for the ECB to engage in QE to stimulate their economy. Stocks were clobbered on Friday. Before Friday’s open, the Labor Department said US employers added 192k new jobs in March and the unemployment rate was unchanged at 6.7%. Keep in mind, Q1 earnings season kicks off next week. S&P 500 earnings are expected to grow just 1.2% versus last year, according to analysts surveyed by Thomson Reuters.
MARKET OUTLOOK: Stocks Wobble After NFP
Friday’s action is not ideal and suggests a near term pullback may be in the cards. Stepping back the bull market is aging (turned 5 last month) and it will likely get tricky as we move forward. As always, keep your losses small and never argue with the tape.