Market Matters…
Happy anniversary, Mr. President. Anything of note happen to conclude your first 100 days in office? Let’s see…Chrysler filed for bankruptcy and then forged a potentially “game saving” partnership with mighty Fiat of Italy. GM (GM, Financial) will be saying good-bye to its Pontiac brand (any interest, Fiat?). Bank of America’s (BAC, Financial)Ken Lewis was stripped of his board chair, but will continue to put out fires from the chief executive office. Earnings season moved forward and Exxon-Mobil (XOM, Financial) did NOT set a new record for a change. IBM (IBM, Financial) bucked the cost-cutting trend and actually raised its dividend. Oh, and a global outbreak of swine flu (rather A/H1N1 so as not to offend pigs) threatened to hinder the world economies even more (prompting Veep Biden to warn his family to avoid public transportation). All in all, another ho-hum week for Obama and his team.
With Treasury set to release the stress test results in the next few days (now delayed to May 7), rumors are circulating that Bank of America and Citigroup (C) may be in need of additional capital, though both are pleading their cases. Meanwhile, Citi began lobbying for permission to pay retention bonuses to key employees (it worked for AIG (AIG) and Merrill) who may seek the greener pastures of other (ailing) financial institutions. Early in the week, Chrysler appeared on track to avoid Chapter 11 until some hedge fund investors refused to restructure their debt positions. Still, Prez O. expects the company to emerge “stronger and more competitive” after a quick 30-60 day period (and another $8-ish billion from the government’s coffers).
Telecommunications firms were in the spotlight early in the week as chipmaker Qualcomm (QCOM) raised its revenue outlook and Verizon (VZ, Financial) actually announced increased earnings in the first quarter. Verizon may be teaming up with Microsoft (MSFT, Financial) to develop its own touch-screen cell phone to cut into Apple’s (AAPL, Financial) iPhone market share. Drugmakers Pfizer (PFE) and Bristol-Myers Squib (BMY) posted quarterly results that beat Street expectations, as did Dow Chemical (DOW) and Starbucks (SBUX), though the latter’s major restructuring (store closures) prompted a 77% decline in profits. MasterCard (MA) confirmed that 2009 will be a challenging year, though rival Visa (V) beat earnings estimates as debit card usage increased, resulting in greater fee income. Procter & Gamble (PG) struggled last quarter with weaker sales as shoppers traded down to lower-priced consumer goods. Exxon-Mobil, Chevron (CVX), and Royal Dutch Shell were victims of the declining global demand for oil. Still, Exxon’s long-term outlook remains strong as the company continues pouring money into development projects to be fully prepared once the recession ends. In fact, management even boosted its stock dividend.
Investors bid a fond adieu to April as the Dow Jones jumped 7.4% last month and experienced its best two-month performance (+15.65%) since October/November 2002, the start of the last bull market. Further, equity indexes initiated a new winning streak during the week. While earnings generally have been softer, many companies posted results that bested dire Street expectations and stocks have rallied accordingly. Oil jumped above $53/barrel as traders overlooked the higher crude inventories and instead focused on a potential economic recovery. For now, Obama seems a tad more comfortable in his role after the 100 day milestone. Camp David, anyone?
Weekly Economic Calendar
"Although the economic outlook has improved modestly since the March meeting, partly reflecting some easing of financial market conditions, economic activity is likely to remain weak for a time… the pace of the economy's contraction appeared to be somewhat slower than had been apparent a few weeks ago.” While the Fed seemed to offer some “cautious optimism” about the overall direction of the economy, the policy-makers avoided any sugarcoating and hedged their comments for fear of unforeseen development (ala A/H1N1 flu). While the virus quickly expanded across the globe, most of the worst cases have been limited to Mexico, where the already depressed economy will be further impacted from business closures and travel restrictions. When SARS hit in 2003, China’s GDP was estimated to have been hurt by about 1%; early projections (Moody’s economy.com) show the Mexican economy contracting by 6.2% in 2009 (revised from the -4.5% estimate to account for the flu). The Fed plans to leave rates at near 0% and stands prepared to purchase more treasury and mortgage-related securities to keep the economy moving in the right direction (especially if the VP’s family stays in their bunkers).
GDP (1 st quarter) highlighted a relatively hectic week on the economic front. While the economy contracted from January through March at a worst than expected 6.1% clip, analysts found some positives deep within the release as consumer activity actually picked up during the quarter. The spending component rose by 2.2%, after falling by 4.3% in the fourth quarter. Additionally, a decline in inventories hindered the release; however, economists point out that such a reduction indicates that manufacturers have scaled back production and will not be burdened with excessive supplies that may need to be deeply discounted to be sold. As demand slowly returns, they will be able to boost production once again. Meanwhile, consumer confidence surprisingly soared to levels not seen since November 2008, which is especially good news since the consumer accounts for about two-thirds of the activity in the economy.
On the Horizon…
The swine flu (oops, H1N1) virus will remain fresh on everyone’s mind as schools close, businesses operate short-staffed, and airlines face more empty seats (thanks Joe). Hopefully, the concerns will turn out to be short-lived, infected folks will recover quickly, and things can get back to normal (at least as normal as a recession can be). All eyes next week will be on the release of the Treasury’s stress test results (Thursday) as investors gather more objective insight into the health of the overall banking system (and their favorite institutions, in particular). The week ends with the April unemployment report as economists get a fresh look into the labor sector for any signs that the devastating layoffs may soon be ending (wishful thinking?). Some expect the jobless rate ultimately to climb above 10% (from 8.5% in March), so a bit more “devastation’ may still be in the cards. Finally, earnings season begins to wind down and Disney (DIS) and Kraft (KFT) are among the key companies reporting. Any good news, Mickey?
Happy anniversary, Mr. President. Anything of note happen to conclude your first 100 days in office? Let’s see…Chrysler filed for bankruptcy and then forged a potentially “game saving” partnership with mighty Fiat of Italy. GM (GM, Financial) will be saying good-bye to its Pontiac brand (any interest, Fiat?). Bank of America’s (BAC, Financial)Ken Lewis was stripped of his board chair, but will continue to put out fires from the chief executive office. Earnings season moved forward and Exxon-Mobil (XOM, Financial) did NOT set a new record for a change. IBM (IBM, Financial) bucked the cost-cutting trend and actually raised its dividend. Oh, and a global outbreak of swine flu (rather A/H1N1 so as not to offend pigs) threatened to hinder the world economies even more (prompting Veep Biden to warn his family to avoid public transportation). All in all, another ho-hum week for Obama and his team.
With Treasury set to release the stress test results in the next few days (now delayed to May 7), rumors are circulating that Bank of America and Citigroup (C) may be in need of additional capital, though both are pleading their cases. Meanwhile, Citi began lobbying for permission to pay retention bonuses to key employees (it worked for AIG (AIG) and Merrill) who may seek the greener pastures of other (ailing) financial institutions. Early in the week, Chrysler appeared on track to avoid Chapter 11 until some hedge fund investors refused to restructure their debt positions. Still, Prez O. expects the company to emerge “stronger and more competitive” after a quick 30-60 day period (and another $8-ish billion from the government’s coffers).
| Market/Index | Year Close (2008) | Qtr Close (03/31/09) | Previous Week (04/24/09) | Current Week (05/01/09) | YTD Change |
|---|---|---|---|---|---|
| Dow Jones Industrial | 8,776.39 | 7,608.92 | 8,076.29 | 8,212.41 | -6.43% |
| NASDAQ | 1,577.03 | 1,528.59 | 1,694.29 | 1,719.20 | +9.02% |
| S&P 500 | 903.25 | 797.87 | 866.23 | 877.52 | -2.85% |
| Russell 2000 | 499.45 | 422.75 | 478.74 | 486.98 | -2.50% |
| Fed Funds | 0.25% | 0.25% | 0.25% | 0.25% | 0 bps |
| 10 yr Treasury (Yield) | 2.24% | 2.68% | 3.00% | 3.17% | +93 bps |
Telecommunications firms were in the spotlight early in the week as chipmaker Qualcomm (QCOM) raised its revenue outlook and Verizon (VZ, Financial) actually announced increased earnings in the first quarter. Verizon may be teaming up with Microsoft (MSFT, Financial) to develop its own touch-screen cell phone to cut into Apple’s (AAPL, Financial) iPhone market share. Drugmakers Pfizer (PFE) and Bristol-Myers Squib (BMY) posted quarterly results that beat Street expectations, as did Dow Chemical (DOW) and Starbucks (SBUX), though the latter’s major restructuring (store closures) prompted a 77% decline in profits. MasterCard (MA) confirmed that 2009 will be a challenging year, though rival Visa (V) beat earnings estimates as debit card usage increased, resulting in greater fee income. Procter & Gamble (PG) struggled last quarter with weaker sales as shoppers traded down to lower-priced consumer goods. Exxon-Mobil, Chevron (CVX), and Royal Dutch Shell were victims of the declining global demand for oil. Still, Exxon’s long-term outlook remains strong as the company continues pouring money into development projects to be fully prepared once the recession ends. In fact, management even boosted its stock dividend.
Investors bid a fond adieu to April as the Dow Jones jumped 7.4% last month and experienced its best two-month performance (+15.65%) since October/November 2002, the start of the last bull market. Further, equity indexes initiated a new winning streak during the week. While earnings generally have been softer, many companies posted results that bested dire Street expectations and stocks have rallied accordingly. Oil jumped above $53/barrel as traders overlooked the higher crude inventories and instead focused on a potential economic recovery. For now, Obama seems a tad more comfortable in his role after the 100 day milestone. Camp David, anyone?
Weekly Economic Calendar
| Date | Release | Comments |
|---|---|---|
| April 28 | Consumer Confidence (04/09) | Unexpected increase results in best showing since Nov. |
| April 29 | GDP (1 st qtr) | Largest than expected 6.1% contraction |
| Fed Policy Meeting Statement | Reflects some signs of “modest” improvement | |
| April 30 | Initial Jobless Claims (04/25/09) | Slight decline in new claims |
| Personal Income/Spending (03/09) | Larger than expected decline in both consumer reports | |
| May 1 | ISM – Manu (04/09) | Sector contraction, though better than expected results |
| Factory Orders (03/09) | Hurt by reduced sales abroad | |
| The Week Ahead | ||
| May 4 | Construction Spending (03/09) | |
| May 5 | ISM – Services (04/09) | |
| May 7 | Initial Jobless Claims (05/02/09) | |
| Consumer Credit (03/09) | ||
| May 8 | Unemployment Rate (04/09) | |
| Non-farm Payroll (04/09) |
"Although the economic outlook has improved modestly since the March meeting, partly reflecting some easing of financial market conditions, economic activity is likely to remain weak for a time… the pace of the economy's contraction appeared to be somewhat slower than had been apparent a few weeks ago.” While the Fed seemed to offer some “cautious optimism” about the overall direction of the economy, the policy-makers avoided any sugarcoating and hedged their comments for fear of unforeseen development (ala A/H1N1 flu). While the virus quickly expanded across the globe, most of the worst cases have been limited to Mexico, where the already depressed economy will be further impacted from business closures and travel restrictions. When SARS hit in 2003, China’s GDP was estimated to have been hurt by about 1%; early projections (Moody’s economy.com) show the Mexican economy contracting by 6.2% in 2009 (revised from the -4.5% estimate to account for the flu). The Fed plans to leave rates at near 0% and stands prepared to purchase more treasury and mortgage-related securities to keep the economy moving in the right direction (especially if the VP’s family stays in their bunkers).
GDP (1 st quarter) highlighted a relatively hectic week on the economic front. While the economy contracted from January through March at a worst than expected 6.1% clip, analysts found some positives deep within the release as consumer activity actually picked up during the quarter. The spending component rose by 2.2%, after falling by 4.3% in the fourth quarter. Additionally, a decline in inventories hindered the release; however, economists point out that such a reduction indicates that manufacturers have scaled back production and will not be burdened with excessive supplies that may need to be deeply discounted to be sold. As demand slowly returns, they will be able to boost production once again. Meanwhile, consumer confidence surprisingly soared to levels not seen since November 2008, which is especially good news since the consumer accounts for about two-thirds of the activity in the economy.
On the Horizon…
The swine flu (oops, H1N1) virus will remain fresh on everyone’s mind as schools close, businesses operate short-staffed, and airlines face more empty seats (thanks Joe). Hopefully, the concerns will turn out to be short-lived, infected folks will recover quickly, and things can get back to normal (at least as normal as a recession can be). All eyes next week will be on the release of the Treasury’s stress test results (Thursday) as investors gather more objective insight into the health of the overall banking system (and their favorite institutions, in particular). The week ends with the April unemployment report as economists get a fresh look into the labor sector for any signs that the devastating layoffs may soon be ending (wishful thinking?). Some expect the jobless rate ultimately to climb above 10% (from 8.5% in March), so a bit more “devastation’ may still be in the cards. Finally, earnings season begins to wind down and Disney (DIS) and Kraft (KFT) are among the key companies reporting. Any good news, Mickey?
