Friday, April 13, 2012 9:08 a.m. ET
DJIA: 12,986.58 S&P 500: 1387.57
The DJIA’s 180-point surge yesterday was twice as much as I expected, which I thought was a nice move in light of uncertainties that befell the market early last week.
Spain’s fiscal problems are still unresolved, depending on who you listen to, the economy is at risk of slowing down, especially in face of the slowdown in Europe and we have any guarantees about how good Q1 earnings will be in coming weeks.
But, more important than listening to what pundits say about the market (including me) is what the market is saying!
Yesterday, the market was saying not to sweat the economy. As the Fed told us two days ago, it is growing at a moderate pace, as it should coming out of a horrible recession (2007 – 2009). Then too, it was suggesting odds favor Q1 earnings wouldn’t surprise on the downside. As for Spain, who knows ? The institutions with tons of cash to put to work for clients (or lose the account) will lose sleep over Europe’s woes when they absolutely have to, not before.
The DJIA and S&P 500 have recouped about one-half of their April 2 – April 10 loss. If it only recouped one-third of its loss before turning down, it would have been a bad sign and an indication the market was headed even lower.
TODAY: Investors had a scare heading into this week. As suddenly as the market tanked in 5 days, it rebounded sharply enough to suggest that plunge was “technical” and “toast.” Today we will see a test of Tuesday’s lows as we had into the weekend. That test should find support around DJIA 12,860 (S&P 500: 1374).
While I defer to what the “market told us” yesterday, today’s action will be even more revealing. If buyers step in to catch the selling at today’s open, it is a welcome confirmation of the market’s bullishness. If not, the market needs to do more work on deciding where its comfort level is.
ECONOMIC REPORTS this week:
ICSC Goldman Store Sales (7:45) rose 0.5% for week ending April 7 up 4.5% over a year ago.
Wholesale Trade (10 a.m.) Sales were up 1.2% to $409.4 billion from January and up 9.3% over a year ago. Inventories were $478.9 billion, up 0.9% over January and up 9.3% over a year ago. The Inventory/Sales Ratio was unchanged at 1.17.
Import/Export Prices (8:30) jumped 1.3% in March after a revised 0.1% increase in February due to higher oil prices which were up 1.8% in February alone, 18.4% year over year.
Beige Book (2 p.m.) Economy still expanding moderately.
Treasury Budget (2 p.m.)The budget deficit increased 5.3% in March. For the first six months of the fiscal year (OCT) the budget deficit is $779.0 billion vs. $829.4 billion for the same period a year ago.
Jobless Claims (8:30) rose 13,000 for the April 7 week to 380,000 after a decline of 6,000 in the week prior. Since Easter comes at different times each year, seasonal adjustments are unreliable, so this week’s number may be distorted.
International Trade (8:30) The trade deficit narrowed more than forecast in February, as imports fell the most in 3 years. The international trade gap expanded in January to 52.6 billion from $50.4 billion in December. The increase in the gap was accounted for by a widened deficit in petroleum goods.
Producer Price Index (8:30) Surged in February 0.4% powered by a 1.3% spike in energy. Core PPI was off 0.2%.
Consumer Price Index (8;30) increased 0.3% in March 0.4% in February. Core CPI was up 0.2% vs. 0.1% a month ago.
Consumer Sentiment (9:55 a.m.) The Reuter’s Univ, of Michigan Consumer Sentiment Index for March rose to 76.2 vs.75.3
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