Investor’s first read – Brooksie’s edge before the open
Tuesday, April 3, 2012 9:08 a.m. ET
DJIA: 13,264.49 S&P 500: 1418.90
The U.S. consumer is well positioned to fuel an economic recovery according to an April 2 Bloomberg article. “We’re entering a sweet spot for the economy,” says Allen Sinai, president of Decision Economics Inc., noting that faster employment growth leads to higher household income and increased spending.
Americans have repaired their balance sheets and therefore are better positioned to spend, says Joseph Carson, director of global economic research at AllianceBernstein LP.
“Household obligations – everything from mortgages and rents to property taxes and car-lease payments – fell to a 28-year low in the fourth quarter, when measured against disposable income,” he explains. He forecasts a 3% GDP growth rate this year.
This is reassuring to hear, but is one reason the stock market has come so far in three years. Worth noting – the stock market rebounded ahead of the good news during a time when the economic recovery was in doubt, when the European bank and sovereign debt crisis threatened to harpoon economic recoveries here and abroad.
At some point (don’t see it yet), the stock market will start to tumble in face of great economic news as it anticipates the bad news that has yet to come to the surface.
I expect at least one sharp correction of 12% to 16% this year, possibly two, but there is still a lot of cash on the sidelines that has been squirreled away in a “safe” place in
response to the European crisis. These funds have been earning next to nothing for over a year. Money managers will be pressured to put them to work in the stock market.
Motor vehicle sales and retail sales were reported this morning, both confirm a growing economy (see below).
February Factory Orders (reported at 10 o’clock today) are projected to show a rise of 1.5% vs. a 1.0% decline in January.
TODAY: Looks like another mixed open. Look for a drift to DJIA 13,227 (S&P 500: 1414). If the 10’oclock Factory Orders hit or exceed estimates, look for new highs.
Disappointment calls for a drop to DJIA 13,120 (S&P 500: 1402) in coming days.
Bulls have the edge.
Very big week for economic reports. They must confirm that the U.S. economy continues to gain traction. No room for doubts here.
ISM Manufacturing Index (10 a.m.) a survey of 300 manufacturers covering employment, production, new orders, supplier deliveries, and inventories, expanded faster than projections rising to 53.4 in March from 52.4 a month ago. Forecasters were looking for it to rise to 53. This report was reassuring since it had slipped in February to 52.4 from 54.1. Autos, corporate purchase of equipment and inventory also contributed.
Construction Spending (10 a.m.) includes residential, non-residential and public projects. Dropped 1.1% in February after a 0.8% drop in January, after a 1.4% increase in December and 1.9% in November.
Motor Vehicle Sales (7:45) includes domestic and foreign sales. Jumped 6.5% in February to an annual rate of 15.1 million
ICSC Goldman Store Sales (7:45) sales at 10% of major retail stores – a sampling but useful comparing one period to another. For the week ended March 31, ICSC Store Sales rose 3.8% vs a week ago, 4.2% year over year.
Factory Orders (10 a.m.) January was down 1.0% after strong December and November months.
ADP Employment (8:15 a.m.) increased 215,000 in February. Is looked to as an early indication of Friday’s “Employment Situation” report.
ISM Non-Manufacturing (10 a.m.)a survey of 375 companies including agriculture, mining, construction, transportation, communications, wholesale, and retail trade. Up slioghtly in February
Jobless Claims (8:30) Dropped 5,000 for week ended March 24 to 359,000 from a revised 364,000 in the prior week. The four-week average is 365,000.
Employment Situation (8:30) Payroll employment increased 227,000 in February after a 284,000 jump in January and 223,00 jump in December.
Consumer Credit (3 p.m.) Gained $17.8 billion in January vs. a revised gain of 16.3 billion in December.
*Stock Trader’s Almanac
The writer of Investor’s first read, George Brooks, is not registered as an investment advisor. Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. Readers are expected to assume full responsibility for conducting their own research pursuant to investment decisions in keeping with their tolerance for risk.