WALL STREET WATCHES BUDGET FIGHT
While journalists and political analysts worldwide pondered the effects of a federal government shutdown last week, Wall Street conducted business as usual. Any prolonged shutdown would test the stock market: while the Federal Reserve would not be forced into a hiatus, the majority of Treasury Department employees would be furloughed, and the Securities and Exchange Commission, Federal Trade Commission and Department of Justice could halt review of M&As, IPOs and new stock and bond issues. Still, much of the Street’s attention will be focused on the new earnings season this week. (For the record, stocks actually advanced about 5% during the three-week federal budget impasse of 1995-1996.)1,2,3

ISM SERVICE SECTOR INDEX DESCENDS TO 57.3
The Institute for Supply Management’s February non-manufacturing index came in at 59.7; the March edition is 2.4% lower, and ISM’s survey estimated a 7.2% decline in business activity/production for the month and a 4.0% increase in the backlog of orders. However, the ISM non-manufacturing index has shown sector expansion for 16 months.4

REMARKABLE GAINS FOR CRUDE & GOLD
Oil prices rose 4.49% last week, and they have soared 11.60% in the last three weeks. NYMEX crude ended the week at $112.79 a barrel. (The American Automobile Association said the price of a gallon of regular unleaded gas averaged $3.73 nationally as of Friday.) Gold advanced $45.30 last week to settle at $1,473.40 on the COMEX.5,6

A FLAT LANDSCAPE FOR STOCKS
The Dow, NASDAQ and S&P 500 didn’t move much between Monday and Friday. Here is how things went for the week: DJIA, +0.03% to 12,380.05; S&P 500, -0.32% to 1,328.17; NASDAQ, -0.33% to 2,780.41.7

THIS WEEK: Monday, a fresh earnings season begins with 1Q results from Alcoa. Tuesday (assuming no federal shutdown), we have data on March import and export prices. On the schedule for Wednesday, we have the Commerce Department report on March retail sales and a new Beige Book from the Federal Reserve – and before the bell, earnings from JPMorgan. Scheduled for Thursday, we have the weekly initial and continuing claims data, the March PPI and 1Q results from Google and Hasbro. The March CPI, the initial University of Michigan March consumer sentiment survey and a report on March industrial output are all slated for Friday, and that day starts with 1Q results from Bank of America and Mattel.




This information should not be construed as tax, legal, or investment advice. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. It is not possible to invest directly in an index.


Citations.
1 – cnbc.com/id/42478476/ [4/7/11]
2 – blogs.wsj.com/marketbeat/ [4/8/11]
3 – money.cnn.com/2011/04/08/markets/thebuzz/index.htm [4/8/11]
4 – ism.ws/ISMReport/nonmfgROB.cfm [4/5/11]
5 – blogs.wsj.com/marketbeat/2011/04/08/data-points-energy-metals-483/ [4/8/11]
6 – charlotteobserver.com/2011/04/08/2208080/gas-prices-are-on-rise-again.html [4/8/11]
7 – cnbc.com/id/42498783 [4/8/11]
8 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=4%2F8%2F10&x=0&y=0 [4/8/11]
8 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=4%2F8%2F10&x=10&y=18 [4/8/11]
8 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=4%2F8%2F10&x=0&y=0 [4/8/11]
8 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=4%2F7%2F06&x=0&y=0 [4/8/11]
8 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=4%2F7%2F06&x=0&y=0 [4/8/11]
8 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=4%2F7%2F06&x=0&y=0 [4/8/11]
8 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=4%2F9%2F01&x=0&y=0 [4/8/11]
8 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=4%2F9%2F01&x=0&y=0 [4/8/11]
8 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=4%2F9%2F01&x=0&y=0 [4/8/11]
9 – treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyield [4/8/11]
9 – treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyieldAll [4/8/11]
10 – treasurydirect.gov/instit/annceresult/press/preanre/2001/ofm11001.pdf [1/10/01]

JOBLESS RATE DOWN 1% SINCE NOVEMBER
In March, the nation’s jobless rate declined to 8.8%. That is the lowest level of unemployment since April 2009 and represents a 1.0% reduction in unemployment in the last four months. The Labor Department said the economy added 216,000 jobs in March, 78,000 in the category of professional and business services._1,2

CONSUMER SPENDING UP 0.7%
Personal spending increased for the eighth month in a row in February, but Commerce Department data showed that much of the gain went to pay for higher food and energy costs. The Personal Consumption Index (PCE) advanced 0.4% for the month. So the inflation-adjusted gain in personal spending was 0.3%. Wages rose by 0.3% in February.₃

ISM: MANUFACTURING GROWTH MODERATES
The March PMI index from the Institute for Supply Management showed a slight reduction in the pace of the sector’s growth: it came in at 61.2 versus February’s 61.4 mark. However, the index has recorded 20 straight months of sector expansion.₄

IN REAL ESTATE, SOME MIXED NEWS
The National Association of Realtors said that pending home sales rose 2.1% in February. The number of contracts for existing home purchases was still down 8.2% from a year ago. In January, the S&P/Case-Shiller home price index fell 1.0% from its December level; if it slips another 1.2%, it will fall below its April 2009 trough, which would signal the dreaded “double dip”._5,6

STOCKS ADVANCE FOR THE WEEK & QUARTER
How did the big indices do last week? DJIA, +1.28% to 12,376.72; S&P 500, +1.42% to 1,332.41; NASDAQ, +1.70% to 2,789.60. In the first quarter, the DJIA gained 6.41%, the NASDAQ 4.83% and the S&P 500 5.42%._7,8

THIS WEEK: Monday, Federal Reserve chairman Ben Bernanke speaks at the Atlanta Fed. On Tuesday, the most recent FOMC minutes will be released, plus the ISM service sector report for March; we also get an earnings report from KB Home. Wednesday brings earnings from Monsanto and Bed, Bath & Beyond. Thursday we have announcements from the European Central Bank and Bank of England along with initial and continuing claims and earnings from Rite-Aid. No major economic releases are scheduled for Friday.




This information should not be construed as tax, legal, or investment advice. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. It is not possible to invest directly in an index.

4Q GDP REVISED UPWARD
The Commerce Department’s final estimate of 4Q 2010 GDP is +3.1%, an improvement from the previous estimate of +2.8%. The revision reflects increased consumer spending, exports and business investment during the quarter – and with this alteration, the Bureau of Economic Analysis now puts U.S. GDP at +2.9% for 2010. Compare that to the -2.6% economic output of 2009.1

WHEN DOES THE REAL ESTATE RECOVERY BEGIN?
By the looks of February’s home sales figures, recovery may not begin for a while. New home sales slipped 16.9% last month according to the Census Bureau, and were 28.0% under year-ago levels. The National Association of Realtors said existing home sales fell by 9.6% last month; the median sales price for a single-family home was $157,000 (-5.2% from a year ago) with distressed homes making up 39% of the market (up 4% from a year ago). While monthly home sales figures are often later readjusted and have a sizable margin of error, the numbers are still troubling; for example, existing home sales were up for each of the preceding three months.2,3

GLOBAL UNCERTAINTY WEIGHS ON CONSUMERS
High gas prices and the unresolved nuclear power plant crisis in Japan likely impacted the University of Michigan’s final March consumer sentiment survey. The final March number was 67.5, the poorest reading the index has registered since November 2009.4

HARD GOODS ORDERS SLIP IN FEBRUARY
Durable goods orders confounded the forecasts of economists, diminishing last month by 0.9%. Minus transportation orders, the decline was 0.6%.5

STOCKS PROVE RESILIENT
While the three major Wall Street indexes are still negative for March, they all posted gains last week: DJIA, +3.05% to 12,220.59; S&P 500, +2.70% to 1,313.80; NASDAQ, +3.76% to 2,743.06. The Russell 2000 was up 3.67% last week and the “fear index”, the CBOE VIX, fell 26.72%.6

THIS WEEK: February consumer spending and January pending home sales reports arrive Monday. The Conference Board’s March consumer confidence index and the January Case-Shiller home price index come out Tuesday, plus earnings from Lennar. Thursday, we have initial and continuing claims and a report on February factory orders. Both the March unemployment report and the March ISM manufacturing report will be released on Friday.



This information should not be construed as tax, legal, or investment advice. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. It is not possible to invest directly in an index.

INFLATION PICKS UP
The Labor Department announced that the Consumer Price Index advanced 0.5% in February, following 0.4% advances in January and December. Energy prices climbed 3.4% in February and food prices rose 0.8%, the biggest monthly increase since July 2008. Annualized inflation now stands at 2.1% – a full percentage point higher than it was last November. The Producer Price Index climbed by 1.6% last month, the biggest monthly leap since June 2009; this puts annualized PPI at 5.6%. However, core CPI and core PPI did not advance so dramatically. In fact, core CPI and core PPI were both just +0.2% in February. _1,2

LEADING INDICATOR INDEX ADVANCES
The Conference Board index of leading indicators improved by 0.8% for February, which was below the 1.0% advance forecast by economists polled by Reuters but much better than the 0.1% gain for the previous month. The Conference Board’s report called the recent jump in food and energy prices a “headwind” in the face of the recovery. ₃

FEBRUARY SEES PLUNGE IN NEW CONSTRUCTION
Housing starts plummeted by 22.5% in February to 479,000, a number marginally better than the historic low measured by the Commerce Department in April 2009. How much of this is attributable to weather, we don’t know. Building permits touched a record low of 517,000 units last month. ₂

TWO DAYS OF RECOVERY ON WALL STREET
The major U.S. indexes rebounded strongly on Thursday and Friday from YTD lows touched on Wednesday. All three indices lost ground for the week, as these numbers show: DJIA, -1.54% to 11,858.52; S&P 500, -1.92% to 1,279.20; NASDAQ, -2.65% to 2,643.67. The CBOE VIX gained 21.81% on the week but fell 7.32% Friday. ₄

G7 INTERVENES IN JAPAN
The crisis in Japan saw the Yen soaring to a record 76.25, and threat of a recession was looming. But that fear was at least partially reduced when the G7 agreed to intervene to weaken the currency. By Friday the Nikkei 225 index was able to recover some of the ground it lost, but still dipped about 10% on the week. _{8, 9}

THIS WEEK: Monday brings a report on February existing home sales; Fed chairman Bernanke addresses a conference of commercial bankers. Tuesday brings before-the-bell earnings from Walgreens and after-the-bell earnings from Adobe. Wednesday, we learn about new home sales in February; after the bell, we get earnings from General Mills. Thursday offers reports on last month’s durable goods orders and initial and continuing claims, and then after-the-bell earnings from Research in Motion and Oracle. Friday brings the final March reading for the University of Michigan’s consumer sentiment survey and the government’s final estimate of 4Q 2010 GDP.


Material prepared by Peter Montoya Inc. This information should not be construed as investment advice. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. It is not possible to invest directly in an index.


Citations.
1-latimes.com/business/la-fi-cpi-20110318,0,1486304.story [3/18/11]
2-nytimes.com/2011/03/17/business/economy/17econ.html?_r=1 [3/17/11]
3-reuters.com/article/2011/03/17/us-usa-economy-index-idUSTRE72G47620110317 [3/17/11]
4-cnbc.com/id/42155882 [3/18/11]
5-bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=3%2F18%2F10&x=0&y=0 [3/18/11]
5-bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=3%2F18%2F10&x=10&y=18 [3/18/11]
5-bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=3%2F18%2F10&x=0&y=0 [3/18/11]
5-bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=3%2F17%2F06&x=0&y=0 [3/18/11]
5-bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=3%2F17%2F06&x=0&y=0 [3/18/11]
5-bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=3%2F17%2F06&x=0&y=0 [3/18/11]
5-bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=3%2F19%2F01&x=0&y=0 [3/18/11]
5-bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=3%2F19%2F01&x=0&y=0 [3/18/11]
5-bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=3%2F19%2F01&x=0&y=0 [3/18/11]
6-treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyield [3/18/11]
6-treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyieldAll [3/18/11]
7-treasurydirect.gov/instit/annceresult/press/preanre/2001/ofm11001.pdf [1/10/01]
8-reuters.com/article/2011/03/18/japan-quake-markets-idUSL3E7EI0JO20110318 [03/18/11]
9-money.cnn.com/2011/03/17/markets/world_markets/index.htm?iid=EL [03/18/11]
10-montoyaregistry.com/Financial-Market.aspx?financial-market=common-mistakes-that-ira-heirs-make&category=1 [03/18/11]