Monday, April 25, 2011
This is a very busy week, with the calendar full of economic and earnings reports. While blockbuster earnings reports pushed stocks to new highs last week, the focus this week will be economic reports.
The Fed will be in the spotlight, with Ben Bernanke holding his first news conference on Wednesday after the FOMC meeting. The market will be looking for clarity on the Fed’s course of action as the quantitative easing program comes to an end in June.
Also on the economic calendar, we have the first-quarter GDP report on Thursday and the March non-farm payrolls report on Friday.
The market does not appear to be overly concerned with the loss of growth momentum in the economy. At the beginning of the quarter, expectations were for first-quarter GDP growth rate in the 4% vicinity. But subsequent reports on consumer spending, international trade and inventory investments caused those expectations to be roughly halved. Economists have generally kept their growth forecasts for the rest of the year intact even as they cut estimates for the first quarter.
I am of the view that the improving outlook for the labor market has been the most important factor in keeping the market in good spirits about the economic recovery even as first-quarter GDP estimates kept coming down. The March non-farm payroll report on Friday, therefore, will be vital for sustaining the stock market momentum.
Stocks reached new highs on the back of solid earnings reports thus far. And this week’s flood of earnings reports — more than one-third of the S&P 500 companies report this week — will likely sustain that mood. But providing direction to the market will be economic reports, with the Fed and jobs as the main drivers.
Sheraz Mian
Director of Research
Be the first to comment