Happy Easter weekend! The stock market was closed for Good Friday, which followed a flat and mixed session on Thursday. It was a tough week as investors had to digest the gruesome terrorist attacks in Belgium, but for the most part investors remained relatively calm this past week. As we have mentioned, terrorist attacks used to send stock markets reeling, so the odd reaction of a fairly mellow reaction by global financial markets was interesting, to say the least. The Dow posted a modest 0.5% loss for the week, and given the terror attacks and the Presidential election free-for-all, it seemed as though financial markets barely flinched.
We did get some good economic news, though, which came in the form of a fourth-quarter upward revision in U.S. GDP to 1.4%, topping estimates of Q4 GDP holding tight at 1.0%. This joins the ongoing parade of “good news and bad news” for the economy. A 1.4% GDP rate is not exactly the sign of a booming economy, but 1.4% is better than 1.0%, which was one of the few positive developments we saw in a challenging week for equities. Oil ended the week slightly below $40 per barrel, and the yield on the 10-year U.S. Treasury finished at 1.90%, so it was basically a quiet week for financial markets.
The S&P 500 is pretty much flat for the year, and if you had not been paying attention for the past three months, you would not have noticed the 10% drop and subsequent 10% rise we have seen in the broader market. You also would not have noticed the big plunge in oil prices and subsequent rebound back to the $40 per barrel level we witnessed. But we had these “bungee” style plunges and rebounds just the same, and that has made the performance in global financial markets so riveting for those investors that NOTICE these moves on a daily basis.
Stocks got a big boost this month from Mario Draghi and the ECB, which lowered ECB rates and shot another “bazooka” of QE bond purchases. Draghi was followed up by a much more dovish U.S. Fed announcement. We were off to the races after these two events, but stocks have pretty much stalled out at this juncture. The terror attacks this week put investors in a “wait and see” mode, and that was likely why we finished the holiday-shortened week on a flat and quiet note.
All eyes next week will be on the jobs picture, and we hear from ADP on private sector job creation on Wednesday. Analysts are looking for 205,000 new private sector jobs, which would be down from the previous month’s 214,000. Then we get the non-farm government jobs report on Friday, and economists are looking for 21,000 new jobs for March that would be down from the previous month’s 242,000. That 21,000 seems low, but that is what we saw from MarketWatch. It will be an interesting week to see if stocks can continue to hold their recent gains, so stay tuned!
We also have first-quarter earnings season beginning in April, and it should offer some additional clues as to the state of the economy. Earnings growth has been decelerating for the past few quarters, and that helped push stocks lower in January and February. A solid earnings season would be just what the “bullish doctor” ordered, but given the ongoing mixed economic numbers we have been seeing, a stellar earnings season might not be in the cards. Consumers are holding up relatively well, but the confidence levels we have seen have still been lackluster.
The good news for this weekend is that college basketball’s March Madness is in full swing, and what a tournament it has been! There have been lots of upsets, lots of excitement and lots of incredible games that go down to the buzzer. You hear the announcers scream “unbelievable” so often that these games start to seem “believable!” The single elimination, and the fact these athletes are still in college (and unpaid, or so they say), makes it all the more fun to watch. That said, we will be back in action on Monday, and the Gorilla wishes each and all a relaxing weekend!
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