With nothing major on the economic front, market action today
will likely reflect the loss of momentum following Friday's jobs
surprise. But the overall tone should be a lot less negative than
what we encountered on Monday as market participants look ahead to
the start of the first quarter reporting season with
) after the close today.
The economic docket is relatively on the lighter side this week,
with the Fed's Beige Book on Wednesday, Trade Deficit on Thursday,
and CPI on Friday as the only major reports. Thursday's Jobless
Claims data could be important, as it will be the first labor
market reading after Friday's non-farm payroll miss. I don't
envision any sharp moves in the market in the coming days, though
an air of tentativeness will likely prevail as the market sizes up
the underlying momentum in the labor market and the odds of further
Worries about Spain's ability to control its deficit situation
have revived following last week's poor bond auction. This has
helped reverse the downtrend in the country's market interest
rates, with benchmark government bond yields reaching their highest
level of the year. Italian bond yields have started moving up in
solidarity with Spain in recent days as well, though we must
concede that interest rates for both countries remain below late
last year's dangerous levels. The situation in Spain may not have
reached the Greek levels yet, but it is nevertheless a reminder to
investors that Europe remains far from settled.
Alcoa's results later today may not give us a good preview of
first quarter results for the corporate sector as a whole. But we
) results on Thursday and
) on Friday. It will be interesting to see continuation of last
quarter's trend of positive trend in banks' loan portfolios. These
specific reports aside, I don't envision any major negative
surprises coming out of this reporting season given the fairly
More so than growth rates and beats, the focus will be on
guidance and outlook, as expectations for the coming quarters have
not come down as much as they have for the first quarter. In fact,
expectations for the first quarter are the lowest of any quarter
this year, with growth expected to improve in the back half of the
year. While the domestic economic scene appears promising enough,
it is far from clear at this stage if it will prove to be
enough to offset the unfavorable developments in Europe and China.
Bottom line, while I don't expect any major negative surprises from
the reporting season, it may help in better anchoring expectations
for the remainder of the year. And those estimate revisions will
most likely be to the down side.
are scheduled for release today at 10:00 AM EST and are expected to
increase by 0.5% after increasing by 0.4% in January.
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