Earnings reports will serve as the key backdrop for market
action this week, though market participants will also be keeping a
close watch on the economy to look for signs that the first
quarter's growth momentum is losing steam. The March jobs miss has
the market wary of a slowdown along the lines of what transpired at
the onset of Spring in the last two years. European fears are also
coming back to the forefront, with yields on Spanish government
bonds reaching their highest level since early December when the
European Central Bank started pumping liquidity into the banking
This morning's better than expected March Retail Sales data belies
the slowdown narrative, but is unlikely to put an end to the
debate. We will likely have to wait till next month's jobs report,
but the Industrial Production and Jobless Claims data coming out
Tuesday and Thursday respectively should provide some evidence
either way. We also have a fair amount of housing related reports
on deck this week as well, with Housing Starts on Tuesday and
Existing Home Sales on Thursday. Last month's housing data was less
than inspiring, but the market will be looking for the 'green
shoots' in this set of data.
The strong March Retail Sales reading is a net positive for the
market today, with both the 'headline' and 'core' readings coming
ahead of expectations. The strength in 'core' sales, which strips
out auto and gasoline sales, is particularly encouraging given the
recent spike in fuel prices. The Retail Sales report is admittedly
not a perfect proxy for 'real' consumer spending since this non
inflation adjusted measure only includes 'goods' sales at retail
establishments and leaves out the much consumer outlays on
'services'. But it nevertheless provides valuable clues to trend in
consumer spending, which is the backbone of the U.S. economy. The
positive March numbers improve the odds of creep up in first
quarter GDP estimates, which at present is just a tad above 2%.
The first quarter earnings season gets into high gear this week,
with a host of bellwether companies reporting results. Relative to
expectations, the early reports have been quite decent, but we need
to wait a bit longer to get a good flavor of corporate earnings.
With almost 90 S&P 500 companies coming out with results this
week, we should have a representative enough sample by this week's
end to be able to judge this earnings season.
Of this morning's earnings reports,
) appear to be better than expected, though getting a clear look
into the banking giant's quarterly report is a bit difficult given
the multiple on-off items. We got fairly good results from Citi's
), last week. But Citi's enormous internal footprint makes it a
play on the global banking industry. We also have weak results this
), the maker of Barbie and Hot Wheels.
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