The second quarter gets underway today after the first
quarter's impressive start to the year that pushed stocks into
new all-time high territory. Hard to envision the market
sustaining the first quarter's strong start in the current and
coming quarters, though there is no shortage of proponents on
both sides of the argument.
Market bulls contend that fundamentals in terms of earnings
and valuation look better now than was the case at the time of
the 2007 peak, while bears find the earnings and economic growth
data to be generally underwhelming. This debate will likely go on
for a while, though economic data on tap this week and earnings
reports from next week onwards will provide support to both
The key report in today's session is the manufacturing ISM
report coming out a little later, though European markets are
closed today and overnight trading out of Asia was on the weak
side following an underwhelming business confidence survey out of
Japan and Chinese PMI data that was positive, but a shade lighter
than expected. Regional manufacturing surveys in the U.S. have
been mixed and today's ISM survey is expected to show a modest
pullback from February levels, but it will nevertheless be
consistent with an expanding factory sector. And that will be the
key takeaway from today's ISM reading.
The employment component of the ISM index will be particularly
informative given the March non-farm payroll report coming out
this Friday. Weekly Jobless Claims data has been moving in the
'wrong' direction over the last two weeks, but the overall level
of initial claims still remains consistent with strong labor
market gains this week. The expectation is for 'headline' job
gains of about 200K in March in Friday's report, which will
follow the strong 236K reading in February. The unemployment rate
is expected to remain unchanged at 7.7%. Labor market gains are
necessary to sustain the momentum in consumer spending, which has
remained fairly resilient despite headwinds in the shape of
higher payroll taxes and gasoline prices.
Today's economic releases include the
ISM Manufacturing Index
which is remain unchanged at 54.2 and Construction Spending, both
of which are scheduled for release at 10:00 AM EST.
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