Tuesday, April 1, 2014
Stocks in Asia and Europe followed Monday's strong performance
from U.S. markets, with reassuring comments from the Fed
Chairwoman doing all the trick. The mood is expected to carry
over to today's session as well, particularly at the open, with
Chinese factory sector data helping lift sentiment as well. The
manufacturing ISM survey coming out a little later will be key
whether the trend carries through to the end of the day.
Janet Yellen appeared to be walking back from her 'six months'
comment about the timeline for interest rate increases following
the end of the bond purchase program. The Fed Chairwoman stated
that the U.S. economy had enough slack that it needed continued
Fed support through low interest rates. The Fed has been a key
pillar of support for this market and the prospect of an earlier
than previously expected pace of post-QE interest rates increases
had unnerved the markets in recent days.
Economic data has been mixed at best lately. It is far from clear
at this stage how quickly and to what extent the data will bounce
back from the weather-induced slowdown of the last two months.
The manufacturing ISM survey coming out a little later will give
us some idea of what to expect in the coming days. The ISM index
fell sharply in January, rebounded in February and today's March
reading is expected to show further improvement, though Monday's
Chicago PMI doesn't bode well for today's release.
China's official purchasing managers index for March came in
better than expected, though the actual reading was barely up
from the prior month. A competing private sector measure of
activity created by the
) was down from the month before and is now at its lowest level
in 8 months. Sampling differences account for most of the
divergence between the PMI measures, with the HSBC PMI reflecting
more small and medium firms while the official PMI survey largely
reflective of large state-owned enterprises.
The variance between the two measures this month
notwithstanding, it is fairly obvious that the Chinese economy
lost steam in the first quarter of the year and GDP growth will
likely come short of the government target. This will keep alive
hopes that Chinese authorities will loosen policy to give the
economy a nudge.
SPDR-DJ IND AVG (DIA): ETF Research Reports
SPDR-GOLD TRUST (GLD): ETF Research Reports
SPDR-SP 500 TR (SPY): ETF Research Reports
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The broad market indexes eked out modest gains in the first
quarter of the year, but it was a tough period for stocks,
particularly for some of the more high profile corners of the
market. Many expect the rest of the year to be better, but I am
not so optimistic. Stocks ran up last year in anticipation of a
rebound in economic and corporate earnings fundamentals. But that
hoped-for rebound keeps getting delayed.
Director of Research