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Market Update - April 24,2014

After starting the morning with a positive gain, the Dow Jones Industrial Average has bounced around between small gains and losses. Caterpillar, 3M and Verizon Communications posted quarterly results.

Caterpillar led blue-chip gains after the agricultural equipment maker surprised with stronger than expected earnings and raised its full year outlook.

After rising as much as 50 points and falling 19, the NASDAQ was more recently up again with strong momentum from Apple’s news of their 7-for-1 stock split and strong earnings report. The technology sector is also seeing some strength due to earnings reports from Facebook & Texas Instruments.

Thursday's economic reports had orders for durable goods rising 2.6 percent in March, ahead of a 2 percent estimate.

Another report had more Americans filing for jobless benefits last week than projected.

On Wednesday, stocks fell after disappointing data on new home sales was reported and as companies including Boeing and AT&T announced earnings.

Starbucks and Visa are among those reporting after Thursday's close.

Office Closed for Holiday

In observance of Good Friday, our office will be closed Friday April 18, 2014.  Wishing you and your family a happy Easter and lovely weekend.

Economic Update - April 14, 2014

This morning we saw the markets move higher after watching the Nasdaq and the Dow plunge 3.1% and 2.4% respectively last week.

Earnings season continues with big names such as Intel, Johnson & Johnson, Google, Coca-Cola & General Electric reporting later this week.

Of the 29 companies in the S&P 500 that have reported earnings last week, 52% have reported earnings above analyst expectations (Thomson Reuters). This is below the long-term average of 63% and below the average over the past four quarters of 66%.

 

Economic Update

A Nice Economic Update perspective from Charles Sherry this morning:

 

We’ve been seeing a breakdown in the highflyers – the momentum plays – biotech and social media. These groups had quite a run last year and have hit an air pocket.

 

And yesterday, we saw the carnage spill over into the broader market.

 

Economic fundamentals are still solid, and recent economic data are confirming we’re leaving the winter blues behind. Yet, the Fed is committed to winding down QE by the end of the year (barring an unforeseen and steep economic slowdown).

 

A reduction in Fed liquidity appears to be having an impact on the momentum plays, though it’s impossible to quantify. Overvaluation and bubble fears are also in view.

 

I’m hearing plenty of talk about 2000, but it reminds me more of 1983.  A rising fed funds rate from elevated levels in late 1983-84 shut the door on techs. Today, it’s the unwinding of QE.

 

I like this quote from Jeremy Siegel, finance professor at the Wharton School, that I saw yesterday—

 

"We are seeing a rotation away from momentum stocks, which is healthy but unsettling. Everyone rides them up, and all it takes is a little bit of bad news on one of them that triggers selling. (At that point) it could be a feather that finally tips (them) over."

 

It’s a great time to remind them of the benefits of diversification. You’d be hard pressed to match last year’s performance in the S&P500 with a balanced approach. But your client’s golfing buddy, who couldn’t stop talking about his success with LinkedIn and Netflix last year, is now licking his wounds.

 

The defensive sectors have held up relatively well, including utilities, telecom and consumer staples. Treasuries are up, and junk debt, the economic canary in the coal mine, has been relatively stable.

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