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April 29: Spring Slowdown in the Offing

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The stock market today will likely maintain the positive momentum from last week even though this morning’s Personal Income & Spending data provides further confirmation of a fresh Spring slowdown in the economy. But investors don’t seem overly concerned about this trend as they see signs of a slowing economy as guaranteeing continued support from the Fed.

The 2013 Q1 earnings season is continuing, with results from two-thirds of the S&P 500 market capitalization already out. Plenty of reports are coming out this week, but earnings will struggle to gain the market’s attention as the week is full of top-tier economic reports. The most important report of the week will be the April non-farm payroll report coming out on Friday, but the two ISM reports will be equally important. We also have Fed and European Central Bank (ECB) meetings this week. The Fed may not do much other than acknowledging the recent negative tone of economic data, but expectations remain high that the ECB will announce a rate cut. The ECB has thus far been resistant to the idea, but with outlook for even Germany now showing signs of strain, they may finally relent.

The earnings Scorecard as of this morning shows Q1 results from 274 S&P 500 companies that combined account for 66.3% of the index’s total market capitalization. Total earnings for these 274 companies are up +2.6% from the same period last year, with 68.2% beating earnings expectations. Revenues are down -1.6%, with only 40.5% of the companies coming ahead of top-line expectations. The earnings growth rate thus far is comparable to what we have seen from this group of companies in 2012 Q4 and the last few quarters, but the revenue picture is decidedly weaker. The composite growth rate for Q1, where we combine the results of the 274 companies that are out with the 226 still to come, is for +1.4% growth in earnings on -0.2% lower revenues.

Pending Home Sales is scheduled for release today at 10:00 AM EST, and is expected to increase by 0.7% after decreasing by 0.4% in February to 104.8.



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