Weekly Recap

Here is a look at Briefing.com's weekly wrap up--

Earnings propelled the stock market higher this week. The Dow posted the largest gain of the indices on the back of a number of good reports from key components. The market showed good resilience and momentum all week.

There was a heavy flood of earnings reports this week. About 25% of the S&P 500 companies have now reported. Individual stocks reacted favorably to better than expected reports, and companies with earnings at forecast were not punished. This reflects a good underlying tone for the market.

In reality, although earnings are beating Wall Street forecasts, this quarter is about in line with normal trends. That is, approximately 67% of companies are beating expectations. That is about the level of most quarters, but down from the near 70% levels of recent years when earnings growth was double digit.

The overall earnings beat is also tracking historical trends. Expectations as the quarter started were for first quarter operating earnings for the S&P in aggregate to be up about 3.5%. With one quarter having reported, that is now at about 5% (including forecasts for the ones not yet reported). Normally, the ultimate gain will exceed expectations by about 3%, sometimes more. The number of companies beating estimates and the total gain for earnings above expectations are therefore nothing out of the norm. And, the overall earnings growth this quarter will be an average 6% to 7%.

The reaction to the earnings says as much about market conditions as the actual earnings reports. The market has reacted very favorably to what could be considered a very average earnings season so far.

Good earnings this week included reports from: Citigroup, Eli Lilly, Wachovia, Coca-Cola, Johnson & Johnson, Wells Fargo, JP Morgan Chase, United Technologies, eBay, Harley-Davidson, Merrill Lynch, Caterpillar, American Express, Honeywell, and Pfizer, among others. IBM and Intel had only decent reports, but the stocks reacted relatively well. Yahoo was a notable disappointment.

The economic reports this week were also supportive to the stock market. March retail sales rose a larger than expected 0.7% with sales excluding the volatile auto component up 0.8%. March housing starts were up 0.8% to a 1.518 million seasonal rate and have now stabilized for five months. Housing permits were, coincidentally, also up 0.8%.

March industrial production was down 0.2%, but that was due to a large aberrant drop in utility output. The core manufacturing component was up 0.7%. The only slightly bearish economic release was a relatively high level of 339,000 in new claims for unemployment for the week ended April 14. That was down from 343,000 the week before but the trend before that was in the 310,000 to 325,000 range.

The best release of the week, however, was the March CPI data. The core rate was up just 0.1%. That was down from 0.2% in February and 0.3% in January. Total CPI was up 0.6%, but the low core rate helped ease inflation fears considerably.

Oil ended the week little changed at $63.38 a barrel, and the yield on the 10-year note dipped to 4.67% on the low inflation number.

The market enters another heavy earnings week with good momentum.