Wednesday, April 30, 2014

Soft GDP Not Worrying Investors

Markets were lower in early trading, but the dip looks mild so far and as of this post the market has already recouped its early losses.

In economic news, the ADP Employment report showed that the private sector added 220,000 jobs in April.  We will get the official govt report on payrolls this Friday.  Consensus estimates are for around 200k jobs, similar to ADP.

The surprising report this morning was the Q1 GDP report, which showed the economy only grew 0.1% last quarter.  That was below estimates and points to a pretty big slowdown.  I think many investors are chalking it up to the extreme cold weather in many parts of the country.  This has some validity, but the slowdown in housing was also likely a culprit.  If weather was the biggest factor, we should expect a bounceback in Q2.

Earnings season remains busy.  Today we are seeing more stocks falling on earnings reports than rising.

Stocks rising on earnings: SLCA, PBI, GRMN, TWX, IP, NEE, LVLT

Stocks falling on earnings: EBAY, TWTR, X, USNA, DLB, DWA, NDLS, VPRT, LL, GSK, IACI, JLL

Asian markets were mixed.  The Bank of Japan met overnight and held current monetary policy steady.

European markets are mixed today.  Eurozone CPI rose 0.7% yr/yr.  Germany's unemployment rate held steady at 6.7%.  And Spain's GDP rose 0.6% last quarter.

The 10-year yield has fallen back to 2.66%.  And the VIX remains low overall at 13.80.

Trading comment: Markets continue to hold up fairly well despite some weak underlying action in many growth-type stocks.  Sector rotation has benefited other sectors from energy to industrials to utilities.  The market is approaching its 8th week in correction, which is about the average length of corrections in recent years.  So while we could see continued volatility in the near-term, we are on the lookout for some stabilization in growth stocks and some signs of new leadership in the market.


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