Friends
This week reminded me a little bit of 2011. Volatility seems to be coming back to the market as we move into the second quarter. Overnight, the Chinese GDP number came in just a little shy of expectations, but Asian stocks rallied anyway. Those rallies fizzled a bit as the morning came and then we got earnings reports from J.P. Morgan and Wells Fargo before the open. These reports, and Google’s earnings yesterday after the close, seemed to disappoint traders and stocks headed lower right at the opening. After being down in triple digits, stocks rallied midday only to falter at the end of the trading session, with the Dow Jones Industrial Average finishing the day down 137 points to close at 12,849. The S&P 500 was down 17 to finish at 1370. Gold was down $23.60 to trade near $1657 per ounce, and oil was down $.75 to close near $102.90 per barrel. After a very good start to the year, this is a second down week in a row for stocks as we begin the second quarter.
On the economic front, both yesterday’s PPI number and today’s CPI number were not market movers as both came in near expectations. Thursday’s Initial Jobless Claims number was disappointing as was today’s Consumer Sentiment report. Nevertheless, the U.S. economy seems to be cruising along at a very slow and deliberate pace while the global situation continues to provide us with day to day thrills.
I would expect that volatility may continue to accelerate as we find ourselves entering the thick of earnings season over the next couple of weeks. Are we destined to repeat the pattern of the past couple of years (a good first quarter followed by a weak Spring and Summer), or will traders use this very normal pullback to rebuild and start a nice advance into the summer?
Let’s see how earnings season unfolds. Watch how individual stocks react to their earnings reports, whether good or bad, to get an idea if traders think a particular stock is priced fairly. Remember, volatility can provide opportunity.
Have a nice weekend everyone.
