Wednesday, April 2, 2014

Spring Thaw (excerpt)

I have been predicting that the stock market would respond positively to rebounding economic indicators even though everyone knows that some of that strength is simply weather related rather than a sign of economic strength. Nevertheless, investors might have been concerned that the winter’s weak numbers might have been fundamentally weak rather than just depressed by the big chill.

So once again, a relief rally is driving stock prices higher. We saw that yesterday in response to the solid M-PMI and auto sales for March:

(1) M-PMI. The M-PMI climbed to 53.7, up from 53.2 in February. The gain was led by production (55.9) and new orders (55.1). The spring in the March manufacturing survey was confirmed by a similar rebound in the average of the six regional surveys that I track.

(2) Auto sales. Sales delayed by the bad winter weather coupled with increased incentives fueled a jump in March vehicle sales to 16.4 million units (saar), up from 15.3 million units in February. As a result, Q1’s average rate of 15.7 million units was just about equal to that of the last two quarters of 2013.

Today's Morning Briefing: Do Earnings Matter? (1) Q1 earnings expectations slashed. (2) Expected growth for S&P 500 earnings just 0.9% y/y. (3) So why are stocks back at record highs? (4) The end of the never-ending winter. (5) Double-digit earnings growth expected to make a comeback soon. (6) Forward earnings matter, and they are at record highs. (7) A relief rally celebrating better weather. (8) Regional and national M-PMIs rebounded in March. (9) So did car sales, but Q1 average was no higher than H2-2013 average. (10) Q1 Performance Derby. (11) Health Care P/E rebounded after HillaryCare, and doing so again despite ObamaCare. (12) Focus on market-weight-rated S&P 500 Health Care. (More for subscribers.)

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