Market Report – April 2, 2012

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In The Rear View Mirror:

U.S. stocks were able to close the first quarter on a high note as the S&P 500 and Dow Jones Industrial Average notched modest gains on Friday. Despite sliding in six of the past nine trading sessions, the S&P 500 jumped 12% in the first quarter, that’s good for the best first-quarter performance since 1998 and the best quarterly performance since 2009. The Nasdaq closed lower on Friday, dragged lower by a $10.31 drop for Apple (Nasdaq: AAPL) that sent the technology darling to a close below the psychologically important $600 mark.

Staples and health care issues showed strength on Friday and as measured by the Consumer Staples Select Sector SPDR (NYSE: XLP) and the Health Care Select Sector SPDR (NYSE: XLV), those groups enjoyed solid runs in March. That may serve as an indication that investors are starting to temper their appetites for risk in favor of lower beta fare.

Volume was lackluster during the quarter, with an average 6.82 billion shares traded daily on the New York Stock Exchange, Nasdaq and NYSE Amex, down from last year’s 7.94 billion average in the first three months, according to Reuters. Given the recent price action, it may come as a surprise, but gold ended the first quarter with a 6.3% gain. The yellow metal must break through the $1,700 an ounce area or risk downside to $1,625 or lower.

The Markets @ 3/30/2012
 
Index Close Weekly % Change YTD Change YTD%
DJIA 13212.04 131.31 1.00% 994.48 8.14%
NASDAQ 3091.57 23.65 0.77% 486.42 18.67%
S&P 500 1408.47 11.36 -0.81% 150.87 12.00%
NYSE Comp 8206.93 26.87 0.33% 729.9 9.76%
NYSE Amex 2405.92 -1.19 -0.05% 127.58 5.60%
RUS 2000 830.3 0.27 0.03% 89.38 12.06%
VANG INTL 14.62 0.02 0.14% 1.56 11.94%
USX CHINA 4993.89 -60.3 -1.19% 464.09 10.25%
EMERG MKTS 6839.83 7.27 0.11% 834.52 13.90%

Market Report

Economic data was decent on Friday. The Commerce Department said personal spending rose 0.8% in February, following an upward revision to a 0.4% increase in January. Economists expected a 0.6% increase for February. Personal incomes rose 0.2%, but economists expected a 0.4% increase.

The Thomson Reuters/University of Michigan final March consumer sentiment reading climbed to 76.2 from 75.3 in February. The preliminary March reading was 74.3.

News of resilient consumer is an important catalyst for the near-term fortunes of equities. The first week of April is historically bullish and the month overall, save for a few days around tax time, usually favors long positions rather than short-selling. This is important because April is the last month in the six-month cycle that favors stocks. If stocks can build on their recent gains in April, then the “sell in May and go away” crowd may not have much ammunition to work with.

Looming first-quarter earnings reports and the March jobs number, which will be delivered next Friday when the market is closed, will each be vital to the bulls’ cause.

AMEX spoiled the weekly party…all other U.S. indexes were flashing green

The Dow gained 131 points this week to close at 13,212.04…up 863.17 and +8.14% YTD.

The Nasdaq moved up a modest 23.65 points, which increased the YTD gains to 18.67%. The S&P 500 was up 11.36 points for the week and is showing a double digit gain of 12.00% for 2012.

The Russell 2000, our bench mark small cap index was essentially flat for the second week in a row…up 0.03%, preserving a 12.06% gain YTD.

The Internationals and Emerging Markets both moved in tandem…UP modestly… 0.14% and 0.11% respectively. The USX China Index continued to lose ground (-1.19%), closing at 4993.89; but still up 10.25% YTD.

Mixed Results for Second Week in a Row

Gold continued to show a little strength this week, closing Friday at $1.669.30…up $7.00. WTI Crude Oil … was down again… -$3.85 for the week…closing at $103.02.

The dollar lost 0.0042, closing at 0.7495 Euros; the 10-year bond continued up… +$0.187 at $98.125, and the 30-year bond lost $0.954 to close the week at $96.00 even.

The Bottom Line for Stocks:

Broadly speaking, stocks are in decent shape, but there are some causes for concern. Large-cap tech, excluding Apple and companies directly related to Apple, has the potential to provide investors with a slew of earnings disappointments. For the time being, the good news appears to be priced into financials and the best opportunities with both financials and energy names are likely with micro-caps, not large-caps.

When it comes to the financial markets, it pays to acknowledge history, not bet against it and for that reason alone, we expect the first week of April to be kind to those holding long positions. Regarding micro-caps, seasonal trends indicate this is a good time for energy and technology issues.

Research and Editorial Staff
MicroCap MarkePlace