Michael Sullivan, CFA
In addition to positive returns for the week, the S&P 500 and Dow Jones Industrial Average recorded the best quarter to start a year in over a decade. In other quarterly news, the preliminary GDP growth estimate for Q1 is slightly lower than Q4′s final GDP growth of 3%. Consumer spending jumped in February, although the U.S. consumer confidence index slipped as consumers expect worse employment and business conditions. For now, the employment situation is stable; in February, the U.S. economy added 227,000 jobs, and the unemployment rate remained at 8.3%. March employment numbers are released this Friday.
First, let’s recap news from the past week:
- The final tally for U.S. real GDP growth in the 4Q 2011 was a positive 3.0%, in line with the market’s expectations. The preliminary estimate for the 1Q 2012 shows GDP growth a bit lower at 2.0%.
- Last week also brought important data on the U.S. consumer. For the month of February, personal income increased only 0.2%, yet consumer spending jumped 0.8%, its largest monthly increase since last July. In a related report, the U.S. personal savings rate fell to 3.7%.
- In other positive news, durable goods orders rebounded 2.2% in February after plunging 3.6% in January. And weekly unemployment claims edged down 5,000 to 359,000. This translates into a 4-week moving average of 365,000 claims, the lowest 4-week reading since June 2008.
- On a slightly disappointing note, the headline U.S. consumer confidence index slipped to 70.2 in March from 71.6 in February. Looking at the components, the present situation index rose to 51.0, its highest level since September 2008, but the expectations index fell 5.4 points to 83.0, as more consumers expected fewer jobs and worse business conditions over the next six months.
- Looking at the equity markets, the major indices ended the first quarter of 2012 with another good week of performance, as the Standard & Poor’s 500 rose 0.81%, and the Dow Jones Industrial Average fared even better, up an even 1.00%. On a total return basis, the S&P 500 was up 12.59%, and the Dow was up 8.84%, for the quarter. For both indices, it was the best quarter to start a year since the first quarter of 1998.
| March 30, 2012 | March 23, 2012 | Change | |
| S&P 500 | 1,408.47 | 1,397.11 | 0.81% |
| Dow Jones Industrial Average | 13,212.04 | 13,080.73 | 1.00% |
| 10-Yr Treasury | 2.21% | 2.24% | -3 bp |
| 10-Yr AAA Muni | 2.11% | 2.17% | -6 bp |
| 30-Yr Fixed Mortgage | 3.97% | 4.03% | -6 bp |
| Oil | $103.02 | $106.87 | -$3.85 |
| Gold | $1,669.30 | $1,662.40 | $6.90 |
| U.S. Dollar | 79.004 | 79.345 | -0.43% |
Sources of chart data: Yahoo Finance, Freddie Mac, MarketWatch, Thomson Reuters, and The Wall Street Journal
Now let’s look at the economic events for the upcoming week:
- Earlier on Monday, the Institute for Supply Management, or ISM, manufacturing index for March was reported. The index increased modestly to 53.4 from 52.4. On Wednesday morning, we will see a related report when the ISM non-manufacturing, or service index, for March is released. The service index is expected to be fairly close to last month’s reading of 57.3. Recall that any readings above 50 indicate expansion in the respective sector.
- On Tuesday afternoon, vehicle sales for the month of March are announced. Vehicle sales have increased in five of the past six months, and on an annualized basis, they topped the 15.0 million mark last month. However, the forecast for March calls for a small backup in sales to 14.7 million units.
- Finally, we wrap up the week with the March employment report. For the month of February, the U.S. economy added 227,000 jobs, and the unemployment rate remained at 8.3%. The consensus for March is another strong gain of approximately 210,000 jobs, with no change in the unemployment rate.
This information is not intended to serve as investment advice. Investments are subject to market risk.
