The S&P 500 Index capped its best first quarter in over a decade. It is up 74% from its 2009 low. The Dow Jones Industrial Average rose slowly yet consistently, to take its five-week gian to 5.8%. The Nasdaq Composite Index rose to 2403, while the Russell 2000 (small-cap stocks) rose 0.7%, to 684. Domestic high yield corporate bond funds also rose, adding approximately 0.44% for the week. Government bonds were down for the week.
Stocks have risen five straight weeks and are pushing 18-month highs. Stock buyers have seen data pointing to increasing orders, record productivity and an improving but still-hesitant pace of hiring, all of which should bode well for corporate profits. As a result, they’ve come to expect stellar first-quarter earnings results, which begin to get released this week. Looking back at the last two stock market pullbacks during this otherwise appreciating market, once a sufficient amount of earnings data was in hand the market participants began to sell the news. As we get deeper into April that could be the drill again this time. Be careful of buying too heavily at the top of the market.
In economic activity, the Labor Department was busy releasing the latest employment figures. The results showed that 162,000 jobs were added last month, however, 50,000 of which were attributable to temporary hiring for the 2010 Census. The count fell short of the roughly 200,000 Wall Street expected. Manufacturing expanded for an eighth straight month and in March grew at the fastest pace since 2004.
All this “good” economic news has hurt the government bond market, sending the benchmark yield on 10-year Treasuries up to 3.94%, a 10-month high but still below the 4%-to-4.5% range most believe is in our near future. There remains no apparent inflation anywhere.
This is all good news. The bad news is that the government continues to borrow at an unprecedented pace, the future consequences of which are unknown. We continue to climb a wall of worry.
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. Investing in stocks, bonds, mutual funds and other investments involves risk, and may decline in value and are not insured by the FDIC or any other Federal government agency.