Stocks rallied for the fourth week in a row on positive economic data as both the S&P 500 and Dow Industrials hit new highs. For the week, the S&P 500 gained 2.07%, the Dow increased 1.56%, and the NASDAQ added 1.82%.[i]
Markets experienced some volatility as stocks pulled back early in the week amid worries that the Fed may be tapering off its bond-buying program soon. However, investors soon regained their positivity after realizing that the Fed would not slow its quantitative easing activities without a simultaneous improvement in economic growth. In other good news, data showed that consumer sentiment is on the upswing, reaching its highest level since July 2007, according to the Thomson/Reuters University of Michigan index.[ii]
The rate of economic growth has been expected to fall in the second quarter as sequestration and higher taxes continue to bite; however, improvements in the labor market, housing market, and retail sales show that the recovery is still ongoing. While a measure of volatility is expected, many analysts are upbeat about the year’s market prospects. JP Morgan raised its year-end target for the S&P 500 to 1,750 from 1,500, indicating that their analysts expect additional upside this year.[iii] Although we don’t want to dwell too much on technical indicators, preferring a long-term strategy driven by research and quality investments, we like to see that analysts are remaining optimistic about market performance this year.
This week will see the release of important housing and manufacturing data, which will hopefully give additional support to the market rally. Ben Bernanke will speak about the economy before the Joint Economic Committee of Congress on Wednesday. Analysts will watch carefully to see whether he believes the economy is strong enough to justify paring back the Fed’s bond-buying activities any time soon.
Overall, we’re pleased with how equity markets have been performing this year and we’re glad to see the economic recovery advancing. Even so, we are determined not to become complacent, but rather, to remain alert for both risks and opportunities. Thank you for allowing us to serve you. We hope you have a great week!
Monday: Ben Bernanke Commencement Speech Notes 8:00 AM ET
Wednesday: Existing Home Sales, Ben Bernanke Speaks 10:00 AM ET, EIA Petroleum Status Report, FOMC Minutes
Thursday: Jobless Claims, PMI Manufacturing Index Flash, New Home Sales
Friday: Durable Goods Orders
Notes: All index returns exclude reinvested dividends, and the 5-year and 10-year returns are annualized. Sources: Yahoo! Finance and Treasury.gov. International performance is represented by the MSCI EAFE Index. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.
The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ.
The Nasdaq is a computerized system that facilitates trading and provides price quotations on some 5,000 of the more actively traded over-the-counter stocks