The question now becomes how long the first quarter strength can last.
-Jason Pride, director of investment strategy, Glenmede
The first month of the year ended with a strong market rally on the back of mostly favorable data. GDP for the fourth quarter was weaker than expected, negative in fact, due to a sharp drop in defense
spending and inventory destocking, but the ISM manufacturing index and nonfarm payrolls (including
revisions) were stronger. The unemployment rate ticked up to 7.9%, 58% of companies have beaten
4Q2012 EPS estimates, and housing remains an economic tailwind.
- A slower data week will allow the market to take stock of its current position. The ISM nonmanufacturing index, initial claims, and productivity are the only major statistics released this week.
- The question now becomes how long the first quarter strength can last. Is it sustainable or simply the reflection of recovery from the hurricane-impacted fourth quarter? How much is Fed-induced and likely to eventually wane? While inclined toward growth expectations, we remain unconvinced that a
sustained high-growth surge is upon us.
Dates of Interest:
2/5: ISM Svc 2/7: Initial Claims, Productivity
- Half-time report: "it's their game to lose" - Senate and ATRA act discussion
- Europe's warming the bench - ECB progress, Spain remains pivotal country