Before the Bell: Two key reports will be issued this morning. In the first release, the Commerce Department noted that personal income and consumer spending both moved up strongly in March, and in line with expectations. Later this morning, the University of Michigan will issue data on consumer sentiment. These reports will follow a release yesterday on first-quarter GDP, which showed a 6.4% annualized rate of growth, but also contained unsettling news on inflation, with the Price Index rising 4.1% during the period.
As indicated, GDP surged 6.4% in the opening stanza, as strong increases in activity were registered by consumer spending, business investment, and residential building. The rise in output was in line with forecasts for the period, and could well be followed by an increase on the order of 10%, or so, in the current term. For the year as a whole, estimates are that growth could reach some 7%. Wall Street generally liked the news and stocks rose, although the jump in prices did raise some concerns.
The other big news yesterday and for the week as a whole has been the flood of mostly positive first-quarter profit reports, notably in recent days from Microsoft (MSFT) and Apple (AAPL). Each company reported blow out results, but the stocks gave ground, the former on Wednesday and the latter, albeit grudgingly, yesterday. The flattish performance by Apple is particularly telling, as the company raised its dividend, increased its stock buyback plans, and saw analyst upgrades. However, the reasoning seems to be what does Apple do for an encore?
Regarding the stock market, itself, it began the day higher, saw some midday malaise, and came back strongly in the end, especially the Dow Jones Industrial Average, which gained a strong 240 points, crossing back above 34,000 in the process. The S&P 500 Index added 28 points and the NASDAQ a modest 32 points. The day's strength was underscored by the fact that nine of the 11 principal equity groups closed higher, with only technology and health care easing. Communications services, the financials, and energy led the way higher.
Finally, looking ahead to a new day, and in addition to the aforementioned economic reports, the day will again see a fair sprinkling of corporate earnings reports. The ebb and flow of these issuances could well have a strong bearing on the Street's performance. – Harvey S. Katz, CFA