Weekly Economic Update for May 2, 2011

Presented by Mark Lund, The Investor Coach.

“Life is either a daring adventure, or nothing.”
– Helen Keller

This March gain wasn’t that surprising in light of rising food and energy costs. (The Commerce Department just revised February’s gain to 0.9%). Disposable incomes were up by 0.1% in March while the personal savings rate held steady at 5.5%. The Commerce Department also released its initial estimate of 1Q 2011 GDP Friday (+1.8%) and 1Q consumer spending (+2.7%).1

The University of Michigan’s final April consumer sentiment survey came in at 69.8, up from March’s final reading of 67.5. The one-year inflation expectation was 4.6%, the same as last month. The Conference Board’s April consumer confidence poll came in at 65.4, better than the median projection of economists surveyed by Bloomberg. Both indices improved despite gas prices rising – AAA said a gallon of regular unleaded averaged $3.87 on April 27, the highest price since August 2008.1,2

February’s Case-Shiller Home Price Index revealed a 3.3% year-over-year drop in prices across 20 metro areas. Most notably, the index was down 1.1% from January to just .01% above its April 2009 trough. Prices in 14 of the index’s 20 metro areas have declined for six months or more. In more positive news, the Census Bureau said new home sales increased by 11.1% from February’s record low. The National Association of Realtors said pending home sales were 5.1% better in March than in February.3,4

Stocks took their cues from earnings last week, and earnings were mostly strong. The weekly performance numbers: DJIA, +2.44% to 12,810.54; S&P 500, +1.96% to 1,363.60; NASDAQ, +1.89% to 2,873.54. The DJIA rose 3.98% in April.5

THIS WEEK: On Monday, ISM’s April manufacturing index comes out, we get data on March construction spending, and we have 1Q results from Humana. Tuesday brings 1Q earnings from Pfizer, CBS, MasterCard and Comcast along with reports on March factory orders and auto sales. Wednesday, we get quarterly results from AOL, MetLife, Kellogg and Anheuser-Busch and the ISM April service sector index. On Thursday, GM, AIG, Kraft, VISA and CVS all release 1Q earnings reports, Fed chairman Ben Bernanke speaks at a Chicago Fed conference, the European Central Bank makes a rate decision, and weekly jobless claims are released. Friday offers the March jobs report and 1Q results out of Berkshire Hathaway.

DJIA +10.65 +14.71 +2.54 +1.93
NASDAQ +8.32 +14.40 +4.74 +3.58
S&P 500 +8.43 +12.99 +0.81 +0.91
10 YR TIPS 0.75% 1.31% 2.39% 3.52%

Sources: cnbc.com, bigcharts.com, treasury.gov, treasurydirect.gov – 4/29/115,6,7,8  Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly.  These returns do not include dividends.

You go in through one hole, you come out through three holes. Once you’re inside you’re ready to go outside, but once you’re outside you’re still inside. What is it?

Last week’s riddle:
What is the smallest number of cars that can be driven down the road in this formation: two cars ahead of a car, two cars behind a car, and a car between two cars?

Last week’s answer:
Three: one car in front, one in the middle, and one behind.

1 – bloomberg.com/news/2011-04-29/personal-spending-in-u-s-rises-0-6-incomes-climb-more-than-forecast.html [4/29/11]    
2 – bloomberg.com/news/2011-04-29/u-s-consumer-sentiment-gains-as-index-climbs-to-69-8-from-67-5-in-march.html [4/29/11]
3 – seattlepi.com/realestate/article/Home-prices-continue-to-slide-nationwide-more-so-1353033.php [4/26/11]
4 – bloomberg.com/news/2011-04-28/pending-sales-of-existing-homes-in-u-s-increase-5-1-more-than-estimated.html [4/28/11]
5 – cnbc.com/id/42827178 [4/29/11]
6 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=4%2F29%2F10&x=0&y=0 [4/29/11]
6 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=4%2F29%2F10&x=10&y=18 [4/29/11]
6 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=4%2F29%2F10&x=0&y=0 [4/29/11]
6 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=4%2F28%2F06&x=0&y=0 [4/29/11]
6 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=4%2F28%2F06&x=0&y=0 [4/29/11]
6 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=4%2F28%2F06&x=0&y=0 [4/29/11]
6 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=4%2F30%2F01&x=0&y=0 [4/29/11]
6 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=4%2F30%2F01&x=0&y=0 [4/29/11]
6 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=4%2F30%2F01&x=0&y=0 [4/29/11]
7 – treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyield [4/29/11]
7 – treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyieldAll [4/29/11]
8 – treasurydirect.gov/instit/annceresult/press/preanre/2001/ofm11001.pdf [1/10/01]
9 – montoyaregistry.com/Financial-Market.aspx?financial-market=power-of-attorney-why-its-so-important&category=30 [5/1/11]

This information should not be construed as investment, tax or legal advice. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. It is not possible to invest directly in an index. NYSE Group, Inc. (NYSE:NYX) operates two securities exchanges: the New York Stock Exchange (the “NYSE”) and NYSE Arca (formerly known as the Archipelago Exchange, or ArcaEx®, and the Pacific Exchange). NYSE Group is a leading provider of securities listing, trading and market data products and services. The New York Mercantile Exchange, Inc. (NYMEX) is the world’s largest physical commodity futures exchange and the preeminent trading forum for energy and precious metals, with trading conducted through two divisions – the NYMEX Division, home to the energy, platinum, and palladium markets, and the COMEX Division, on which all other metals trade. Additional risks are associated with international investing, such as currency fluctuations, political and economic instability and differences in accounting standards. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. All economic and performance data is historical and not indicative of future results. Market indices discussed are unmanaged. Investors cannot invest in unmanaged indices. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This material was prepared by Peter Montoya Inc., for Stonecreek Wealth Advisors, Inc., A fee only registered investment advisor firm in Salt Lake City, Utah. Mark Lund is the author of The Effective Investor.