Broker Check
181 East Main Street, Suite 7 Hendersonville, TN
545 N. Mt. Juliet Road, Mt. Juliet, TN

615-826-5749

Contact Us Today

 


April 29, 2013 - Slower Growth Ahead?

| May 01, 2013
Share |

Markets ended positive last week despite a disappointing GDP report, erasing losses endured the previous week. As of Friday’s close, the S&P 500 gained 1.74%, the Dow climbed 1.13%, and the Nasdaq increased 2.28%.[i]

Earnings data and a handful of economic reports drove most of the market action last week. According to our first peek at preliminary first quarter GDP data, the economy grew at an annualized rate of 2.5%, which is up significantly from the 0.4% gain in the fourth quarter of 2012, but still below consensus expectations of around 3.0%.[ii] While the data is preliminary, a deeper look suggests we may face slower growth in the second quarter. Let’s break down the numbers to see why:

Nearly all the gains in Q1 came from consumer spending and inventories. Consumer spending is expected to drop in the spring as Americans continue to feel the effects of the 2% payroll tax increase. Inventory growth, driven by farmers stocking up their silos after last year’s drought, made a strong contribution to last quarter’s growth; however, the activity was unusual, and unlikely to continue into Q2. Furthermore, government spending, which accounts for a significant part of economic activity, is declining rapidly – dropping 4.1% in Q1 alone. Most analysts expect government spending to continue to slide as the effects of sequestration become more pronounced.[iii]

On the earnings front, more than 30% of the S&P 500 has reported and, while results are uneven, the news is mostly good. Blended earnings are up 2.4% in the first quarter, which is great since most analysts had low expectations. Two standout sectors thus far are technology, which benefited from strong consumer electronics sales, and building materials, which is getting a boost from the housing sector.[iv] 

On the downside, there are a lot of revenue misses happening; so far, only 39% of companies have beat revenue expectations, which is far below the historic average of 61%. This indicates that demand is still soft and companies are achieving their results by cutting costs. Anemic revenue growth seems to be tied to slow global demand, which is a particular problem for large multinational corporations that do a lot of business abroad. Demand in Europe is essentially flat, and sales volume is down across the board, making it difficult for companies to improve their margins.[v]

Next week will see the release of a slew of economic data, along with the steady march of more earnings reports. Analysts will be closely watching consumer spending and consumer confidence data, as well as the jobs report to see whether more market upside is possible. As always, we’ll continue to monitor earnings reports and economic data and keep you updated.

 ECONOMIC CALENDAR:

Monday: Personal Income and Outlays, Pending Home Sales Index, Dallas Fed Mfg. Survey
Tuesday: Employment Cost Index, S&P Case-Shiller HPI, Chicago PMI, Consumer Confidence
Wednesday: Motor Vehicle Sales, ADP Employment Report, PMI Manufacturing Index, ISM Mfg. Index, Construction Spending, EIA Petroleum Status Report, FOMC Meeting Announcement
Thursday: International Trade, Jobless Claims, Productivity and Costs
Friday: Employment Situation, Factory Orders, ISM Non-Mfg. Index


 

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 Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. 

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


[i] http://briefing.com/investor/markets/weekly-wrap/weekly-wrap-for-april-22-2013.htm

[ii] http://www.reuters.com/article/2013/04/27/us-usa-economy-idUSBRE93P04P20130427

[iii] http://www.reuters.com/article/2013/04/27/us-usa-economy-idUSBRE93P04P20130427

[iv] http://www.cnbc.com/id/100668291

[v] http://www.cnbc.com/id/100673553


Share |

Check the background of your financial professional on FINRA's BrokerCheck.

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. Some of this material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named representative, broker - dealer, state - or SEC - registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.

Danny Prestage, a registered representative, offers securities through Triad Advisors, LLC. Member FINRA & SIPC. Wesley Wood and Danny Prestage (Investment Advisor Representatives) offer Investment advisory services through Key Capital Management, Inc. Key Capital Management, Inc. and Triad Advisors, LLC. are not affiliated.

We currently have individuals licensed to offer securities in the states of; Arizona, Florida, Indiana, Kentucky, Maryland, Massachusetts, Michigan, Mississippi, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Ohio, Oklahoma, South Carolina, Tennessee, West Virginia, Wisconsin. This is not an offer to sell securities in any other state or jurisdiction.

Wood Financial Group, LLC is also a tax preparation business, performed by Wesley Wood and Danny Prestage. This activity is separate from and independent of Triad Advisors and its affiliates.

Triad Advisors and its affiliates are not in the business of giving tax advice, consultation and/or tax preparation services and are not responsible for any outside businesses or persons providing such services.

This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher, and host are not providing legal, accounting or specific advice to your situation.