Here we go again. For the past three years, investors sang the blues (“spring can really hang you up the most…”) as global growth fears infected sentiment and U.S. stock indexes tumbled by double digits in 2010, 2011 and 2012. The damage this year has been limited – stocks have dropped just 2.4 percent from the recent highs. But the concern over growth escalated last week, after China reported Q1 GDP of 7.7 percent, below expectations of 8 percent. As if slow growth in China and mediocre corporate earnings were not enough (see market section below), there has been bad news from every trader’s favorite Doctor, Dr. Copper. Copper is widely seen as the only commodity that holds a doctorate in economics, and the one that can most accurately reflect the state of the global economy, because it is used in everything from pipes to high tech equipment.
Last week, Dr. Copper became eligible for bear market status, settling down 21 percent from its February 2012 high. It stands to reason that if the largest consumer of copper (China) is slowing down, demand for the industrial metal will ebb. But if the Chinese slowdown is temporary, copper and the stock market bears, may turn out to have erred in the diagnosis.
Meanwhile, growth in the U.S. likely picked up in the first quarter. GDP is expected to rise by a robust 3 percent, when the first estimate is reported on Friday. Last year ended on a sour note, as the U.S. economy expanded by just 0.4 percent, but the trend is likely to have reversed in the beginning of 2013. Investors are not likely to savor the results, because they are bracing for Q2, which is expected to be a clunker due to government spending cuts.
Markets: Last week, I pointed out that gold had been tanking, but who knew that the rout would continue so dramatically just a day later? The yellow metal cratered by 9.3 percent on Monday, the largest one-day percentage drop in over three decades. Gold finished the week down a whopping 7 percent, and off over 25 percent from its August 2011 high print of $1920 an ounce. "Gold Bugs" will remind us that the “safe-haven” surged more than 7 fold from 2001 to 2011. Those same folks will omit that gold fell 52 percent in the 1980’s and by another 29 percent in the 1990’s. Welcome to the world of commodities!
- DJIA: 14,547, down 2.1% on week, up 11% on year
- S&P 500: 1555, down 2.1% on week, up 9% on year
- NASDAQ: 3206, down 2.7% on week, up 6.2% on year
- June Crude Oil: $88.27, down 3.6% on week
- June Gold: $1395.60, down 7% on week
- AAA Nat'l average price for gallon of regular Gas: $3.51
THE WEEK AHEAD: After the worst week of the year for stocks, investors remain on edge. As earnings season continues, bulls will stress that 2/3 of the companies that have reported have beaten forecasts. Meanwhile, the bears contend that only 43 percent beat their revenue numbers. Amid the battle for market direction, keep an eye on Apple, which reports quarterly results on Tuesday after the close. The stock has tumbled nearly 45 percent since its September high of $705 and is down over 26 percent year to date.
Halliburton, Caterpillar, Texas Instruments
10:00 March Existing Homes Sales
Apple, AT&T, DuPont
8:30 March New Home Sales
Boeing, Proctor & Gamble, Ford
8:30 March Durable Goods
UPS, 3M, Amazon, Starbucks, Exxon Mobil, Altria
8:30 Weekly Claims
8:30 Q1 GDP
9:55 U Michigan Sentiment