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DOW + 34 = 17,712
SPX + 4 = 2061
NAS + 27 = 4891
10 YR YLD – .06 = 1.95%
OIL – 3.01 = 48.42
GOLD – 5.70 = 1199.40
SILV – .13 = 17.07
Modest gains on Wall Street Friday, but not nearly enough to make up for the four previous days of losses. It wound up being the second-worst week for the market so far this year. The Dow Jones industrial average remains down slightly for 2015, and the Standard & Poor’s 500 index is essentially flat. For the week, the S&P 500 fell 2.2 percent, the Dow lost 2.3 percent and the Nasdaq declined 2.7 percent. The semiconductor sector was a leader today after a report that Intel (INTC) is in talks to buy rival chipmaker Altera (ALTR). Intel shares were up 6%; Altera shares were up 28%.
Gross domestic product expanded at a 2.2 percent annual rate last quarter. This was the Commerce Department’s third estimate of GDP, and it was unchanged from last month’s estimate.  Economic growth cooled in the fourth quarter and after-tax corporate profits recorded their biggest drop since early 2011, as a strong dollar dented the earnings of multinational corporations. The fourth quarter GDP was down from a very strong third quarter reading of 5% growth. The first estimate on the first quarter will be published April 29th.
Profits originating outside the U.S. dropped by $36 billion in the fourth quarter, the biggest decrease since 2008 and the second-biggest since 2002. This would be money earned by big multinational companies, as well as any business that sells goods and services abroad. Profits from the rest of the world accounted for the smallest share of total corporate earnings since 2006 and have been on the downswing for years. Meanwhile profits from domestic industries rose by $5.7 billion in the last three months of 2014. While that’s not stellar, it was weighed down by a drop in earnings of financial companies. Non-financial industries reported a rise in profits of $18.1 billion. Much of the rest of the world is seeing a slowdown, but here in the US, the economy has been getting stronger. As a share of the total economy, corporate profits were just a hair below the record high of 10.5% set in 2013.
Consumer spending rose at a 4.4% annual pace in the fourth quarter, up from an earlier estimate of 4.2% and the fastest pace since the first quarter of 2006. Spending on goods rose at a 4.8% rate versus an earlier estimate of 4.5%. Spending on services grew at a 4.3% pace, up from the earlier estimate of 4.1% and the fastest pace since the second quarter of 2000.
U.S. consumer sentiment dropped in March. The Thomson Reuters/University of Michigan’s final March reading on the index was 93. It was down from the previous month’s reading of 95.4 but beat estimates of 92. Consumer optimism reached a 10-year peak of 95.5 in the first quarter of 2015, its highest level since 2004.
Last week the Federal Reserve FOMC changed their stance on interest rate hikes; they went from “patient†to “not in a hurryâ€. And for the past week, Fed policymakers have gone out and made speeches, usually saying that the Fed will probably raise interest rates sometime this year. Today, Fed Chairwoman Janet Yellen delivered a speech in San Francisco, entitled “The New Normal in Monetary Policyâ€. Yellen said she expects “conditions may warrant an increase in the federal funds rate target sometime this year.†The timing of a rate hike will be data dependent; Yellen said, “The actual path of policy will evolve as economic conditions evolve, and policy tightening could speed up, slow down, pause, or even reverse course depending on actual and expected developments in real activity and inflation.â€
With labor markets looking set to improve further, and one-time downward pressure on inflation likely to dissipate, a “modest†rate rise would be unlikely to undercut the recovery. So, to translate: the drop in oil prices is probably temporary; things are getting better; the Fed will hike rates; slowly. Unless everything unexpectedly goes to hell in a hand basket.
