April 8, 2011 : Market Update
Employment Trends Looking Up
It was a somewhat lackluster week in the market with expectations building for earnings season which starts next week. Analysts expect Standard & Poors 500 firms to post a 12% year over year (Y/Y) increase in 1st quarter earnings amidst new highs in sentiment readings among company CEO’s. We are hopeful that positive sentiment among CEO’s will lead to faster job creation – and we may be seeing this. It was reported this week that the March Employment Trends Index was up 8.1% Y/Y to 100.9. Excluding construction and state/local government, this has been the fastest growing six-month period for employment in the past decade.
The GOP unveiled a plan to slash $4 Trillion from the deficit over the next ten years. This is more than President Obama’s debt commission had proposed. The GOP plan includes a statutory cap on actual discretionary spending as a percentage of the economy, changes to Medicare and Medicaid’s status as direct payers of costs, lower taxes and a wider tax base. In addition, after improving economic data and hawkish comments from some U.S. central bankers, Wall Street is beginning to price in a more aggressive Federal Reserve (Fed) according to the latest CNBC Fed survey. About a third of economists, fund managers and strategists who responded see the Fed hiking interest rates, which is double the percentage from the March survey.
In company news, TJX Companies and Ingersoll-Rand increased their dividends by 27% and 71% respectively. In addition, TJX plans to buy back $1.2 billion in stock this year. The NASDAQ announced it will cut Apple’s weighting on the NASDAQ 100, effective May 2nd, to 12.3% from over 20% in a “special rebalance” to more accurately reflect the number of Apple’s shares. In addition, an almost-finished version of Google’s internet music storage service was leaked to the public. This service would rival Amazon’s “Cloud Drive” that was unveiled last week.
For the story you might not have heard this week we return you to the oil disaster in the Gulf of Mexico. It appears that Transocean, one of the firms involved with the spill, paid out “safety bonuses” after boasting that it was the “best year in safety performance in the company’s history.” The New Orleans Times-Picayune responded with the comment, “That’s like the owners of the Hindenburg claiming they had an ‘exemplary’ safety record – except for the dramatic explosion of the blimp over New Jersey in 1937.”
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