Later this week, the Federal Reserve will release minutes of its
March policy meeting, possibly giving investors fresh insight into its
plans for interest rates and its "quantitative easing" program of bond
purchases. Last Friday's jobs report, which showed slow job growth in
March and an exodus of workers from the labor force, may make Fed
officials especially cautious about pulling back on easy-money
policies.
On Friday, the Commerce Department is scheduled to
release its retail-sales report for March. Those figures may show
whether consumers' surprising resilience this year is likely to persist.
Consumer spending has been relatively robust in the first two months of
the year, despite a Jan. 1 increase in payroll taxes. But the
disappointing March employment report could signal mounting pressure on
pocketbooks—and, in turn, on retailers.
Continuing uncertainty
in Europe—including over a court ruling Friday that could affect
Portugal's international bailout program—adds another wild card.
Analysts
surveyed by data provider FactSet predicted first-quarter profits will
decline 0.6% from a year earlier among companies in the Standard &
Poor's 500-stock index. If they are right, corporate earnings will fall
from the year-earlier period for the second time in three quarters.
Yet
many fund managers remain optimistic that stocks will continue their
record-setting run. The Dow Jones Industrial Average is up 11% for the
year following Friday's close at 14565.25. Bullish investors see signs
the U.S. economy will continue a slow expansion, creating jobs, boosting
incomes and bolstering corporate profits.
"The Fed's
unconditional support of asset prices has made people more confident,"
said David Ellison, a portfolio manager with Hennessy Funds, which
oversees around $3 billion. "But my bet is that the economy is getting
better.prepreg"
U.S.
companies have allowed some optimism to creep into their forecasts, but
their tone remains cautious. Concerns about still-high unemployment,Mobile crushing machine budget
debates in the U.S. and depressed prospects in Europe have been a
counterweight to an improving housing market and better prices on
petroleum products.
Top executives at big consumer-products
companies Procter & Gamble Co. PG -0.39% and Clorox Co. CLX -0.54%
said in the middle of the first quarter that sales improved early in the
year, a sign that shoppers were holding up despite burdens such as the
expiration of the payroll-tax break. In mid-March, United Technologies
Corp.knife sets UTX
-0.56% Chief Financial Officer Greg Hayes said improvements in the
housing and construction markets could help sales of the company's
Carrier air conditioners and Otis elevators.
Honeywell International Inc.Vintage bath fixtures HON
-1.04% Chief Executive David Cote struck a less optimistic tone last
month, saying the U.S. economy wasn't yet growing fast enough to support
increased hiring.
Recent economic data have clouded the
outlook. Friday's jobs report followed a tepid manufacturing report
earlier in the week, fanning fears that U.S.Used excavator growth
is losing steam at a time when economies in Europe and Japan already
are struggling. In Portugal, Prime Minister Pedro Passos Coelho said
Sunday he would look for fresh spending cuts to keep its bailout program
on track following a Constitutional Court decision striking down some
planned austerity measures.
U.S. shares tumbled Friday as
investors fled for the safety of government bonds. The CBOE Market
Volatility Index, the "fear gauge" known as the VIX, rose to a one-month
high midday Friday before easing at the close. The 10-year U.S.
Treasury note closed at 1.72%, its lowest yield since December, and the
Dow Jones industrials shed 40.86 points.
Some investors contend
last week's reversal was a blip. Economic data have generally been
improving this year and fears of a global economic shock have largely
dissipated, said Steve Rees, head of U.S. equity strategy at J.P. Morgan
Private Bank, which helps oversee $877 billion in client assets.
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