Weekly Update-April 28, 2012

By: Michael Vodicka

“The only fresh warning signal we saw this week was a fairly sharp GDP miss on Friday, with a read of 2.3% coming in below expectations of 2.6%.”

The market took a turn for the better this week, rallying on strong quarterly earnings to reverse a recent bout of weakness. For the week, the Dow Jones added 1.5%, the S&P 500 1.8% and the NASDAQ led after tacking on 2.31%.

Stocks had been under pressure for the last few weeks as a fresh flare up in the Euro zone weighed on the Street. But sentiment took a decidedly bullish turn this week on the back of some very strong Q1 earnings results from bellwethers like Ford Co (F), Apple, Inc. (AAPL) and Amazon (AMZN).

That is consistent with what has been another solid earnings season, with 72% of the 275 S&P500 companies coming in ahead of expectations.

The only fresh warning signal we saw this week was a fairly sharp GDP miss on Friday, with a read of 2.3% coming in below expectations of 2.6%. The Street didn’t seem to care too much though, closing Friday’s session with a slight gain as the market knows full well that the Fed will be there to stimulate on any kind of material equity or economic weakness

Looking ahead, we’re still in the heart of earnings season, so we’ll see a fresh bevy of reports hitting the wire this week. But so far the private sector continues to look exceptionally strong, so that looks like one less thing the market has to worry about right now.

We’ve also got some important economic data on tap, with two ISM reports set for mid week before Friday’s main event with non-farm payrolls. The pace of jobs growth slowed last month after a relatively solid start to the  year, so the Street will be watching closely to see if that’s an anomaly or a trend.

  • Tuesday-ISM Manufacturing
  • Thursday-ISM Services
  • Friday-Non-Farm Payrolls

 

So as it stands, this week’s bullish movement was a nice boost for the market, lifting the average back above recent key levels. The Street is keenly aware of problems in Europe and China, but for the time being, strong earnings and expected support from the Fed seem to rule the day.

Let’s get into some updates.

Updates:

With earnings season heating up, we saw a number of our favorite companies report.

This conversation has to start with Apple, Inc, (AAPL), absolutely crushing their quarter once again and posting an insane 93% increase in profit from last year. Shares were quite weak going into the report, but with a fresh blast of optimism to fuel the bulls, Apple, quickly jumped back above the $600 level. In the meantime, estimates continue to surge, with some analysts now calling for $1,000. As far as I’m concerned, all bets are off. We’ve never seen a company do something like this before. Apple is well on its way to becoming the first Trillion dollar company, so let’s enjoy the ride in one of the brightest spots in the market.

We also heard from good old Baker Hughes, (BHI) an energy services company that has been a bit of a dog over the last year as energy stocks have struggled amongst lingering uncertainty. BHI chimed in with a nice surprise, reporting earnings of 86 cents against expectations of 81. Bigger picture, natural gas prices are killing the service providers, so for the time being this could be a slower investment. But for anyone who is bullish in the long run, the time to buy energy stocks is when everyone else hates them. So with shares beaten down close to 50% from the 52-week high, opportunity is at hand.

And finally, we have Kansas City Southern (KSU), hitting a new 52-week high after beating the Street with earnings of 75 cents against expectations of 72. KSU and transports are a direct play on economic growth, so even though GDP was a bit cooler than expected, growth is still in play. So as long as that trend stick KSU should continue to benefit.

That’s all for this week, but until next time, here is a good article discussing international investment opportunities. Enjoy!

Mexico, Canada Put Your Stock Portfolio on the Map

Your Investment Partner,

Mike

ABOUT THE AUTHOR

Michael Vodicka

Michael Vodicka is the president and founder of the Vodicka Group Inc., a licensed investment advisor (Series 65) and a financial journalist.