Daily Bullets…….For April 23, 2014

·         Earnings beats…….We are in the heart of Q1 earnings reporting season and we note many large companies are reporting “better-than-expected” results. In most cases, companies are astute at playing the “earnings game” by guiding conservatively, then delivering upside results. Forward guidance therefore becomes more critical for investors and guidance remains conservative. The point? Earnings reports, while important, are not materially moving the market; it will be increased confidence in earnings expectations and economic data that we think will be more important in driving the market further upward, which by the way, we expect.

 

·         More Home Sales Data………New single family home sales dropped 15% in March, below economists expectations. Extreme winter weather had a significant effect on the housing market in Q1, which is  normally a seasonally softer quarter to begin with. We expect housing activity and data to improve moving into the spring. The point? All sectors of the economy ebb and flow in a recovery. We continue expect housing will be a significant driver of economic growth over the next several years. Link: http://money.msn.com/business-news/article.aspx?feed=OBR&date=20140423&id=17548330

 

·         More China weakness…….An HSBC survey out earlier today indicates more weakness in the China manufacturing sector, reflecting both order and employment weakness. The point? We have been concerned about further slowing in the China economy. China has major global market significance. The hope is for an engineered “soft landing” in China. We believe China can achieve this but falling short of this would have negative repercussions for global financial markets. Link: http://money.msn.com/business-news/article.aspx?feed=AP&date=20140423&id=17546559

 

·         Europe strengthening……. A Markit PMI survey out this morning is showing business activity in the Eurozone running at a three-year high. This is encouraging and obviously a positive for the troubled Eurozone economy and has positive implications for U.S. export companies. The problem is the recovery continues to be very anemic and deflation continues to be a concern for Europe. The point? This should cause the ECB to continue its very accommodative monetary policy which could also limit a potential rise in interest rates globally. Accommodative monetary policy is generally positive for financial assets such as bonds and dividend-paying stocks. Link: http://money.msn.com/business-news/article.aspx?feed=AP&date=20140423&id=17546793