Despite a strong rally on Thursday, equities remained in the trading range that began last November. True, the S&P 500 Index closed at an all-time high the past two trading sessions, but the move upward was largely unimpressive. For the week, the S&P was ahead 0.3%, the Dow Industrials moved higher by about 0.5% and the NASDAQ gained 1%. Market movers to the upside centered on healthcare, industrials, consumer goods and technology, but energy stocks were lower on average by about 1.6%. Oil was virtually flat on the week, but gold soared $36/oz. So the economy, and equities, are moving in opposite directions as soft economic data provides stock traders with a reason to expect continued low-interest rates, and up it goes. However, on a long-term basis the market will only improve significantly if the economy gets on a more solid footing and corporate earnings follow. While jobless claims reported last week were decent, retail sales, consumer sentiment and industrial production figures were disappointing. On Wednesday, the Fed will publish minutes from it April meeting, which can provide some clues as to the bank’s views on moving rates higher. But June appears to be off the table for now and September is still a wild card. Given all this, investors would be well advised to seek out a diversified group of stocks for inclusion in a well-balanced portfolio of cash, high-quality debt instruments and equities; the allocation depending on one’s time frame and penchant for risk. Last week there was some significant news from conservative choice Danaher Corp. agreeing to pay $13.8 billion for filtration outfit Pall Corp. and contemplating a split into two companies late next year; income candidate DuPont winning out over Trian Fund Management’s proxy battle sending the shares in a reactionary tailspin and conservative and income member Verizon Communications’ planned purchase of AOL gaining access to its mobile advertising technology. Applied Materials delivered decent numbers on Thursday, but the outlook is only “so-so”. On Friday, we will hear from athletic retailer Foot Locker with an estimate of $1.23 for the first quarter vs. $1.11 last year and Deere & Co, which was hit with a negative report by J.P. Morgan this week, with a target of $1.55 for the second quarter vs. $2.65. Shares of the agriculture and construction manufacturer, however, were still being sought after by Buffet’s Berkshire Hathaway for its long-term value.
Here is the answer to last week’s trivia question: What does the term “clipping coupons” refer to? Answer: At one time bonds were issued as “bearer bonds”, whereby whoever held possession of the certificate was the owner. The bond literally came with coupons attached and were “clipped” off on scheduled dates and the interest for the period was redeemable at a bank or from the issuer. Today, virtually all bonds are registered in one’s name and interest payments are made directly to the owner of record’s brokerage account.
Today’s Trivia Question: The enviable NYSE ticker symbol “X” belongs to which company: Xerox, United States Steel, Xilinx or Chevron?