CRISIS ALERT: Companies Are Expanding Without Adding Jobs, DOW Hit Record High But Corporate Earnings Are Shrinking, And Private Clients Are Propping Up The Stock Market While Everyone Else Is Selling
Walmart customers across the country are complaining that many stores have trouble keeping items stocked.
This actually speaks trend at Walmart represents a bigger problem with the U.S. economy.
Companies have expanded a lot since the downturn, but haven’t hired that many additional workers, leading to high unemployment.
Dudley interviewed Bob Shank, a Tucson, Arizona man who said his local store had “bare shelves” with “yards of empty spaces” and “few employees visible, especially at the check-out counters.”
Stocks held near their best levels Tuesday, with the Dow hitting a new intraday record and the S&P 500 within striking distance of its all-time high, boosted by gains in the health care sector.
|DJIA||Dow Jones Industrial Average||14668.31|| ||95.46||0.65%|
|S&P 500||S&P 500 Index||1572.22|| ||10.05||0.64%|
|NASDAQ||Nasdaq Composite Index||3264.04|| ||24.87||0.77%|
The Dow Jones Industrial Average hit a fresh intraday high of 14,684.49….
The first quarter of 2013 was one of the best first quarters on record, with the DJIA and S&P 500 both closed at new all-time highs. Corporate earnings, however, don’t appear to have fared quite as well. According to FactSet, year-over-year earnings growth will shrink by 0.7% in the first quarter, partially explaining why cyclical P/E ratios now stand near all-time highs. So a bit of caution for investors is certainly advisable.
There are at least three takeaways from this first-quarter financial anomaly.
1. The U.S. economy is leading the global pack—despite fiscal headwinds. U.S. economic momentum in early 2013 positively surprised, and is greater than economic growth occurring overseas. This, in turn, is leading capital to the U.S. and supporting local assets. That same relative view of the world is also boosting U.S. yields, as investors price in tighter U.S. monetary policy over time. Consider equities: in the first quarter, global equity mutual funds and ETFs saw some $107 billion in total inflows, the strongest quarterly flow since 2000 and with capital biased towards the U.S. (EPFR Global data, including March 2013 estimates).
(Read More: Fed Keeps Easing, Not Worried About Stock Bubble)
2. The American investor remains cautious: we are a long way from needing to worry about irrational exuberance. Despite the first-quarter move towards stocks, we are not seeing similar capital shifts into other assets that would reflect a stronger cyclical view. Commodities, for instance, which should at least partially reflect demand expectations, fell more than 1 percent in the first quarter, using the Dow Jones-UBS index.
Her post-mortem on the first quarter: ” Started with a bang, ended with a whimper.”
“Private clients have been the primary driver of BofAML client flows into US stocks this year, with strong inflows in January that tapered off in February and turned to net sales in March,” says Subramanian. “Hedge funds and institutional clients have both been cumulative net sellers, with outflows during all three months of the quarter.”
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Russell 2000 broke to all-time highs a few weeks ago. Now this key index’s relative momentum is reaching levels that has caused this index to at least take a pause over the past 7 years.
At the same time relative momentum is overbought, the Russell 2000 is up against a line that has been in place for the past 7-years, marking several key emotional turning points.
At least, small caps are due a breather because of these conditions! Could a breather in the relative strength winner impact the S&P 500? Could!