Market Digest – Week Ending 4/20

in Market Commentary by

[dropcap]M[/dropcap]ostly positive US earnings results more than offset lingering fear over Spanish debt. Yields on newly issued Spanish bonds rose, but demand was stronger than expected. Reinforcing a positive outlook for the global economy, the usually conservative IMF raised its growth forecast for 2012. Stocks finished the week higher while commodities were mixed and bonds little changed.

Weekly Returns

S&P 500: 1,379 (+0.6%)

MSCI EAFE: +2.1%

US 10-Year Treasury Yield: 1.96% (-0.03%)

Gold: $1,642 (-0.8%)

USD/EUR: $1.321 (+1.0%)

Major Events               

  • Monday – US Retail sales for March reported up 0.8%, above expectations.
  • Monday – Spanish 10-year bond yields rose above 6%.
  • Monday – Argentina’s president Cristina Kirchner said she will send a bill to congress to nationalize YPF, the country’s largest oil and gas company. YPF is currently majority owned by Spanish energy giant Repsol YPF.
  • Tuesday – Spain’s short term debt auction attracted greater demand than expected, reducing fears of another debt crisis in the near term.
  • Tuesday – The International Monetary Fund (IMF) increased its global growth forecast for 2012 to 3.5%.
  • Wednesday – Warren Buffed announced he was diagnosed with stage one prostate cancer, but said it was not life threatening.
  • Wednesday – Intel and IBM both announced disappointing sales growth.
  • Thursday – Microsoft announced third quarter earnings beat estimates due to strong corporate demand.
  • Friday – GE announced quarterly profit was up 17% from the prior year, ahead of expectations.
  • Friday – The IMF was rumored to possibly announce a $400 billion boost of funds to deal with the European debt crisis, largely a result of pledges from emerging countries such as China and Brazil.

Our Take

Corporate earnings season is generally off to a strong start. European bond yields continue have more impact on the US market than earnings, and the debt crisis there retains the potential for tremendous disruption. But at the end of the day, quality global corporations continue to increase their intrinsic value – good news for long term investors.

Quietly, Apple dropped 5% this week even as the broader markets rose. We don’t have a specific outlook for the stock, but those with a concentrated position may want to take the opportunity to evaluate how it fits into their goals and broader portfolio. The stock is still up over 40% for the year, so an emotional response to avoid selling below the high may be misguided.

While Argentina doesn’t matter much to the global economy or stock market, the proposal to nationalize YPF was highly disappointing. We are generally of the opinion that government intervention in private markets is a bad thing. The US recently proved that coerced bailouts can be successful, but flat out seizure of property almost always has disastrous implications.

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Craig Birk, CFP®

Craig Birk, CFP®

Craig Birk is a member of the Personal Capital Advisors Investment Committee. He also serves as Vice President of Portfolio Management. Prior to Personal Capital Advisors, he was an integral leader within the portfolio management team at Fisher Investments. During Craig’s time there, the company increased assets under management from $1.5 billion under management to over $40 billion. His responsibilities included risk management, portfolio implementation oversight, and management of all securities and capital markets research analysts. Mr. Birk graduated from the University of California at San Diego and has earned the Certified Financial Planner® designation.
Craig Birk, CFP®

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