As we attend the shareholder meeting on May 1st and 2nd, market comments will not be presented.

As we attend the shareholder meeting on May 1st and 2nd, market comments will not be presented.

The market ended the Fed decision day modestly lower after gaining as much as 1.4% earlier. For the month, it gained more than 4%, the best since December 2003 and ending the longest losing streak since 1990. Most economic news for the day was positive. The first reading on Q1 GDP came at 0.6% vs. 0.5% expected. In other words, although it certainly feels the US economy is already in a recession and most likely it is, technically we are not there yet. The Chain Deflator reading, on the other hand, came below expectation and so did the Employment Cost Index. Both are good news for inflation outlook. There is also some good news on the employment front. The ADP Employment report, which was released two days ahead of the Nonfarm payroll report, came at 10K vs. -60K expected. But traditionally the ADP report doesn’t correlate very well with the non-farm payroll report, so any inference of a better reading on the latter should be contained.  
Commodity stocks had a nice rebound following recent weakness. Transportations, technologies and financials were among the noticeable losers. Treasuries reversed early losses and closed higher. Apparently some investors were not convinced that the Fed had finished its rate-cut campaign, which added pressure to the US dollar. But the latest Fed statement did take out “downside risks to growth remain”, indicating the Fed is ready to keep rates steady for a while. So today’s sell-off in the US dollar may just be profit taking. One of the biggest gainers of the day came from Brazil following Standard&Poor’s granting the country debt investment grade for the first time. The yield on the 10 year Brazil Global Bond dropped 18 bps while the country’s stock market gained more than 6%, reaching a new historical high. Indeed, if one simply invested in the Brazil stock market during the past five years, the total gain (currency gain + capital gain) would come at 1000% compared to roughly 40% in the US. That is probably why investors are so attracted by the emerging markets these days.

The market continued to behave in a rather lacklustre mood ahead of tomorrow’s closely watched GDP report and Fed’s interest rate decision. Similar to yesterday, all three major indices spent most time hovering around the unchanged level and closed within 0.4% from the previous session. The Dow Transportation Average continued to be a star performer and closed at a new high for this year. Year to date, that index is up an impressive 14% compared to a 5% drop in the broad S&P500 index. The news on the economic front didn’t provide much relief to investors. The Consumer Confidence index fell to 62.3, the lowest in five years. In a separated report, the S&P/Case-Shiller Home Price Index posted a record 12.7% y-o-y decline in the 20-city composite. And it is very likely we are going to see even worse readings in the months ahead given the relatively high inventory to sales level. On the positive side, most earnings news of the day continued to beat market consensus, easing concerns of a sharp slowdown in corporate profits. 
Transportations and technologies were among the noticeable winners for the day. Commodities, on the other hand, pulled back rather significantly. Apparently more rotation is ongoing as money moved out of the previously hot commodity sectors and piled into some tech momentum names, including the “Big Four” --- Google, Apple, Bidu and Rimm. The CRB commodity index suffered a big loss for the day and was down almost 2% in face of continuing strength in the US dollar. The US dollar moved higher against most major currencies. Treasuries rallied slightly following the weak economic news. One encouraging sign in the credit market is the rally in the high-yield bonds, which has brought the yields down by around 200 bps since Mar 17th. Of course, the market can easily change course following tomorrow’s Fed decision. Tomorrow also marks the last day of April, which is on track to be the first month that the market registers a gain since last October, so some window-dressing activities should be expected.

The market started the new week in a rather muted fashion. All three major indices spent most time of the day hovering around the unchanged level and closed within 0.2% from the previous session. The Dow Transportation Average continued to be a star performer and closed at a new high for this year. There is little economic news but we have some sizeable M&A deals including one involving Mars, Wrigley and Berkshire Hathaway with a price tag of $23 billion. Earnings continued to be the major driving force behind market activities. With more than half of the S&P 500 companies having reported their earnings, the results are actually not as bad as some had feared before the earnings season kicked off: Excluding financials, companies delivered an impressive earnings growth of more than 10% for the latest quarter. 
Consumer Cyclicals and Transportations were among the winners for the day. Commodities pulled back a little bit despite a positive movement in the CRB commodity index. The US dollar ended lower against most major currencies although it managed to retain most of the gain from the previous week. Treasuries rallied a little following the sharp sell off last week. With the Fed starting its 2-day meeting tomorrow, the market will wait patiently for the decision, which is scheduled to be released at 2:15 pm on Wednesday afternoon. Interestingly, we are also going to get some important economic data including Q1 GDP and ADP report on the same day. So enjoy the quiet time as long as you can.