Weekly Comment

Nothing succeeds like success.  Now that the U.S. stock market up 17% this year and hitting new all-time highs, there are signs that investor interest in equities is growing.  A report by U.K.-based asset manager Schroeders said that 81 percent of global investors plan to invest the same amount or more over the next 12 months...with 68 percent targeting equities.  Last week, the Dow Jones Industrial Average was up 235.91 points (1.56 percent), the S&P 500 Index rose 33.77 points (2.07 percent), and the Nasdaq Composite advanced 62.38 points (1.82 percent).  Interestingly, it was an unexceptional weak for economic data with consumer prices falling for the second straight month and the weekly jobless claims figure posting its biggest increase since November.  In the meantime, the euro zone reported that economic activity contracted for the sixth consecutive quarter.  While poor economic trends are old news for countries like Italy (seven consecutive quarters of decline), it should be noted that there is a new member of the recession club...France's economy shrank for the second consecutive quarter.  Concerns (hopes?) that the Federal Reserve may begin to ease up on its asset-purchase program earlier than previously expected strengthened the dollar, weakened gold (down $71.90 or 5.00 percent for the week), and sent the yield on the 10-year Treasury up to 1.95 percent (as recently as May 2 it was 1.63 percent).   A trio of investment strategists/managers quoted in this week's Barron's had one-year targets for the 10-year Treasury yield of between 2.50 percent and 3.75 percent.   One item that may have been missed as the market drove to new highs was the Congressional Budget Office's reduced forecast for the current fiscal year's budget deficit.  The new estimate of $642 billion is down $203 billion from its last forecast as year-to-date tax revenues surged 16 percent for the comparable period last year.

A thin but upbeat list of economic reports are expected this week; the home sales figures should show modest improvement while the volatile durable goods orders report is expected to flip back to the positive side. Retailers will continue to dominate the earnings report calendar.  On Wednesday, the Federal reserve will release the minutes of its meeting on monetary policy and Fed Chairman Bernanke will testify in Congress....however, Fed watchers will have the ability to here from Fed governors giving speeches all week long (two on Monday, one on Tuesday, and one on Wednesday).  An added note of drama comes on Tuesday when JPMorgan Chase (JPM) shareholders will take a non-binding vote on whether to split the roles of Chairman and CEO, currently both held by Jaime Dimon.  The Treasury auctions this week are only on Monday: $30 billion three-month bills and $25 billion six-month bills.