U.S. markets rose on Friday on
better-than-expected earnings from Amazon. The S&P 500 rose 3.38
points or 2.24% to 1,403.36. The Dow gained 23.69 points or 0.18% to
13,228.31. For the week, the S&P 500 gained 1.8% for its best
week in a month, as strong corporate earnings overshadowed concerns
about the euro zone. The S&P 500 also closed above the
psychologically-important 1,400 level.
U.S. First Quarter Growth
Disappoints
On Friday, the U.S. Commerce Department
announced that first quarter GDP growth was 2.2%, which was lower
than the 2.5% the market expected. However, it was higher than the
1.5% that economists expected at the beginning of the year, which
prevented the market from falling on the news. On Thursday, U.S.
initial jobless claims also disappointed the market, when it fell by
only 1,000, to 388,000.
Spain Downgraded by S&P
On Friday, S&P announced that it is
downgrading Spain's rating by two notches, from A to BBB+. S&P
has also placed Spain's rating on negative watch, and stated that
Spain's banking system was too reliant on government funding.
Meanwhile, Italy's bond auctions disappointed investors, with the
yield on its 10-year debt at 5.84%, which was 60 basis points above
last month's auction.
Federal
Reserve Reiterates Stance
On Wednesday,
after the Fed's much-anticipated meeting, it announced it is
continuing its stance of keeping interest rates at the current level
until the end of 2014. However, it did not mention QE3.
UK Slips Into
Double-Dip Recession
Also on
Wednesday, the UK announced that first quarter GDP shrank by 0.2%,
which was weaker than the 0.1% growth the market expected. With the
negative 0.3% growth in the fourth quarter, the UK is now officially
in a double-dip recession.
Apple Boosts
Markets
On Wednesday,
U.S. markets received a boost from Apple's earnings. The company's
profits rose 94% from last year to $11.6 billion. EPS was $12.30,
higher than the $9.94 the market expected.
Markets Tumble
on Netherlands and France
On Monday,
markets tumbled when the Prime Minister of the Netherlands resigned
due to a disagreement in parliament over austerity measures. In
addition, with the second round of federal elections in France about
to get underway, investors faced a large degree of uncertainty. As a
result, the yield on Spain's 10-year government bonds rose above 6%,
and stock indices in Europe fell more than 1%.
Looking Ahead
to Next Week
Investors will be
paying close attention to the U.S. March jobs report on Friday. On
Wednesday, the ADP jobs report will be announced. In addition,
investors will continue to pay attention to corporate earnings. So
far, 57% of S&P 500 companies have posted earnings. Next week,
companies including Visa, Kraft and Prudential will be reporting
results.
With the
situation in Spain showing no signs of improvement, it will take
stronger-than-expected earnings just to keep the market from falling.
If the yield on Spanish debt rises, then the market will likely fall
regardless of earnings results. With the UK now in a double-dip
recession, it will likely conduct quantitative easing, which should
boost the prices of gold and silver.
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