Market Overview

Toppy Tuesday – Pricing to Perfection



SPY 5 MINUTEHave we gone too far, too fast?

The spread between analyst forecasts and stock prices is less than half what it was when the S&P last peaked in Oct, 2007. Average estimates for individual equities implied gains of 12 % at the time, data compiled by Bloomberg show.  The Dow exceeded its record on March 5th, erasing losses from the financial crisis, and has advanced 2.3% since then on signs the U.S. housing and job markets are recovering. Home prices increased the most since June 2006 in January, a report last month showed. First-time jobless claims unexpectedly fell the week ended March 9.

The move we've had so far does not mean it cannot continue,” said Warren Koontz, head of U.S. large-cap value stocks at Loomis Sayles. “When we see this dislocation between a near-term analyst opinion and what we believe is longer-term and better potential that's already being reflected in the price, we look at that as an opportunity.”

Meanwhile, as Dave Fry notes, the ISM Mfg Index fell sharply (51.3 vs 54 exp. & prior 54.3), signaling slower growth, which may also indicate that there may be disappointing first quarter earnings reports ahead, which begins in earnest next week.  We discussed China's PMI and Japan's Tankan Index in yesterday's post – also items that make us wonder what everyone is so excited about in the markets.

XLI WEEKLYThe Fed dumped $3.1Bn in POMO money on the markets yesterday on top of the $4.7Bn no one used on Thursday so it would be pathetic if we can't get a move up today, even though "only" another $1.5Bn is scheduled for today.  Tomorrow is another $3.5Bn but then Thursday and Monday are weak ($1.5Bn) with no Monday so, if we're going to get a dip, look for it at the end of the week and into the next.  Front-loading the month can be dangerous but next week the Fed gives us $3Bn on Thursday and a whopping $5Bn on tax day (15th) but then earnings come out and they mostly fizzle in the 2nd half. 










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