thependulumswings

Friends

At first blush, our first look at 1^st quarter GDP
was a bit of an eye opener. The economy grew at 3.2% in the 1^st
quarter which was quite a bit better than the 2.5% that analysts were expecting.
But, after further analysis the bears among us noticed that a good portion of
the growth was due to inventory build and that underlying demand had weakened.
Remember the days when a good number was just, well, a good number? Bond market
participants immediately went with the more cynical view as bond prices rose,
while yields fell. But, stocks had a relatively good day. Moderate growth with
low interest rates and no inflation has been just fine for stock investors for
quite some time.

Anyway, by the close, the Dow Jones Industrial Average was
up 81 points to finish the day at 26,543. The S&P 500 was up 13 points to
close at 2,939. Gold was up $8 to trade at $1,288 per ounce, while oil was down
$2.32 to trade at $62.89 per barrel WTI.

On the earnings front, Intel, Chevron and Exxon Mobil
disappointed, while Amazon did its thing and delivered solid results. As busy
as this week was, next week is the busiest week on the earnings calendar. We’ll
see reports from Alphabet (Google), Apple, GM, McDonalds, Conoco Phillips,
Merck, Pfizer, Kellogg, DowDupont and hundreds more. As we have seen the
earnings reports and the subsequent share price reactions have been very mixed.
My overall impression so far is that earnings are probably a little better than
we expected, but share prices were already reflecting that, with the advance we
have seen since the beginning of the year. Also noteworthy is that companies
are still providing very cautious guidance going forward, and that too has been
a bit of a headwind for stocks over that past couple of weeks. All in all,
though, here we are at all-time highs. As I said, stocks don’t mind a slow
growth, low inflation, and low interest rate environment. We’ll let you know
how next week’s busy earnings schedule plays out.

Have a great weekend everyone.

Jim