(MoneyWatch) Let's get this straight: The; the economy is in a slow-growth mode; consumers aren't feeling too good (consumer sentiment dropped to its lowest level since July 2012) and accordingly, they are not spending robustly (retail sales dropped by 0.4 percent in March)...AND stocks keep grinding higher. What is going on here?
Ladies and gentlemen, welcome to the 2013 version of a classic stock market melt-up. A melt-up is of course the opposite of a meltdown, though it usually occurs more slowly, torturing the pessimists along the way. Every time it looks like the bears will step in and take control, the bulls claw their way back up. Right now, every downbeat economic or earnings report is interpreted to mean that global central bankers will keep loose monetary policy in place from now until infinity. In an easy money world, investors are left with the nagging feeling that stocks may be the best alternative to every other asset class out there.
Some are warning that the run up will have to take a breather, but it's not clear what would cause a correction at this point. In fact, until more of the nervous investor class throws in the towel and capitulates, the rally likely has room to run even higher.
This week, the bulls are hopeful that reports from the housing market will show that the spring selling season will boost the moribund economy and propel the stock market even higher. The construction sector actually did pretty well in the last jobs report, adding new positions faster than the overall economy. It was also noteworthy that among the few category winners in the retail sales report were furniture stores and building materials. Those results underscore the healing of the beaten down housing market. Residential investment (includes investment in new single-family structures, multifamily structures, home improvement and commissions on existing home sales housing) is expected to make a positive contribution to GDP this year, according to Bill McBride at Calculated Risk.
Markets: If you haven't been following the gold market, you are missing all the fun. Gold has been sinking like a stone (maybe investors prefer BitCoin?) and closed at a 21 month low of $1,501.40 an ounce. The so-called safe heaven is down 20.5 percent from its August 2011 high, which qualifies as the first bear market for gold in its 12-year march higher.
-- DJIA: 14,865 up 2 percent on week, up 13.4 percent on year
-- S&P 500: 1,588, up 2.3 percent on week, up 11.4 percent on year
-- NASDAQ: 3,295, up 2.8 percent on week, up 9 percent on year
-- May Crude Oil: $91.29, down 1.5 percent on week
-- June Gold: $1,501.40, down 4.7 percent on week
-- AAA nat'l average price for gallon of regular gas: $3.54
Road Warrior Alert: The U.S. Energy Information Administration expects that regular gasoline prices, will average $3.63 per gallon during the current summer (April through September) driving season, down from $3.69 last summer.
THE WEEK AHEAD:
8:30 Empire State Manufacturing Survey
10:00 Housing Market Index
Coca-Cola, Goldman Sachs, Johnson & Johnson, Intel, Yahoo
8:30 Consumer Price Index
8:30 Housing Starts
9:15 Industrial Production
Abbott Labs, Bank of America, Bank of NY Mellon, American Express, Ebay
2:00 Fed Beige Book
Morgan Stanley, PepsiCo, Philip Morris, United Health, Verizon, Nokia, Google, IBM, Microsoft, Capital One, E-Trade Financial
G20 finance ministers' meeting
8:30 Weekly Claims
10:00 Philadelphia Fed Survey
10:00 Leading Indicators
GE, McDonald's, Schlumberger, Honeywell