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It’s spring in the northern half of the world and the early crocus and daffodils are either up or starting to shoot upward. And many market analysts see early green sprouts in the economic news, providing lift to equities. Any negative news was seen as largely in the rear view mirror—behind where the economy is.
 Equities ended this past week up for the fourth consecutive week. Stocks were up smartly, focusing on positive news as being based on leading types of indicators. Bad news was claimed to be outdated. However, there probably was a greater variety of factors than usual behind stock movements.
The biggest mover of the week actually came from accountants and not Administration or Fed officials. The Financial Accounting Standards Board (FASB) on Thursday voted to change the "mark-to-market" accounting rule to one where banks can value bad debt using judgment in part and on modeling. Financial companies are expected to reduce their earlier write downs on certain investments, including mortgage-backed securities. The new rule can be applied to first-quarter results and should boost banks’ net income significantly.
Treasury Secretary Geithner both threw water on equities and added lift—on different days, of course. On Sunday, he stated in a TV interview that some banks will need “large amounts” of assistance from the government—which weighed on stocks at open of the week. Financials were hard hit. But on Wednesday, the Treasury Secretary stated in another TV interview that there are signs that financial markets are recovering, boosting stocks, notably financials.
Comments by President Obama also impacted equities on Monday as he stated that bankruptcy might be the best option for GM and Chrysler after his auto team found their restructuring plans inadequate. However, Obama gave both more time to improve their restructuring plans.
Economic news did play a role in boosting equities. News that stood out in the U.S were motor vehicles, ISM manufacturing, and pending home sales. All three were quite weak but had turned up from the prior month, topping expectations. Many analysts jumped on these numbers as indicating that the recession is softening—that is, the rate of decline is slowing. These indicators were seen as the green sprouts of early spring—or pending recovery. Added to the list from overseas was a gain in the China PMI—which rose back to positive territory for the first time since September of last year.
 Indeed, equities picked and chose which indicators counted last week. Payroll employment was abysmal for March but many called it a lagging indicator (although technically it is a coincident indicator). And consumer confidence remained near its historic low. Finally, the markets ignored news from the international scene, sixth straight negative quarters for Japan's Tankan survey.
Rightly or wrongly, equities traders believe that the economy is close to a turning point, providing much of the optimism that boosted markets the latest week and entire month of March.
Equities were up this past week. The Dow was up 3.1 percent; the S&P 500, up 3.3 percent; the Nasdaq, up 5.0 percent; and the Russell 2000, up 6.3 percent.
Equities were up sharply for the month of March. The Dow was up 7.7 percent; the S&P 500, up 8.5 percent; the Nasdaq, up 10.9 percent; and the Russell 2000, up 8.7 percent.
 However, stocks were down notably for the quarter despite the March surge. The Dow was down 13.3 percent; the S&P 500, down 11.7 percent; the Nasdaq, down 3.1 percent; and the Russell 2000, down 15.4 percent.
For the year-to-date, major indexes are mostly down as follows: the Dow, down 8.6 percent; the S&P 500, down 6.7 percent; and the Russell 2000, down 8.7 percent. The Nasdaq, is now up 2.8 percent year-to-date.
Weekly percent change column reflects percent changes for all components except interest rates. Interest rate changes are reflected in simple differences.
 Treasury yields were soft early in the week as markets focused on the impact on the economy of increasingly likely bankruptcies for GM and Chrysler. A very negative Chicago PMI report and record year-ago decline in the Case-Shiller home price index weighed on yields Tuesday. Lower home prices mean more foreclosures as distressed homeowners walk away. The Fed’s purchases of Treasuries early in the week also helped ease rates.
But three factors pushed rates back up late in the week. The Thursday surge in equities led to reversal of flight to quality. On Friday, the jobs report was bad but not as much as feared after a very negative ADP report on Wednesday and rates rose on the news Friday morning. By late in the day, bond trader sentiment focused on heavy supply coming the next week and also boosted yields. Net, rates were pushed up by flow of funds into stocks and over supply worries.
 For this past week Treasury rates were up as follows: 3-month T-bill, up 8 basis points, the 2-year note, up 4 basis points; the 5-year note, up 8 basis points; the 10-year bond, up 13 basis points; and the 30-year bond, up 8 basis points.
 Despite sharp swings during this past week, crude oil prices essentially were unchanged net. Prices for West Texas Intermediate dropped sharply on Monday on worries about GM and Chrysler bankruptcies weighing on economic growth. Prices surged on Thursday as optimism from equities carried over to the oil pits. Also supporting oil prices was an agreement by G-20 participants to increase funds to the International Monetary Fund and to the World Bank to assist developing countries during the recession and by a drop in the dollar.
Net for the week, spot prices for West Texas Intermediate edged up 13 cents per barrel to settle at $52.51.
The economy was mixed this past week with the employment report for March decidedly negative. Motor vehicle sales, pending home sales, and ISM manufacturing turned up slightly. While markets focused on marginal improvement for this last set of indicators, all remained severely depressed.
 Payroll losses have plodded and plunged downward now for 15 consecutive months. Nonfarm payroll employment in March dropped 663,000, following a plunge of 651,000 in February and a decline of 741,000 in January. While the March decline essentially matched expectations, the one facet of the report that markets did not expect was a sharp downward revision to January. February was unrevised while January was bumped down by 86,000. More than 5 million jobs have been lost since the recession began in January 2008.
Consumers have a lot to be nervous about on the job front. The civilian unemployment rate jumped to 8.5 percent from 8.1 percent in February. The unemployment rate was the highest since the same rate in November 1983.
Not surprisingly, the downtrend in employment finally has softened up wage inflation. Average hourly earnings came in at a monthly 0.2 percent in March, matching gains seen the prior two months. The year-ago wage increase eased to 3.4 percent from 3.6 percent. This will help calm any remaining fears at the Fed about wage pressures on the economy.
 Turning back to the payroll survey, job losses in March were widespread. The service-providing sector cut 375,000 jobs. In this sector, the largest job losses seen in professional & business services, down 133,000, and in trade & transportation, down 112,000. The goods-producing sector gave pink slips to 305,000—worse than February’s losses of 285,000. In the latest month, manufacturing and construction fell by 161,000 and 126,000, respectively. Natural resources & mining dropped 18,000.
The latest employment report shows the consumer sector still downtrodden. Job losses remain steep and aggregate earnings are declining. This is not good news for retailers and it certainly is too soon to count on the consumer to boost the economy.
 Unit new motor vehicle sales made a modest comeback in March, rising to an annualized 9.9 million unit pace from 9.1 million the month before. The bigger surprise was that March was led by sales of domestics which rose to 6.9 million units from 6.3 million the month before.
Year-on-year, sales are still depressed. At GM, sales declines were less severe but still showed a 44.7 percent year-on-year drop. Ford and Chrysler were down 40.8 percent and 39.3 percent, respectively. Nonetheless, the movement on the margin is in the right direction. Apparently, various payment guarantee programs (if the buyer loses his or her job) and low prices are bringing some new buyers into showrooms. The bad news is that there is not much upside potential given the worsening job market.
 Based on the latest consumer confidence report, consumers are in no mood to go out and spend the economy into recovery. Consumer confidence in March was little changed just above rock bottom, edging slightly higher to 26.0 from 25.3 in February. Buying plans continued to deteriorate for cars, major appliances, and even homes.
Turning to the major components of the overall index, weakness was led by a decline in the Present Situation Index which dropped to 21.5 from 22.3 the month before. The Expectations Index was a little less negative, increasing to 28.9 from 27.3 in January. But consumers may be saying expectations are better only because the situation right now is so bad. The mood is particularly glum on labor markets with only 4.6 percent saying jobs are plentiful against 48.7 percent who say they are hard to get. No matter how you slice the numbers, consumers are in hunker-down mode and likely will be holding on tight to their wallets in coming months.
The ISM manufacturing index rose slightly in March while the non-manufacturing composite fell back. But both remain deep in negative territory, indicating further declines in activity.  The ISM's manufacturing index edged 5 tenths higher to 36.3 in March, suggesting that manufacturing is declining less rapidly. The best news in the report was an 8 point jump in the new orders index to 41.2—still a negative number. But supplier deliveries—an indicator of tightness in the supply chain—fell in the latest month, indicating slack conditions.
The ISM non-manufacturing report showed a reversal, falling back to 40.8 from 41.6 the month before. New orders also headed in the wrong direction with a nearly 2 point loss to a 38.8 reading.
Prices paid were mixed. For manufacturing, the prices paid index was little changed at 31.0 while for non-manufacturing made a 9 point drop to 39.1 for a 9 point swing downward.
Overall, manufacturing and non-manufacturing activity continues to decline. While markets focused on the manufacturing index’s small rise as a sign that contraction is lessening, the March employment situation report suggests otherwise. Manufacturing job losses were essentially as severe as February and aggregate production hours were essentially as negative in the latest month. It is too early to declare a contraction in the contraction in manufacturing.
 We got a little good news this past week from the housing sector as pending home sales (for existing homes) rose 2.1 percent in February, after falling 7.7 percent in January. Apparently, some first-time buyers are starting to take advantage of lower mortgage rates and depressed home prices. The news points to likely improvement in existing home sales for March and April. Levels for pending sales are still weak, down 5.3 percent on a year-ago basis. Nonetheless, the latest numbers offer a glimmer of hope that the decline in sales has bottomed.
 Part of the reason pending home sales rose is likely lower home prices. Home prices have not yet hit bottom, according to the latest Case-Shiller report. The 10-city composite home price index fell 2.5 percent in January while the 20-city composite dropped 2.8 percent. Year-on-year rates of decline also worsened, coming in at minus 19.4 percent for the 10 index and minus 19.0 percent for the 20 index. The Case-Shiller indexes have been showing greater price weakness that other measures such as from new or existing home sales reports. The Case-Shiller index is a repeat sales comparison (matching price changes for the same house) while new and existing home sale measures are not. Industry analysts believe the recent worsening in home prices reflects increased sales of foreclosed homes.
Some market analysts and economists are claiming that we are now at an inflection point in the economy—the decline continues but at a slower rate. The jury is still out on that. While the unemployment rate is a lagging indicator, payment employment is a coincident indicator and jobs declines are not yet improving. The consumer sector may be worsening even as housing could be leveling. Overall, a return to positive overall growth is still months away.
It’s a holiday shortened trading week with U.S. markets closed on Friday for Good Friday observance. The only market moving indicator is international trade on Thursday. However, Wednesday’s release of the latest FOMC minutes should provide good reading for traders trying to glean more information on the Fed’s quantitative easing.
Consumer credit unexpectedly rose in January, gaining $1.8 billion and ending an unmatched string of three declines including December's $7.5 billion drop. Both revolving credit and non-revolving credit showed improvement in gains suggesting that government efforts to stimulate consumer lending may be taking hold, despite rising unemployment. Retail sales firmed in January and consumers apparently took out credit cards to take advantage of discounting by retailers.
Consumer credit Consensus Forecast for February 09: -$3.0 billion
Range: -$5.0 billion to +$3.5 billion
The Minutes of the March 17-18 FOMC meeting are scheduled for release at 2:00 p.m. ET. While the no change outcome for the fed funds target was entirely expected, the Fed’s plans to purchase up to $300 billion of long-term Treasuries over the next six months, double its agency debt purchases to $200 billion, and increase purchases of agency mortgage backed securities by $750 billion to $1.25 trillion were more than expected for further quantitative easing. Markets will be picking apart the minutes for any signs for when the Fed might start reversing the quantitative easing.
The U.S. international trade gap in January shrank again as exports and imports competed to see which could fall the fastest. The overall U.S. trade deficit narrowed to $36.0 billion from $39.9 billion shortfall the month before. In January, exports fell 5.7 percent while imports dropped 6.7 percent. For February, rising oil prices are likely to boost imports while weak demand abroad will keep exports down. Look for some reversal in the February trade gap.
International trade balance Consensus Forecast for February 09: -$36.5 billion
Range: -$38.5 billion to -$33.1 billion
Initial jobless claims for the week ending March 28 jumped 12,000 to 669,000, showing further weakening in the labor market. But continuing claims were even more disconcerting, spiking a very sharp 161,000 to yet another record—5.728 million for the March 21 week.
Jobless Claims Consensus Forecast for 4/4/09: 664,000
Range: 650,000 to 675,000
U.S. Holiday: Good Friday
All Markets Closed, Banks Open
The U.S. Treasury monthly budget report for February showed a further bulging of the deficit. Five months into the government's fiscal year, the deficit has already swollen to $764.5 billion, about three times higher than February 2008. The recession has pushed year-to-date receipts down 17 percent, reflecting low tax payments. Over the same period, outlays were up 32 percent, reflecting bailout and stimulus spending. The February deficit stood at $192.8 billion and we are likely to see another ugly number for March. For historical perspective, the month of March typically shows a notable deficit for the month. Over the past 10 years, the average deficit for the month of March has been $57.1 billion and $76.9 billion over the past 5 years.
Treasury Statement Consensus Forecast for March 09: -$150.0 billion
Range: -$205.0 billion to -$140.0 billion.
Econoday Senior Writer Mark Pender contributed to this article.
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