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It is getting to be a recurring theme. Company earnings on average are doing better than the economy overall. While first quarter GDP growth disappointed, there are signs of more recent improvement in the economy. Nonetheless, the Fed is keeping monetary policy extremely loose though the debate continues on whether QE3 is likely.
 Equities posted solid gains for the week but started off in the other direction. Stocks declined Monday as U.S. markets joined the global selloff as political uncertainty in France (Sarkozy behind in the polls in the presidential election) and the Netherlands (resignation of the prime minister after a breakdown in budget talks, leading to new elections) and intensified concern about Europe’s sovereign debt crisis. Other news from overseas weighed on stocks as Eurozone flash PMI indices for services and manufacturing declined more than estimated, German manufacturing PMI slid and data indicated China’s production contracted for a sixth month. Wal-Mart weighed on the Dow after a report of bribery allegations at its Mexican unit.
But the rest of the week was positive for equities. Stocks rebounded Tuesday as sales of new homes fell to a pace that topped expectations—largely due to upward revisions to prior months. Also, earnings from 3M and AT&T beat estimates. After close, Apple posted blow out earnings.
At mid-week, equities gained sharply, led by momentum from Apple with techs showing the greatest strength. Boeing gained after the aerospace giant reported first quarter earnings and revenue that beat estimates. Adding to upward momentum was an upgrade in the Fed’s forecast for economic growth for 2012. Earnings and the Fed outweighed a disappointing report on durables orders. Also, official statistics from the United Kingdom indicate that country may have entered a shallow recession but many analysts are skeptical of the numbers, believing that growth is somewhat healthier than official numbers.
Equities continued upward Thursday despite a disappointing number for initial claims. More than offsetting was March pending home sales which increased to their highest level in nearly two years. Homebuilder shares posted strong gains for the day. Also, many traders continued to soak in news from the Fed’s latest policy meeting, believing that additional easing may happen. After market close, Starbucks reported better-than-expected quarterly earnings and raised its outlook for the full year. Also after close, Amazon was down for the year-ago numbers but beat expectations. Expedia, on-line travel bookings site, also topped analysts’ estimates after close.
Equities gained Friday as traders focused more on positive earnings reports than on a generally disappointing GDP report for the first quarter. However, analysts found some comfort in the relatively strong PCEs component.
Equities were up this past week. The Dow was up 1.5 percent; the S&P 500, up 1.8 percent; the Nasdaq, up 2.3 percent; the Russell 2000, up 2.7 percent; and the Wilshire 5000, up 1.8 percent.
For the year-to-date, major indexes are up as follows: the Dow, up 8.3 percent; the S&P 500, up 11.6 percent; the Nasdaq, up 17.8 percent; the Russell 2000, up 11.4 percent; and the Wilshire 5000, up 11.9 percent.
Weekly percent change column reflects percent changes for all components except interest rates. Interest rate changes are reflected in simple differences.
Treasury yields ended the week slightly down for the most part. Rates dipped at the start of the week on flight to safety over European concerns, including uncertainty over the French presidential election, Dutch elections, and sovereign debt concerns in general.
Rates firmed Tuesday on better-than-expected new home sales and concern that the Fed may be ending loose monetary policy sooner than indicated by current guidance by the Fed. At mid-week, yields edged up on news of the Fed boosting its forecast for GDP growth in 2012, more than offsetting a disappointing durables report.
 Treasury yields eased Thursday despite a strong report on pending home sales. Traders continued to focus on the belief that the Fed might engage in another round of quantitative easing, though the meeting statement and Bernanke’s press conference gave no positive indication that such is likely. Rates were flat to down marginally on Friday after a disappointing GDP report for the first quarter. Consumer sentiment beat expectations and was partially offsetting.
For the four latter days of trading, mostly positive earnings reports kept some upward pressure on rates as there was a tendency to move into equities.
For this past week Treasury rates were down as follows: the 2-year note, down 1 basis point; the 5-year note, down 2 basis points; the 7-year note, down 2 basis points; the 10-year note, down 3 basis points; and the 30-year bond, down 1 basis point. The 3-month T-bill firmed 2 basis points.
 There were no big daily moves but for the week the spot price of crude drifted upward. After a flat Monday, spot WTI nudged up on better-than-expected new home sales and improvement in home prices. Prices continued upward Wednesday on the Fed’s upward revision to its GDP forecast for 2012. On Thursday, pending home sales bumped oil up the largest daily move of the week—a modest 60 cents per barrel. At week’s close, traders focused on the rise in PCEs within the GDP report, bumping up crude slightly.
Net for the week, the spot price for West Texas Intermediate rose $1.88 per barrel to settle at $104.93.
The first quarter turned out to be disappointing. But more recent numbers point to modest improvement in housing, mixed momentum in manufacturing, and a slightly more optimistic consumer.
 GDP growth slowed in the first quarter with a drop in government spending being the big negative. The positive was a moderate acceleration in consumer spending. GDP growth eased to 2.2 percent from 3.0 percent in the fourth quarter. The advance estimate came in lower than market expectations for a 2.5 percent gain.
However, the component mix showed modest improvement in demand. Final sales of domestic product increased an annualized 1.6 percent in the first quarter after a 1.1 percent rise in the fourth. Final sales to domestic purchasers (excludes net exports) advanced 1.6 percent, following a 1.3 percent gain in the fourth quarter.
Strength in the first quarter as mentioned above was largely in PCEs which rose 2.9 percent, following a 2.1 percent rise in the prior quarter. Inventory investment added to growth as did residential investment. Business investment in equipment was positive but less so than in the fourth quarter. Net exports were marginally positive but essentially neutral.
On the downside, government purchases fell an annualized 3.0 percent, following a 4.2 percent decline in the fourth quarter. Business investment in structures was notably negative.
On a year-ago basis, GDP was up 2.1 percent, compared to 1.6 percent in the fourth quarter.
Economy-wide inflation according to the GDP price index picked up to 1.5 percent annualized from 0.9 percent in the fourth quarter.
But the market focus GDP price index is influenced by technical interaction of net exports with other components. Inflation for domestic consumers is higher as indicated by the Commerce Department’s headline inflation number. The price index for gross domestic purchases, which measures prices paid by U.S. residents, increased 2.4 percent in the first quarter, compared with an increase of 1.1 percent in the fourth. Excluding food and energy prices, the price index for gross domestic purchases increased 2.2 percent in the first quarter, compared with an increase of 1.2 percent in the fourth.
The biggest good news is that the GDP numbers are somewhat dated as consumer spending has recently been mostly positive and there are positive signs in housing. The economy appears to be improving but from a slower pace than earlier believed.
 The Fed kept policy rates unchanged and near zero with the funds target rate remaining at a range of zero to 0.25 percent. The key wording on policy guidance also is unchanged with the Fed continuing to state that economic conditions are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.
Regarding the economy, the Fed has retained essentially the same characterization as in March though one might see very marginal positive comments about labor market improvement. Overall, the Fed sees the economy as “expanding moderately.” But the labor market comments are cautionary.
 The meeting statement is rather general in its commentary about the economic outlook. However, the Fed forecasts for the economy show stronger growth for 2012 and an easing in inflation.
“The Committee expects economic growth to remain moderate over coming quarters and then to pick up gradually. Consequently, the Committee anticipates that the unemployment rate will decline gradually toward levels that it judges to be consistent with its dual mandate. Strains in global financial markets continue to pose significant downside risks to the economic outlook. The increase in oil and gasoline prices earlier this year is expected to affect inflation only temporarily, and the Committee anticipates that subsequently inflation will run at or below the rate that it judges most consistent with its dual mandate.”
On other policy issues, Operation Twist continues—the Fed continues to keep downward pressure on longer-term interest rates. The balance sheet is being maintained at high levels with reinvestment of principal paid on agency debt and mortgage-backed securities and rollover of Treasuries. There is no mention of QE3 but options remain open.
Again, there was one dissenting vote.
“Voting against the action was Jeffrey M. Lacker, who does not anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate through late 2014.”
While Lacker was the sole dissenter, the forecasts for the timing for the next increase in the fed funds rate suggests that other FOMC participants have become a little more hawkish. The shift toward earlier timing for higher rates indicates that there is less satisfaction with the 2014 guidance than explicitly stated in the statement.
Overall, despite some mixed signals from recent economic indicators, the Fed appears to be on hold. It is hard to see any differences between the latest statement versus that in March. But the forecasts indicate less inclination for further easing.
 New home sales came in at a 328,000 unit annual rate in March, slightly more than expected—largely due to upward revisions to prior months: February was revised 40,000 higher to 353,000 and January was revised up 11,000 to 329,000.
It has taken a while but supply is finally looking in line. Supply of new homes on the market is manageable, at 5.3 months from February's 5.0. Price data are mixed and hard to read with the median down on the month but the average up sharply.
 A 4.1 percent jump in March pending home sales convincingly extends the strong upward trend for the pending home sales index. The number of contract signings for purchases of existing homes has been moving higher since September, as have the closings of these purchases. Pending sales are up in five of the last six months.
But the gain in closings, at only five percent during this period, is badly lagging the 17 percent gain for signings. Still, the gain for March is unusually strong and even given the usual stumbling blocks to closings—appraisal problems, credit problems—the March report provides some moderate optimism for the spring housing market.
 Home prices showed mild improvement in February as the seasonally adjusted Case-Shiller composite 20 city index rose a monthly 0.2 percent, following a 0.1 percent dip the prior month. The year-on-year rate (unadjusted) improved to minus 3.5 from a revised minus 3.9 in February.
As usual, the numbers vary sharply by city. On the plus side, Phoenix continued a string of pluses, rising 2.1 percent in the latest month. Miami and Minneapolis also are having a nice run upward. On the downside, Atlanta continued its slide, dipping 2.0 percent in February. Also with negative consecutive strings are Chicago, New York, and Cleveland.
 Another measure of home prices is corroborating the likelihood of home prices stabilizing. According to the FHFA, house prices in February rose 0.3 percent, following a 0.4 percent decline in January.
On a year-on-year basis, the FHFA HPI is up 0.4 percent versus down 1.2 percent in January. This is the first positive year-ago reading since 0.4 percent seen in July 2007. The Case-Shiller index covers all types of financed mortgages while the FHFA covers those bundled or financed by government agencies (conventional loans only).
Overall, the latest repeat transaction data (Case-Shiller and FHFA), indicate that home prices are stabilizing. While the housing sector is still anemic, it is starting to look like it is no longer pulling down on economic growth (though not adding much either).
 Durables orders came in unexpectedly soft in March. Transportation was expected to pull down overall orders but core orders also were negative. The positive was in shipments. Durables orders declined 4.2 percent in March after a 1.9 percent rebound the previous month.
Excluding transportation, durables posted a 1.1 percent decrease after a revised 1.9 percent increase in February.
The transportation component plunged a monthly 12.5 percent in March after rising 1.8 percent the month before. Subcomponent weakness was led by a 47.6 percent plunge in new orders for nondefense aircraft (Boeing orders). Defense aircraft increased 15.5 percent while motor vehicles edged up 0.1 percent.
Outside of transportation, declines were broad based. Decreases were seen in primary metals, fabricated metals, machinery, and computers & electronics. On the upside were electrical equipment and “other.”
Businesses are starting to think in terms of caution about future investment in equipment. But current investment is strong. New orders for nondefense capital goods excluding aircraft slipped 0.8 percent in March after a 2.8 percent boost the month before. Shipments for this series jumped 2.6 percent, following a 1.4 percent gain in February.
Forward momentum in manufacturing appears to have eased but current activity is moderately strong. Durables shipments rose 1.0 percent in March after slipping 0.3 percent the prior month.
Manufacturing appears to be in a soft patch but durables orders are notoriously volatile. This week’s earnings numbers from Boeing points to caution about interpreting the latest weakness in durables. Boeing’s earnings rose 58 percent to $923 million, or $1.22 a share. Essentially, there are conflicting signs on the health of the manufacturing sector. Divergent trends are showing up in regional surveys also.
 The latest Fed surveys on manufacturing show diverging trends for April. Richmond is positive while Kansas City indicates softening.
Manufacturing indications have been slowing but not those from the Richmond Fed whose index rose seven points in April to 14. Growth in new orders rose in the month while shipments surged.
Of notable strength were readings on employment including a rising pace of monthly growth in the sample's workforce as well as increasing gains in wages which is a welcome sign for the consumer sector. This is a healthy report that underscores areas of strength in last week's otherwise soft regional reports from the New York and Philly Feds.
 However, the manufacturing in the Kansas City Fed district is slowing. Growth in manufacturing in the Kansas City Fed District eased further in April, but activity in general remained expansionary and well above year-ago levels. The majority of producers reported some negative effects from elevated gasoline prices, and nearly half of all respondents noted difficulties finding workers.
The current composite index was 3 in April, down from 9 in March and 13 in February. Manufacturing growth eased in most durable and nondurable goods-producing plants. Other month-over-month indexes also slowed in April. The production index dropped from 13 to 0, and the shipments, new orders, and order backlog indexes also fell. In contrast, the employment index remained unchanged, and the new orders for exports index edged up slightly.
The majority of future factory indexes eased slightly, but remained close to levels in late 2011. The future composite index decreased from 18 to 12.
Overall, manufacturing appears to be mildly positive but not as strong as earlier in the recovery. Consumer confidence flat while sentiment shows modest improvement
 Depending on the survey, consumer confidence is either holding steady or improving slightly.
According to the Conference Board, consumer confidence is flat, down three tenths to a no better than soft 69.2 in April. But there is good news led by a 3.2 percentage point decline to 37.5 percent in those who say jobs are hard to get right now. More also say business conditions are currently good while inflation expectations, reflecting the easing in gas prices, are down four tenths in the month to 5.8 percent.
An offsetting factor was a 1.5 percentage point decline to 14.0 percent for those who see their income rising.
The Reuters/University of Michigan final reading for April was somewhat more positive. The Reuters/University of Michigan index rose slightly to 76.4 in April with strength, given comparison with a slightly lower mid-month reading, loaded in the last couple of weeks. The recovery peak for this index, hit early last year, is just a little higher than the current level. The index also hit a similar peak in early 2010.
Consumer expectations are improving at the same time that their assessment of current conditions is weakening, a combination that hints at underlying optimism and the hope that conditions will be getting better, not worse. Some if not much of this optimism is tied to the current moderation underway for gas prices, a moderation that helps boost confidence in future income. The effect of gas prices is indicated in this report in inflation expectations which show a huge seven tenth decline in the one-year outlook, to 3.2 percent, and a one tenth decline in the five-year outlook to 2.9 percent.
The first quarter was more sluggish than believed. However, more recent economic news suggests modest strengthening and not further slowing.
The focus is on the consumer, starting with personal income and spending on Monday. Motor vehicle sales post Tuesday. ADP gives a hint on private employment at mid-week. And the highlight is Friday’s employment situation for April. Other market movers include ISM manufacturing (Tuesday) and ISM non-manufacturing (Thursday).
Personal income in February advanced 0.2 percent after a 0.2 percent gain the month before. The important wages & salaries component was a little stronger, advancing 0.3 percent, following a 0.4 percent gain in January. Consumer spending in January accelerated to a 0.8 percent increase, compared to 0.4 percent in January (previously up 0.2 percent). Inflation was mixed. The headline PCE price index got hotter, rising to 0.3 percent from 0.2 percent in January, reflecting stronger energy costs. The core rate eased to 0.1 percent from 0.2 percent the prior month. Looking ahead, the private wages & salaries component of personal income is likely to be sluggish in March as aggregate earnings for private payrolls rose only 0.1 percent. Personal consumption is likely to be tugged down by the durables component as unit new motor vehicles sales dropped 4.8 percent in March. However, on the plus side for goods consumption, retail sales excluding autos and gasoline were up 0.7 percent for the month. PCE inflation is likely to be a little on the warm side as the headline CPI rose 0.3 percent in March while the core CPI rose 0.2 percent.
Personal income Consensus Forecast for March 12: +0.3 percent
Range: +0.1 to +0.5 percent
Personal consumption expenditures Consensus Forecast for March 12: +0.4 percent
Range: +0.2 to +0.7 percent
PCE price index Consensus Forecast for March 12: +0.2 percent
Range: +0.1 to +0.4 percent
Core PCE price index Consensus Forecast for March 12: +0.2 percent
Range: +0.1 to +0.2 percent
The Chicago PMI for March came in at 62.2 versus February's 64.0. A reading over 50 denotes monthly growth and the further over 50, the stronger the rate of growth. The new orders index slowed to a still very strong 63.3 from February's outsized pace of 69.2.
Chicago PMI Consensus Forecast for April 12: 60.8
Range: 58.0 to 62.9
The Dallas Fed general business activity index in March reflected expansion but at a slower pace as it eased to 10.8 from a reading of 17.8 in February. The company outlook index posted a sixth consecutive positive reading, but it also retreated slightly, falling to 9.5 from 15.8 last month. The production index, a key measure of state manufacturing conditions, held steady at 11.1, suggesting growth continued at about the same pace as last month. However, the new orders index fell from 5.8 in February to zero, suggesting that demand stalled.
No consensus available
Sales of total light motor vehicles in March dropped a sharp 4.8 percent, but followed a surge of 6.5 percent in February. Despite the very negative monthly change, the March level of 14.5 million units annualized was still quite healthy. Domestics in the latest month declined 4.3 percent to 10.9 million units annualized.
Motor vehicle domestic sales Consensus Forecast for April 12: 11.0 million-unit rate
Range: 10.9 to 11.3 million-unit rate
Motor vehicle total sales Consensus Forecast for April 12: 14.4 million-unit rate
Range: 14.0 to 14.8 million-unit rate
The composite index from the ISM manufacturing survey in March rose one full point to 53.4, notably above of 50 to indicate monthly growth and slightly above February to indicate an increasing rate of growth. New orders, the most important detail in the report, softened very slightly to a still respectable 54.5 which is four tenths below February.
ISM manufacturing composite index Consensus Forecast for April 12: 53.0
Range: 52.0 to 54.4
Construction spending fell 1.1 percent in February, following a 0.8 percent decrease the month before. The drop in February was led by a 1.7 percent drop in public construction with private nonresidential decreasing 1.6 percent. New one-family outlays fell 1.5 percent after a 2.2 percent rise in January. However, new multifamily construction gained 2.0 percent after a 2.6 percent boost in January.
Construction spending Consensus Forecast for March 12: +0.5 percent
Range: -0.2 to +1.0 percent
ADP private payroll employment for March posted a gain of 209,000. This compares to BLS estimates of 121,000 for private payrolls and 120,000 for total payrolls.
ADP private payrolls Consensus Forecast for April 12: 183,000
Range: 140,000 to 216,000
Factory orders rebounded 1.3 percent in February to more than reverse a 1.1 percent revised decline in January. Orders for durable goods have been the key strength of the factory sector, rising 2.4 percent in February. Orders for non-durable goods, up 0.4 percent, have also been rising but much less strongly than durable goods. More recently, durables orders declined 4.2 percent in March after a 1.9 percent rebound the previous month.
Factory orders Consensus Forecast for March 12: -1.6 percent
Range: -2.5 to +0.5 percent
Initial jobless claims in the April 21 week declined a modest 1,000 to 388,000, which includes a 3,000 upward revision to the prior week, at 389,000. The four-week average continued its upward pivot, at 381,750 for a third straight gain of 6,250. In contrast to initial claims, continuing claims have been trending lower though data for the two latest weeks do show small gains. But the four-week average, at 3.312 million, extended its long downtrend with a 10,000 decline in the latest week.
Jobless Claims Consensus Forecast for 4/28/12: 378,000
Range: 365,000 to 385,000
Nonfarm business productivity for the fourth quarter’s final estimate was bumped up slightly to an annualized 0.9 percent in the fourth quarter, compared to the initial estimate of 0.7 percent and compared to 1.8 percent in the previous quarter. Unit labor costs were revised up notably to an annualized 2.8 percent increase versus the initial figure of 1.2 percent, and following a 3.9 percent jump in the third quarter.
Nonfarm Business Productivity Consensus Forecast for initial Q1 12: -0.4 percent annual rate
Range: -1.5 to +1.1 percent annual rate
Unit Labor Costs Consensus Forecast for initial Q1 12: +2.5 percent annual rate
Range: +1.1 to +3.5 percent annual rate
The composite index from the ISM non-manufacturing survey in March fell 1.3 points to 56.0.
The composite was pulled back by slowing growth in new orders and business activity both of which however remain very healthy. The new orders index eased to 58.8 from 61.2 in February. Business activity posted at 58.9 versus 62.6 the month before.
ISM non-manufacturing composite index Consensus Forecast for April 12: 56.0
Range: 54.0 to 62.0
Nonfarm payroll employment in March advanced a modest 120,000, following increases of 240,000 in February and 275,000 in January. The March jobs report was clearly disappointing though the unemployment rate dipped to 8.2 percent from 8.3 percent in February. Private payrolls were barely stronger than overall, rising 121,000 in March after a 233,000 increase the prior month. Average hourly earnings rose 0.2 percent, following a 0.3 percent gain in February. The average workweek for all workers in March slipped to 34.5 hours from 34.6 in February. Analysts projected 34.5 hours for March.
Nonfarm payrolls Consensus Forecast for April 12: 165,000
Range: 105,000 to 244,000
Private payrolls Consensus Forecast for April 12: 178,000
Range: 105,000 to 246,000
Unemployment rate Consensus Forecast for April 12: 8.2 percent
Range: 8.1 to 8.3 percent
Average workweek Consensus Forecast for April 12: 34.5 hours
Range: 34.5 to 34.6 hours
Average hourly earnings Consensus Forecast for April 12: +0.2 percent
Range: +0.1 to +0.3 percent
R. Mark Rogers is the author of The Complete Idiot’s Guide to Economic Indicators, Penguin Books, 2009.
Econoday Senior Writer Mark Pender contributed to this article.
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