First quarter ends. The stock markets ended the first quarter last Monday more or less flat for the year. Despite an up day for the U.S. markets on Monday, for the year the Dow and the Nasdaq were down slightly, and the S&P 500 was up slightly. The next day, stocks started the new quarter in positive territory. The markets seemed to be responding to statements from Fed Chair Janet Yellen that the economy was still weak and that the Fed would continue to intervene for the foreseeable future. In corporate news, General Motors CEO Mary Barra faced tough questioning before Congress last week over her company’s handling of faulty ignition switch recalls. GM has now recalled more than 6 million vehicles this year alone. The company said it will take a $750 million charge against its first quarter results to pay for the problems.
Unemployment. The report most market watchers have been waiting for finally came on Friday: March unemployment. What did it tell us? The unemployment rate is unchanged at 6.7 percent, which remains historically high. But the good news is that about a half-million people who had stopped looking for jobs came back to the job market. The economy created about 197,000 private sector jobs last month, about what analysts expected.
Other indicators. The Institute for Supply Management said Thursday that its gauge of the non-manufacturing sector rose to 53.1 last month. Readings over 50 signal expansion. On Wednesday, payroll processor ADP said U.S. private employers added 191,000 workers in March. For those who think we depend too much on government numbers, note that the ADP report is a private source with findings not too terribly different from the government’s number of 197,000. None of these estimates is perfect, but taken together they do give us a pretty good idea of where the economy’s headed at any given moment.
Tech stocks dive. The Nasdaq slumped toward the end of the week, and took a nosedive on Friday, plunging 2.6 percent. The main reason seems to be fallout from Michael Lewis’s book on high frequency trading. Lewis has been on all the talk shows saying the markets are rigged, favoring those who can execute trades the fastest. Analysts who are not trying to sell books counter that high-frequency trading keeps the markets liquid and adds self-correction. Nonetheless, by Friday the U.S. Attorney General’s office said it would be looking into high frequency trading for signs of insider trading. That caused shares of online trading companies to plunge, and those stocks dragged down the markets.
The week ahead. It will be a light week for government reports. Quarterly earnings season starts later this week, and for the next few weeks stock market prices do a re-set based on actual earnings. Corporate earnings are our quarterly reality check. While some analysts criticize the tyranny of the calendar, the fact that companies have to manage themselves to these three month report cards and can’t focus on long-term results, I personally think these quarterly earnings give us helpful data. They keep us from depending too much on government reports, and allow us to focus more on what’s actually going on in companies all across America.