The Markets This Week
THIS MAY BE SPRING, 2009, but the stock market is already celebrating 2010.
So what if companies are still sheepishly detailing a 35% slide in first-quarter earnings, and the U.S. economy just suffered its sharpest contraction in generations? A stock market that prides itself on anticipation and a healthy disregard for fusty conventions — like, say, the Roman calendar — smells possible growth next year, and that whiff was enough to propel stocks to their best two-month gain since 1975.
Perhaps the grim present accentuates the determination to focus on the future. The U.S. economy shrank 6.1% in the first quarter, and investment spending was halved, but personal consumption survived constricting credit to rise 2.2%. To traders groping for a catalyst, this was a sign our consumer-reliant economy is ready to shake the recession. Outbreaks of swine flu hogged the news and hobbled the MSCI Mexico iShares (ticker: EWW), and Chrysler filed for bankruptcy but stocks rolled merrily to their seventh gain in eight weeks.
Companies struggled but held out hope. Whirlpool (WHR) warned of weaker appliance sales, but says the "rate of consumer decline is lessening." MGM Mirage (MGM), prodded by bondholders to file for bankruptcy, secured financing to complete its grandiose $9 billion casino-condo complex, but investors (and short sellers) bid up the shares 36%, greeting this stay of execution as though it were a passport back to 2006(source: Barrons Online).
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