Most of the time the U.S. stock market
looks to 3 factors (call them the “pillars” that support the stock market) to
support its upward trend – let’s grade each of the pillars. 

CONSUMER
SPENDING:  I grade this factor a C- (below average)

THE
FED AND ITS POLICIES:  I continue to grade this factor an A+ (extremely favorable) because the
FED cannot do much more than it is doing to support the stock market and asset
prices.

BUSINESS
PROFITABILITY:  I have
downgraded this factor to a B- (above average). We
have reached the end of the first quarter and it showed little sign of the
acceleration many are expecting.  We can
expect more stock market volatility from lower-than-expected first quarter
earnings reports, out in April and May. One well known analyst issued a consensus
first-quarter earnings-per-share growth projections for S&P 500 companies declining
to 1% to 2% from 6% to 7% as the year began. The severe winter weather that
gripped much of the U.S. in January and February may yet be seen again in many
first-quarter reports.  The question
remains whether the warming weather will bring the economic acceleration stock
market analysts expected to occur starting in January.