That was some end to the week last week and some start to the month of May. The Dow, S&P 500, and Russell 2000 broke out to new record highs on the back of the April employment report, which hit the sweet spot for the market.
Specifically, the jobs report was good enough to temper concerns that hiring activity is falling off a cliff, yet not good enough to suggest the Fed will be pulling back on its accommodative policy soon.
There were some caution signs in the report that economic activity could still disappoint in coming weeks. The biggest signal there was the drop in the average workweek, which contributed to a 0.3% decline in aggregate earnings. The latter could be a harbinger of weak consumer spending.
Still, the equity market would have none of the bad news. The S&P 500 rallied out of the gate on Friday and easily cleared the 1600 level.
It is going to be a much more subdued start this morning. The S&P futures are basically flat and are trading slightly below fair value.
All things considered, that's a relatively good indication given the scope of recent gains. The S&P 500 is up 5.1% from its intraday low on April 18.
There isn't any news this morning that is creating newfound excitement. In turn, there aren't any economic releases changing the low-growth message for developed economies.
The first quarter earnings reports will continue to roll in this week, yet the rush of reports will slow with 80% of the S&P 500 having already reported their results. The news is good on the bottom-line with earnings per share growth up about 4.0%. It is not so great on the top-line with revenue growth basically flat.
The guidance hasn't been all that great either -- at least not relative to expectations ahead of the results. According to Thomson Reuters, 62 S&P 500 companies have made negative EPS preannouncements for the second quarter versus just 11 companies that have issued positive EPS preannouncements. The 5.6-to-1 ratio is the most negative ratio since the third quarter of 2001.
Still, the equity market will have none of that bad news when the good news is that the Fed isn't going anywhere. We discuss that last point in The Big Picture this week, "Fed Policy as Easy as 1-2-3."