U.S. Stock Market - Solid Bounce Today; New Record Highs Ahead

Solid across-the-board gains were posted in the U.S. stock market today as most investors shrugged off Friday’s surprisingly weak monthly employment report. Today’s rally came on the heels of a fairly dramatic upside reversal which began early Friday in the first hour of NYSE dealings after the employment-news-related gap-down opening. Earnings season is now officially underway, and it seems to me that analysts and corporations alike have both set expectations on the low side (which means actual results may surprise on the upside). There have been an unusually high number of negative warnings, with 107 negative revisions for companies in the S&P 500. Compared to positive revisions, this is the worst pace in 12 years. According to a survey by Bloomberg, analysts now project profits for S&P 500 companies actually fell 1.8 percent in the latest quarter, the first year-over-year drop since 2009. These same analysts had predicted a 1.2 percent increase when surveyed in January.

Here are today’s closing marks, with changes from Friday’s close:

                                                                                    Monday’s Closing Prices                   

Dow Jones Industrial Average                        14,613.48        +48.23             +0.33%

S&P 500 Index                                                  1,563.07        +  9.79             +0.63%

NASDAQ Composite Index                               3,222.25        +18.39             +0.57%

Russell 2000 Index                                               931.49        +  8.21             +0.89%

Dow Jones Transportation Average                  6,091.59        +54.23             +0.90%

Bottom Line: The bar has been set artificially low for upcoming corporate earnings reports, and “smart money” is already buying ahead of actual results, which may very well surprise on the upside. IRA retirement fund contributions ahead of the April 15th deadline may also provide a boost for U.S. stock prices this week. As mentioned over the weekend in this column,  it looks to me like the Dow Jones Industrial Average and the S&P 500 Index will both post new all-time record highs this week.