The latest economic indicators point to a "Goldilocks" economy, in turn fueling a surge in equity prices. Growth is not so hot that it prompts the Federal Reserve to hike interest rates, and not so cold that it causes a recession. Among the big winners have been consumer and technology stocks. But in the days ahead, will the market rally get mauled by underlying weaknesses?
Stocks rose on Friday after the U.S. Labor Department's monthly jobs report showed that employers added 215,000 jobs last month. On the same day, the Institute for Supply Management reported that its manufacturing index rose to 51.8 last month from 49.5 in February.
Investors are cheered by our "just right" economy. After a terrible start to the year, the S&P 500 (SPY - Get Report) is now up almost 2% year to date. But threats lurk in the woods. When the final numbers are in, first-quarter profits of S&P 500 compares are expected to be nearly 4% lower on a year-over-year basis.
And despite a modest recovery in oil prices over the past month, the energy sector remains deeply troubled. Massive debt incurred by energy companies is of particular concern. The total debt in the entire oil and gas sector reached $3 trillion in 2014, or about three times the amount in 2006.
This week, we'll get a better idea as to whether Goldilocks will have a rendezvous with a big bad bear. On the docket this week are economic reports pertaining to employment, consumer confidence, energy stockpiles, and rig counts.
Forthcoming earnings reports also will provide clues. Notably, these companies are reporting first quarter earnings in the week ahead:
Tuesday: Walgreens Boots Alliance (WBA - Get Report) and Darden Restaurants (DRI - Get Report) . Wednesday: Monsanto (MON) , Constellation Brands (STZ - Get Report) , and Bed Bath & Beyond (BBBY - Get Report) . Thursday: Rite Aid (RAD - Get Report) and CarMax (KMX - Get Report) .
Keep your eye on consumer stocks, which have rallied on good economic news and rising confidence. The Consumer Staples Select Sector SPDR ETF (XLP - Get Report) has gained 6.20% year to date and spiked 1.06% on Friday alone. Year to date, major consumer products stocks have posted these hefty gains: Procter & Gamble (PG - Get Report) (+5.19%); Unilever (UL) (+4.59%); Colgate-Palmolive (CL - Get Report) (+6.87%); and Kimberly-Clark (KMB - Get Report) (+6.99%).
Technology stocks also boast momentum. Despite a volatile and still risky broader market, several promising growth investments are emerging in the tech sector. Notable is Elon Musk's electric car maker Tesla (TSLA - Get Report) , which jumped 3.4% on Friday, after it reported 198,00 pre-orders for its lower-priced Model 3. The Technology Select Selector SPDR ETF (XLK - Get Report) is up 4.37% year to date.
Even IBM (IBM - Get Report) , given up for dead by some analysts, is on a tear. IBM's stock is up 10.83% year to date, as a reinvigorated "Big Blue" makes several large acquisitions designed to expand its footholds in cloud computing and medical IT.
Here are the major economic reports to watch in the coming week:
Monday: Gallup U.S. Consumer Spending Measure, Labor Market Conditions Index, and Factory Orders.
Tuesday: PMI Services Index and ISM Non-Mfg Index.
Wednesday: MBA Mortgage Applications, Gallup U.S. Job Creation Index, and EIA Petroleum Status Report.
Thursday: Chain Store Sales, Jobless Claims, Bloomberg Consumer Comfort Index and EIA Natural Gas Report.
Friday: Baker-Hughes Rig Count.
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