The Week Ahead: Not Looking Good

Last week saw questions raised, once again, about the strength of the U.S. economic recovery. The order drop in the Institute for Supply Management manufacturing index, and the bad March employment report, served as counterweight to strengthening February construction spending and March's highest-volume figures for auto and truck sales since August 2007. My key takeaways from the employment report were that, not only did the labor force shrink again, but the participation rate is at multiyear lows. That's not good news for the consumer and those industries that rely on them, such as restaurants and retail. Even looking outside the U.S., the latest figures point to a depressed European economy, while those for China point to a modest improvement in March. 

We also remain at the whim of any potential sequestration impact; gas prices that remain high vs. the prior year (though on the decline); and the stock-market indices are near record levels. All of this this tells me that the upcoming wave of corporate earnings will be key. While the season officially starts after Monday's market close, when Alcoa (AA) is set to report its first quarter, it seems the season is already off to a questionable start. 86 companies have issued negative earnings-per-share guidance against only 24 with positive forward figures, according to Friday's data from FactSet (PDF). It's not a favorable ratio, that's for sure. ...439 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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