Weekend Summary

Week Ends Positive on Outlook the Recovery Remains on Par

After a mid-week hiccup as concerns about Greece's debt issues flared up, stocks finished out the week in favorable fashion, as the aforementioned Greek concerns eased and optimism about 1Q earnings season-which unofficially kicks off next week-supported Friday's advance. Sales optimism helped boost the outlook that the economic recovery will continue in the wake of Thursday's solid gains in March retail same-store sales, while a larger-than-expected increase in wholesale inventories was met with the eleventh-consecutive monthly sales increase. Equity news had an M&A tilt as Atlas Energy announced a joint venture and Casey’s General Stores received a hostile bid, while Reuters reported that Boston Scientific Corp has hired an adviser to sell two units. Meanwhile, Dow member Chevron issued a positive interim update and Constellation Brands reported earnings that missed the Street. Treasuries finished the day modestly higher.

The Dow Jones Industrial Average rose 70 points (0.6%) to close at 10,997, the S&P 500 Index gained 8 points (0.7%) to 1,194, and the Nasdaq Composite was 17 points (0.7%) higher at 2,454. In moderately light volume, 971 million shares were traded on the NYSE and 2.1 billion shares were traded on the Nasdaq. Crude oil was $0.47 lower at $84.92 per barrel, wholesale gasoline was $0.01 lower at $2.29 per gallon, and the Bloomberg gold spot price gained $10.15 to $1,160.70 per ounce. Elsewhere, the Dollar Index-a comparison of the US dollar to six major world currencies—was down 0.7% to 80.94. For the week, the DJIA rose 0.6%, the S&P 500 Index advanced by 1.4%, and the Nasdaq Composite gained 2.1%.

Dow member Chevron Corp (CVX $80) issued an interim update and indicated that its 1Q earnings are likely to be better than 4Q earnings, while not giving specific numbers, citing higher oil prices and a return to profitability in its refining and marketing business. Shares were higher.

Reuters reported that Boston Scientific Corp (BSX $7) has hired an adviser to help sell its advanced-bionics and target-therapeutics units. BSX declined to comment on the report and shares finished nearly unchanged.

Shares of Atlas Energy (ATLS $38) traded sharply higher after Indian conglomerate Reliance Industries agreed to pay $1.7 billion, $340 million in cash and $1.36 billion in the form of a drilling carry, for a share of a joint venture in the Marcellus Shale natural gas field. ATLS has 5 ½ years to utilize the drilling carry and Reliance will acquire a 40% undivided interest in approximately 300,000 acres of the Marcellus Shale field. Atlas will serve as the development operator for the venture, while Reliance will have the option to operate in certain project areas in coming years outside of Atlas’ core operating areas.

Constellation Brands Inc (STZ $16) reported 4Q earnings ex-items of $0.27 per share on net sales of $708.7 million, while analysts had expected $734 million in revenue and EPS of $0.24. Constellation, which produces Robert Mondavi wines, Corona beers and other brands, said that full-year 2011 earnings would be $1.53-1.68, below the Street estimate of $1.77. In commenting on the lower sales and profits for 4Q, the company said "As our fiscal year came to a close, we worked with our distributors to reduce their fourth quarter inventory levels while securing incremental distributor investments behind our brands," and added that the action better positions the company for the future. The company also authorized a $300 million share repurchase program. Shares declined.

Shares of Casey's General Stores Inc(CASY $39) surged over 20% after Quebec-based operator of Circle K Stores, Alimentation Couche-Tard Inc, made a hostile $36 per share offer for the Midwestern US convenience store operator. Couche-Tard said it made repeated efforts to engage in negotiations with Casey’s starting in October 2009, adding in a letter to the board of Casey’s today "due to your unwillingness to engage in discussions” the company feels “compelled to make this proposal known to your shareholders."

Wholesale stockpiles rise as sales expansion streak survives

Wholesale inventories rose 0.6% in February month-over-month (m/m), versus the Bloomberg consensus, which called for a 0.4% advance, and January’s figure was revised to a 0.1% increase, versus the initially reported decline of 0.2%. The 0.6% increase in inventories comes as sales rose 0.8%, the eleventh-straight monthly gain, bringing the inventory-to-sales ratio—the amount of time it would take to deplete inventories at the current sales pace-to 1.16 months, the same as in January. The increase was paced by a 2.5% jump in computer equipment, as durable goods increased by 0.5% while nondurable goods gained 0.8%, with petroleum products up 3.1%. Treasuries were slightly higher, as the yields on the 2-year and 10-year notes dipped 1 bps to 1.06% and 3.88%, respectively, while the yield on the 30-year bond decreased 2 bps to 4.74%.

Greece concerns ease in Europe

Sentiment in Europe was supported by easing fears about a default in Greece, but Fitch's downgrade of the nation's long-term foreign sovereign debt limited enthusiasm. Fitch cited the sharp rise in Greek interest rates, which were at the root of the concerns on Thursday, as default fears pushed the spread of the Greek 10-year bond over the German bund higher, peaking at 448 bps during the day, with the Greek 10-year yield reaching nearly 7.6%. Fitch also noted the "intensification of fiscal challenges in response to more adverse prospects for economic growth" and kept the nation’s outlook negative. However, carry over optimism from Thursday's comments from European Central Bank (ECB) President Jean-Claude Trichet, where he confirmed new collateral rules that would benefit Greece and said "A default is not an issue for Greece," lifted hopes that Greece could receive a bailout, possibly as soon as this weekend. Remarks from French President Nicolas Sarkozy, who said "A support plan has been agreed to and we are ready to activate at any moment to come to the aid of Greece," also helped ease concerns.

Economic reports in Europe were mixed, as German exports rose faster than forecast, and posted their biggest increase in eight months, while UK producer prices were much higher than expected. In other international economic news, Canada reported that its net change in employment for March rose by a smaller amount than forecasted, increasing 17,900 compared to the 26,000 that economists had expected. Also, the unemployment rate unexpectedly remained at 8.2%, which was forecasted to tick lower to 8.1%.

Markets post upward move on earnings optimism

Coming off a long Easter weekend, traders had their first chance to react to last Friday's labor report, which showed a solid increase in jobs to nonfarm payrolls, and the week began on a positive note. Sentiment was also aided early on by a larger-than-expected increase in the ISM Non-Manufacturing Index, which posted the third-straight month of expansion for service sector, which accounts for the lion’s share of the economy. The early optimism had the Dow destined for 11,000, but the bears would not let that happen without a say on the matter.

Some of the luster of economic recovery optimism was rubbed off as Greece debt concerns flared up, while weekly initial jobless claims unexpectedly rose and remained uncomfortably above the 400,000 mark. Adding to some of the uncomfortable mid-week mood, the release of the minutes from the Federal Reserve’s last monetary policy meeting showed policymakers modestly downgraded its GDP outlook on concerns that high unemployment and the possibility of a relapse of the housing downturn could threaten economic prosperity.

However, as the week came to a close, stocks moved back into positive territory and the Dow returned to threaten the 11,000 mark, as traders may have been feeling more upbeat about the upcoming 1Q earnings season-which unofficially kicks off next week- after this week’s strong March same-store sales results from the retail sector.

Busy week ahead as earnings season kicks off and economic calendar rich

There will be plenty for traders to consider in action next week, beginning after the bell Monday, when Alcoa (AA $14) becomes the first Dow component to release earnings, and provide the unofficial start of earnings season.

Economic data begins in earnest with three releases on Wednesday, including the Consumer Price Index (CPI), anticipated to have risen 0.1% m/m in March, after posting a flat m/m reading in February, and ex-food and energy, the core CPI rate is forecasted to have risen 0.1%, inline with the 0.1% increase in February.

Advance retail sales for March will also be released mid-week, forecasted to advance by 1.1% m/m, after growing 0.3% in February, while sales ex-autos are estimated to increase 0.5% in March, on the heels of a rise of 0.8% in February.

The last economic release scheduled for Wednesday is the mid-day release of the Beige Book, wherein Fed staffers summarize anecdotal economic data from all twelve Federal Reserve districts in preparation for the next Federal Open Market Committee (FOMC) meeting scheduled for April 27-28, and is used as an input to the Fed’s decision on whether to make any changes in monetary policy.

Thursday brings the report on industrial production, anticipated to rise 0.7% m/m in March after posting a 0.1% increase in February, while capacity utilization is expected to have risen to 73.3% from 72.7%.

The week ends with the release of housing starts for March on Friday, expected to show an increase of 6.1% m/m to an annual rate of 610,000 units, after falling 5.9% in February, while building permits, one of the leading indicators tracked by the Conference Board, are forecasted to decline 1.7% m/m in March after falling 1.6% m/m in February. This report has been volatile in recent months, distorted by the initial expiration of the buyer tax credit, as well as seasonality and weather.

Investors will be focused on earnings in coming weeks, as corporations report results quarterly, while economic data continues to stream in on a monthly basis, and while volatile on a month-to-month basis, the trend in the economy has shown continued improvement. The key for the next move in stocks is whether corporate results are strong enough, as the market has already posted nice year-to-date returns.

Other releases on the US economic calendar include the import price index, business inventories, the Empire Manufacturing Index, MBA Mortgage Applications, initial jobless claims, the NAHB Housing Market Index, the Philadelphia Fed's Business Activity Index, and the University of Michigan consumer sentiment survey.

The international economic calendar in Europe includes euro-zone industrial production and CPI, and German consumer and wholesale prices. In the Americas, Canada is scheduled to report housing starts and prices, while Brazil is set to announce retail sales.

In Asia/Pacific, Japan is scheduled to announce money supply and lending, as well as industrial production, and Australia will report consumer and business confidence. Elsewhere, China will be announcing housing prices, money supply, new loans, the trade balance, CPI and PPI, retail sales, industrial production and the first report globally on 1Q GDP.