Corporate earnings for the first quarter of 2004 released to date suggest a favorable trend is developing.  As of today, 242 companies of the Dow Jones US Total Market Index have reported and are up and average of 28%.  This total represents less than 15% of 1,632 stocks in the index, but if the trend continues, first quarter 2004 results will compare well with the 24% average gain of S&P 500 fourth quarter 2003 earnings. 

The U.S. economy added 308,000 jobs in March, almost three times economists’ expectations and the largest gain since April 2000.  Treasury Secretary John Snow said “strength is apparent across the board, including strong job growth in construction, retail, and business services.”  The increase follows gains that were revised upward to 46,000 for February and 159,000 for January.  Manufacturing may soon be joining the party as this was the first month without a decline since August 2000.  The Unemployment rate rose to 5.7% from 5.6% as more people returned to the labor force to seek jobs. 

If the majority of Americans feel uneasy about their employment status as the media and certain politicians claim, they don’t show it when it comes to buying homes and taking on larger mortgages.  New home sales for February surprised to the upside while mortgage applications were down only .2% from historic highs.  Both Fannie Mae and Freddie Mac, the nation’s two largest purchasers of mortgages, are forecasting another record year for home sales amid low interest rates.  The 30-year fixed mortgage is within a half a percent of the all-time low.

Offices and worksites are abuzz with NCAA college basketball talk as the tournament got off to a great start this week.  The event is characterized as “March Madness” or “March Mania” because of all the hoopla (no pun intended) and energy of 64 college and university fanatics converging on 14 American cities over the next three weeks.  Good luck if you have a pony in this race.

After a 36% rise of the Dow Jones Industrials, a 40% rise of the broader S&P 500 and a 55% rise of the NASDAQ, investors decided to take a breather.  The first stocks to succumb to selling pressure were last year’s market leaders; technology and biotechnology companies comprising the majority of the NASDAQ index.  It reached a peak on January 29th suffering three periods of 6% declines each since then.  The index is currently off just under 10% from its high.   The Dow reached a 52-week high on February 19 at 10,753, but has fallen 5.6% since then.  The S&P 500 was last to succumb, peaking on March 5th and falling 4.4% from that level. 

Tuesday’s Consumer Confidence numbers reported an unexpected erosion of confidence in the economy.  During February as the Democratic candidates marched through each state in their presidential quest their criticism of the economy grew louder and more focused.  As jobs or the inability of the current economy to create substantial job growth seems to resonate so well with some voters, politicians’ criticisms of the economy and the current administration have grown louder and, on occasion, outlandish.  Political experts suggest that negative campaigning is not only effective, but may be the only way to win modern elections.  But, there is a cost – the words are carried far and wide and more people than ever seem to accept them at face value.  

Remaining economic and market bears may soon be forced into hibernation.  Even the most obstinate of naysayers may have to acquiesce to the improving economic outlook.  As is the case every four years, the primaries have taken center stage in the media and most of what we hear is the obligatory bashing of the economy and the current administration’s economic policies. 

In his testimony before committees of the House of Representatives on Wednesday and the Senate yesterday, Federal Reserve Chairman Alan Greenspan delivered essentially the same message.  The extraordinary pace of productivity has reduced the need for companies to hire workers, but the lengthy spell of jobless growth is "atypical" compared to previous cycles.  In his view employment should be "expanding at a reasonably good clip within a short period of time." 

The headline Unemployment Rate, announced this morning, fell by a tenth of a percent to 5.6%, the lowest since January 2002.  But today’s focus is on the number of jobs created.  The change in non-farm (service) payrolls was up by 112,000 jobs, the biggest jump in three years, but less than expected.  Everyone from economists, to analysts, from bond traders to stock traders, and I suspect the White House expected a bigger number.  Why?  Virtually every measure of growth in theU.S.economy points to increased job formation.

If you watched any financial news or commentary at all this week you could not have missed the attention given to whether or not the Fed would continue to use the phrasing “considerable period” in their prepared comments.  The words have appeared in their remarks for several months conveying to the financial world that they were prepared to keep interest rates low for an indefinite period to sustain a less-than-robust economic recovery.  The phrase was dropped on Wednesday and replaced with the words can “be patient” before raising rates.