Month in Review:
Strong start fades as Wall Street responds to mixed earnings and GDP figures

For the month of April, 2003

Optimism was high at the beginning of the month as investors were initially buoyed by positive corporate earnings reports. However, as the month wore on that shine had dulled as lackluster economic data, led by a disappointing first quarter U.S. gross domestic product figure, dampened the mood on Wall Street.

While this week opened with a hefty two-day rally, the tide turned on Thursday as the Dow Jones industrials fell 75.62 points to 8,440.04 after hitting its highest close since mid-March on Wednesday. The Standard & Poor's 500 also fell, 7.59 points, to 911.43, after finishing Wednesday at its highest level since mid-January.

Earnings reports front and center

Amazon.com and American Express kicked off the week with strong earnings announcements. Amazon shares rose more than 11% after the online retailer topped estimates for the first quarter and raised its sales forecast for this quarter and the rest of 2003. American Express beat Wall Street's consensus estimate when it posted results for the quarter.

On the down side, AFLAC Inc., the No. 1 U.S. supplementary health insurer, reported higher first quarter profits but also saw a slowdown in its domestic sales growth, causing its stock price to decrease. Internet advertising provider Overture Services posted lowered quarterly earnings and warned that its full-year results would be below Wall Street forecasts because of higher expenses and reduced advertising sales in the United States.

Overall, of the 313 companies in the S&P 500 that reported first-quarter earnings prior to Thursday’s market close, 85% had either beaten or matched analysts’ expectations.

Investors were also paying close attention to:

• Disappointing GDP: The pace of U.S. economic growth improved slightly in the first quarter of 2003, the U.S. Commerce Department announced, but not nearly as much as economists expected. The U.S. GDP, the broadest measure of the world's largest economy, grew at a 1.6% annual rate in the quarter after growing 1.4% in the fourth quarter of 2002. Economists had expected GDP growth of 2.3%, according to a Reuters poll.
• Higher unemployment figures: The number of Americans filing for first-time unemployment claims rose to 455,000, up 8,000 from the previous week, according to the U.S. Commerce Department. The weekly jobless claims number has not been below 400,000 since mid-February.
• Increase in SARS cases: Growing anxiety over the SARS virus also left investors concerned. SARS has killed more than 260 people and infected about 4,600 worldwide. The crisis prompted the World Bank to trim its forecast for growth in East Asia, including China, where the disease has rattled the fast-growing economy.

Not all of the week’s news was negative:

• Durable goods up: The US Commerce Department said new orders for durable goods (items designed to last three years or more) rose 2% in March after declining 1.5% in February. It was the second increase in the last three months and a far better showing than the 0.5% decline economists had forecast.
• Mortgage rates fall: Mortgage rates dropped below 6%. A 30-year mortgage averaged 5.79% for the week, down from 5.82% and well below its 6.88% average of a year ago.
• New home sales up: The pace of new home sales rose 7.3% to a seasonally adjusted annual rate of 1.01 million units from a revised rate of 943,000 units in February, according to the US Commerce Department.

Think long term

No matter what the market does week to week, we think it’s important to remember the familiar investment strategies that we believe apply in any market: Think long term. Be diversified. See market crises as opportunities. By working closely with your investment professional, you can help ensure that your portfolio is properly diversified and that your financial plan is still in line with your long-term goals, needs, and risk tolerance.