The movement of Apple’s stock price this year somewhat summarizes the sentiments of
the U.S. Economy
It was another mixed economic picture in the U.S. this week.

On the positive side, we saw rising Retail Sales, falling oil and gasoline prices, rising bank earnings, positive leading indicators, and an expanded outlook for world GDP this year. However, the optimism was dragged down by rising initial claims for unemployment, declining Housing Starts, Existing Home Sales, a slowdown in the
growth rate in U.S. manufacturing, and further problems in the Eurozone. The stock market feels “heavy” and interest rates remain low.

The changing forecast and durability of growth will be one of the most important topics of discussion at the Central Bank’s policy meeting on Tuesday and Wednesday, when officials will update their quarterly economic projections.

The outlook arguably has not shifted enough that would support new initiatives to boost economic growth. The new forecasts could project a little more inflation in 2012 than the Fed forecast in January, thanks in part to a recent rise in gasoline prices. It could also project a little less unemployment for 2012, thanks to recent declines in the jobless rate. But the overall growth outlook for 2012 doesn’t seem to have changed much from several months ago. The economy looked at times in the first quarter as though it was gaining momentum, but it
finished with a whimper… which will likely reinforce Fed officials’ worries about the recovery’s durability. That should also mean their projections for 2013 and 2014 won’t change much until they get more evidence about the
ever-evolving recovery. Whereas we don’t expect any significant changes to the Fed statement, member economic projections could shift slightly, reflecting a lower unemployment rate and higher inflation.

Apple reports quarterly earnings results tomorrow and the market is expressing nervousness prior to the release.

The stock is up 40 percent year-to-date but down 6 percent for April and nearly 10 percent since hitting all-time highs just two weeks ago. The official estimates are for earnings of $9.95 on just north of $36 billion in revenue. Any positive surprise may provide a little fresh boost to the market – which is currently weighing heavily on news from Europe.

The Fed is meeting on Tuesday and Wednesday and will pretty much set the tone for the week.

A few important upcoming data releases include New Home Sale on Tuesday, Jobless Claims due to be released on Thursday and the GDP Report on Friday. Consensus estimates a deceleration in activity to perhaps a 2.2 percent rate for the quarter.

The bottom line is the economic situation throughout the world and the economic situation in the United States is tepid at best. A sustained economic recovery takes GDP growth North of 4.500% Anything less than that is just more of the same of our current economic state and that’s not good.

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