After getting off to a rocky start in 2010, the major stock indexes enter the last few days of the first quarter having posted almost too-good-to-be-true gains. Volume, or the number of shares changing hands, has been running bearishly low, but there's no denying equities have held up remarkably well. That's especially so considering everything that's been thrown at them over the last few weeks.
The blue-chip Dow Jones Industrial Average ($INDU) heads into the quarter's end up a healthy 4% year-to-date and within 150 points of the psychologically reassuring 11,000 level. More impressive, the broader S&P 500 ($INX) has gained nearly 5% on the year, while the tech-heavy Nasdaq Composite ($COMPX) is up almost 6%.
That's a strong start for the market anytime -- well above its long-term average. But as traders look to the second quarter, it's becoming increasingly difficult to square the undeniable V-shaped recovery in global corporate profits with the anything-but-robust recoveries in economies throughout the developed world.
Bulls like Ed Yardeni, prescient president of Yardeni Research, are counting on rising corporate profits to generate capital spending and hiring. More defensively, John Hussman, manager of the well-regarded Hussman Funds, sums up the bear case pretty well when he reminds his shareholders that the market remains overbought, overvalued and overly bullish.
Either way, investors will have plenty of data to digest in a holiday-shortened trading week, including home prices, factory orders and -- most important -- payrolls data, which come out somewhat ominously on Friday, the day after April Fool's Day.
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