David Joy: Strong earnings, yet consumer confidence remains low - Could this week tell a different story?

This is an important week on the economic calendar. For the first time, we will get a look at activity that is largely unaffected by winter weather. On Friday, the April jobs report is expected to show the creation of 215,000 new non-farm jobs. If so, it would be the highest total since November (or before the polar vortex started). And on Thursday, we learn how well the manufacturing sector performed in April, as well as the pace of automobile sales.While these reports will not be the last word on the true underlying pace of economic activity, they will be the first. So, a lot is riding on these reports among those who are expecting a reacceleration of growth as a catalyst for a further rise in stock prices. Recent increases in the manufacturing PMI and leading indicators suggest that the pace of activity is firming, but evidence of a sustainable trend has yet to emerge. Strong readings later this week would certainly help to bolster the bullish case.It will be another three weeks before we see whether housing activity, an important element in the reacceleration story, experienced a rebound in April. However, we did learn on Monday that pending home sales rose in March more than expected. In fact, the percentage increase was the strongest since May 2011. It was also the first increase in the index in nine months. Other indicators of housing activity have been generally sluggish, raising questions about whether presumed pent-up demand would eventually overcome a rise in mortgage rates and tight credit standards.The Federal Reserve also meets this week. It is widely expected to once again trim the pace of quantitative easing and reiterate its guidance to remain accommodative. It has little to worry about on the inflation front, at least for the time being. The March core personal consumption expenditure deflator, due out on Thursday, is expected to have risen at an annual rate of just 1.2 percent. The headline rate is thought to have climbed at a rate of 1.1 percent. And, even though the best news on the inflation front may be behind us, both are well below the Fed’s target rate of 2 percent.The S&P 500 stumbled fractionally last week, continuing the saw-tooth pattern of one down week, following an up week that extends back to the beginning of March. During this period it has gained just 0.2 percent, the same percentage increase it now has for the year-to-date.Tensions in Ukraine have not helped investor confidence, despite first quarter earnings that, although not robust, are generally stronger than expected. According to Factset, as of last Friday approximately half of the S&P 500 had reported results, with an aggregate projected earnings growth rate for thequarter now of 0.2 percent, better than the 1.2 percent decline that had been anticipated at the start of thereporting season. Sales growth is trending at an increase of 2.4 percent, the same as at the start of reportingseason.The Nasdaq Composite has not fared nearly as well as the S&P. It has fallen 5.3 percent since the start ofMarch, with the internet and biotech groups continuing to get severely punished. The Nasdaq Biotech indexhas lost 18 percent since its recent weekly peak of February 21, while the Nasdaq internet index is down 17percent from its March 7 peak. Small cap stocks also continue to underperform, as the Russell 2000 is down 7percent since March 7.On Monday, the U.S. and EU announced additional sanctions on Russia for its failure to honor commitments tostabilize the Ukrainian situation made two weeks ago. Instability in the region has far greater consequences,both economically and in terms of security, for central and eastern Europe than it does for western Europe orthe United States. How aggressive the U.S. and EU will ultimately be in opposition, therefore, remains an openquestion, as does how far Russia intends to assert its influence in the region. That it intends to do so comes asno surprise. The question is to what extent.Important Disclosures:The views expressed are as of the date given, may change as market or other conditions change, and may differ from views expressed by otherAmeriprise Financial associates or affiliates. Actual investments or investment decisions made by Ameriprise Financial and its affiliates, whether for itsown account or on behalf of clients, will not necessarily reflect the views expressed. This information is not intended to provide investment advice anddoes not account for individual investor circumstances. Investment decisions should always be made based on an investor's specific financial needs,objectives, goals, time horizon, and risk tolerance.The Standard & Poor's (S&P) 500 Index tracks the performance of 500 widely held, large-capitalization U.S. stocks.The NASDAQ composite index measures all NASDAQ domestic and international based common type stocks listed on the Nasdaq Stock Market.The NASDAQ Biotechnology Index includes securities of Nasdaq-listed companies classified according to the Industry Classification Benchmark aseither Biotechnology or Pharmaceuticals which also meet other eligibility criteria.The NASDAQ Internet Index is a modified market capitalization-weighted index designed to track the performance of the largest and most liquid U.S.-listed companies engaged in internet-related businesses and that are listed on the NASDAQ Stock Market, the New York Stock Exchange (NYSE) orNYSE Amex.The Russell 2000® Index is a market-capitalization-weighted index made up of the 2,000 smallest US companies in the Russell 3000.Investment products are not federally or FDIC-insured, are not deposits or obligations of, or guaranteed by any financial institution and involve investment risks including possible loss of principal and fluctuation in value.Ameriprise Financial Services, Inc. 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