Earnings From the Tech Sector

Earnings season is off to a sluggish start, with some prominent tech companies coming out of the gate in somewhat disappointing fashion. First off, IBM fell short of the consensus of its revenue expectations. Even though it did beat expectations on its earnings, the market was no impressed, and drove Big Blue's stock down by 2.4 percent.

Intel was a similar story. It beat its earnings estimates, and just barely beat its revenue estimates, but that wasn't enough for investors. Its profit margins were down from the previous quarter, and Intel's share price dropped 1.7 percent on the day. As usually happens, the expected earnings had already been factored into the share price, which means barely beating expectations was not enough to bolster a share price.

These tech companies have become a bit of a sideshow this earnings season - the bigger news comes next Tuesday. That's when Apple, which is just the largest tech company but by far the largest company in the U.S., releases its first quarter earnings report.

Bumps in the Road

There were a couple of dark spots in for our economy in reports released yesterday. First of all, manufacturing, which had looked strong in recent months, stumbled a bit in March. Production at U.S. factories dropped by 0.2 percent in March, the first time in four months that it's fallen. It might be more proper to look at that small decrease as a plateau: It followed three months in which manufacturing productivity grew by 3.4 percent. That represents the biggest three-month gain for manufacturing since 1984.

Also in March, the number of new homes being started dropped suddenly. New homes had been started at an annual rate of 694,000 in February, but they dropped to a rate of 654,000 in March, a decrease of 5.8 percent. That's the lowest that number has been since October.

At the same time, though, the number of new building permits rose 4.5 percent in March, to an annual rate 0f 747,000. So there's a possibility that the drop in housing starts, as well as the drop in manufacturing, might just be a blip.

Some Good News for Tax Day

Happy Tax Day! Or not so happy, as the case may be, but for most taxpayers, this is actually a good time of year. According to the IRS, during fiscal year 2011, 83 percent of all taxpayers - that's 119 million individual tax returns - got refunds. The final toll of all those refunds was $338 billion.

More good news: The IRS isn't quite as diligent about its audits as you might think. For fiscal year 2011, just 1.1 percent of all individual income tax returns got examined by the government. And taxes are getting easier and easier to file. More than three quarters of all individual returns are now filed electronically.

And now the bad news: The taxman took in a whopping $2.4 trillion last year, from a total of 234 million tax returns. In that light, the $338 billion in returns was just a drop in the bucket.

Rough Week on Wall Street

Last week was a bit of a disaster for the stock markets, with all three major indexes posting their biggest weekly losses of the year. The S&P 500 lost 2 percent of its value, the Dow Jones industrial average lost 1.6 percent, and the Nasdaq lost 2.3 percent. Tuesday was the single worst day for the Dow all year, when it dropped 213 points.

The biggest losers were in the financial sector, where Bank of America lost 5.3 percent of its value in the course of the week, the biggest drop among the 30 Dow stocks. J.P. Morgan and Wells Fargo weren't far behind, falling by 3.6 percent and 3.5 percent, respectively. Overall, the S&P's financial sector index lost 2.8 percent for the week.

Was there any good news? Apple reached a milestone on Tuesday, when its market capitalization reached a stunning $600 billion. It's still a little bit short of the all-time record high market cap, set by Microsoft on December 30, 1999 - one day before Y2K arrived - when its total value peaked at $621 billion.

Stock Funds Still Hurting

The news just keeps getting worse for domestic equity mutual funds. We've noted before that inflows into these funds has slowed to a trickle, but the week ended April 4th marked a new low for the year. During that week, investors pulled a net of $4.27 billion out of American stock funds. That category has now lost $19 billion on the year to date.

Meanwhile, every other category is still taking on more and more assets:

* Hybrid funds took in $1.1 billion for the week ended April 4th.
* Foreign equity funds took in $1.22 billion on the week.
* Municipal bond funds took in $572 million.
* And corporate bond funds continue to be extremely popular, with inflows of $9.09 billion for that single week.
* All told, mutual funds had a net inflow of $7.71 billion on the week.

The Fears of the Baby Boomers

The Baby Boom generation is famously facing its retirement years, with the first post-WWII babies having turned 65 last year. But they are still very uneasy about their retirement prospects, especially for the long term. The Insured Retirement Institute surveyed Americans ranging in age from 50 to 66, and found that the majority of them expect their financial picture to be get worse as they age.

Sixty-two percent of the respondents said that they expect their personal financial situation will be worse off in five years than it is now. Sixty-four percent expect to have to rely on income from jobs they'll take on after their retirement. The number of people expecting to retire after the age of 66 is up to 35 percent, whereas it was 28 percent a year earlier.

It doesn't have to be this way, of course. With proper financial planning, you should be able to enjoy a comfortable retirement, where the only job you need to take on is baby-sitting your grandchildren. If you're concerned about where your finances will be five years from now, feel free to give me a call.

The Demand for Bonds

The American corporate-bond market continues to show a lot of popularity, even with the solid returns posted by the stock market so far this year. Investment-grade corporate bonds and ETFs took in a remarkable $28 billion from individual investors for the first quarter of 2012. That's more than the combined total they took in over the last two quarters of 2011.

At the same time, the yields on the bonds has been dropping, which shouldn't be a surprise to anyone. As bonds become more popular, the interest the issuers need to pay to get people to finance their debt drops. So as all that money has been pouring into bonds, the average yield on corporate bonds has dropped from 3.8 percent to 3.4 percent through the first quarter.

And, oddly enough, companies aren't issuing great amounts of this debt. Barclays estimates that the total amount of investment-grade bonds issued this year will be the lowest since 2007. That leaves an awful lot of bond investors chasing after a dwindling number of bonds.