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Will There Be a Spring Stock Market Slide?

Written by: Jeff Kleintop 05/01/12 - 1:15 PM EDT

2. Economic surprises (red) -- The Citigroup Economic Surprise index measures how economic data in the U.S. fared compared to economists' expectations. The currently falling line suggests expectations have become too high; this typically coincides with a falling stock market relative to the safe haven of 10-year Treasuries.

Chart 1: Economic Surprises and Market Performance


Citigroup Economic Surprise Index and S&P 500 Less 10-Year Treasury 3-Month Total Return

The Citigroup Economic Surprise Index is an unmanaged index and cannot be invested in directly. Past performance is no guarantee of future results.

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3. Consumer confidence (red) -- In 2010 and 2011, early in the year the daily tracking of consumer confidence measured by Rasmussen rose to highs just before the stock market collapse as the financial crisis erupted.

The peak in optimism gave way to a selloff as buying faded. Investor net purchases of domestic equity mutual funds began to plunge and turned sharply negative in the following months. This measure of confidence is once again beginning to fall from the highs.

Chart 2: Consumer Confidence


Rasmussen Daily Consumer Confidence Index

Source: LPL Financial, Bloomberg data

The Rasmussen Daily Consumer Confidence Index is an unmanaged index and cannot be invested in directly. Past performance is no guarantee of future results.

4. Earnings revisions (green) -- Last week was about earnings, and the news was good.

S&P 500 profits were up 7% (4.7% ex-Apple(AAPL) ) from a year ago with 72% of companies beating expectations, relative to 68% in the past four quarters.

However, strong first-quarter earnings reported in April of 2010 and 2011 were not enough to avoid the spring slide.

The first couple of weeks of the first-quarter earnings season in April 2010 and April 2011 drove earnings estimates for the next 12 months higher, but as the second half of the earnings season got underway in May 2010 and May 2011, guidance disappointed analysts and investors as the pace of upward revisions began to decline.