Growing confidence in the sustainability of the U.S. recovery helped push stocks back to their mid-February highs. This offset concerns about impact of global headwinds that were showing up in higher oil prices and disruptions to global supply chains. The labor market turnaround, as shown by Friday's jobs report, would further strengthen the recovery's foundations.
Oil remains a risk factor, though the economy is resilient enough to withstand $100 oil. But with the Libyan situation slowly becoming a stalemate and unrest still the dominant theme in the Middle East, it may not take much to push prices much higher. Nigeria, a major oil producer in West Africa with a history of political instability, is heading into elections in the coming weeks. Brace up for hearing more about them in the coming days.
Unless something extraneous comes along, the market's focus will decidedly shift to the first-quarter earnings season in the next few days. To make significant gains from current levels, the market will like to hear unequivocally positive guidance from management teams. Of particular interest would be the outlook for margins, given the recent commodity-price inflation.
My feeling is that the extent of positive surprises may be towards the weaker side this time around. But we will have to wait and see.