02 April, 2009

Rally Continues past April Fools

The 2nd of April, typically a let down day for pranksters has markets rising like the Sun in the East. North American markets had spent March on an absolute tear, had the Madness from the NCAAs spread to the trading floors or was there finally something to be optimistic about?

Well, first and foremost the G20 summit has economists, investors and the media talking, which is always a good thing, especially if what's being talked about is recovery. Not only recovery, but how to get there. The month of April has opened with positive market gains despite a jobs situation in America that if taken by the numbers seems as dire as ever. Jobless claims rose to about 670,000 in America at the end of March, as high a figure as has been seen since 1982, but the G20 leadership, and that leadership's commitment to economic strength going forward has investors optimistic.

The latest reports out of the G20 summit have leaders close to agreements on stricter financial rules, including the use of tax havens, and a planned influx of money to the International Monetary Fund in order to help fight the global recession. This total could reach upwards of $1Trillion based on the unveiling of the plan by Britain's Prime Minister Gordon Brown.

It isn't just the G20 that has been providing the spark of late. In the Auto Industry, one of the hardest hit by the curbing of consumer spending, Toyota (TM) showed a sales increase of 18% in March, compared to February of this year, which led of a Vice President at the company predicting that Toyota has seen and moved past the bottom in slumping car sales. Toyota is up 14% in the last two sessions.

Piracy, a long and hotly debated issue came to the forefront of the press yesterday as a major 20th Century Fox motion picture was leaked online a month before its theatrical release. X-Men Origins: Wolverine, which is a follow-up to the hugely successful X-Men franchise for Fox and its parent News Corp (NWS) and based on the characters created by Marvel Entertainment (MVL), was set to be a summer blockbuster and tent-pole film for the studio. An unfinished, but DVD quality version of the movie somehow found its way around the Internet for fans and commentators alike to have a look. How this plays out in the month ahead is guess-work but bad word of mouth amongst the core fan-base could spell trouble for Fox, which is coming off of an abysmal 2008 movie year.

The first weekend box office for comic book movies depends heavily on the core fan-base and intelligent marketing, but if the movie doesn't live up to expectations and the core fans get to see it in nearly completed fashion a month prior to release, the effects of piracy will be felt harder here than ever before in Hollywood. News Corp, being the giant conglomerate that it is, is unharmed for now as the stock has risen 7% today along with the broader market.

Today's continued bullish sentiment was broad, with seemingly all sectors moving higher. The Dow, which has broken 8000 this morning is joined by its American benchmark brethren with gains of nearly 4% as of this writing. Question is, should investors be cautious for when the Sun sets in the West in the weeks ahead?

Disclosure: Author owns MVL

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