“Don’t call it a comeback!”  That classic line from the 1990 song Mama Said Knock You Out by American musician LL Cool J comes to mind seeing this week’s action on many fronts.  The best place to start is on earnings.  So far so good.  It is looking like 18% year-over-year growth in the bottom-line of the S&P 500 with revenue growth topping 7%.  While this type of fundamental performance is lowering forward-looking P/E multiples to attractive levels, there was still plenty of volatility early in the week.  The hangover of technology scrutiny along with comments by Caterpillar’s management team saying they may have seen “peak earnings growth” was enough to cause some skittishness.  That said, Facebook crushed a lot of doubts out there…at least in the short-term.  The company posted earnings of almost $5 billion on sales of $12 billion in the first quarter.  More importantly, despite the “delete” campaign, they still added 70 million users in the first three months of the year raising total users to over 1.4 billion.  It was enough to reinvigorate the whole technology sector giving their price charts a chance to knock out the “bears.”

Economically, US GDP growth never left.  The initial estimate released today is 2.3% quarter-over-quarter expansion which exceeded most estimates.  First quarter is seasonally the weakest of the year so the economy is on track for reaching closer to full year 3% real growth which has been a goal of this Administration.  Fixed Investment is a big contributor and an early sign that capital expenditures are getting a boost from the corporate tax cut enacted last year.  Of course, the flip side is that quick growth leads to concerns of inflation and the Fed getting more aggressive.  Rates have already moved higher with the 2yr Treasury yield nearing 2.5% and the 10yr Treasury popping over 3% this week.  The economy can take the hits from higher rates for a bit as long as they can see it coming instead of a sucker punch.

Geopolitically, it sounds like peace is coming back.  The summit between North and South Korea appears to have gone well.  Only six months ago, it felt like we were on the brink of nuclear war.  Testing of nuclear weapons and transcontinental ballistics were in the headlines and minds of people all over the world.  It is unclear exactly what caused the abrupt change, but a joint statement after the summit of leaders from both countries stated a clear desire to ease military and political tensions with words that suggested a denuclearization of the Korean peninsula.  Time will be the final arbiter of the peace, but there is fighting chance for hope.