Strong Week For The Market

Friday, March 5, 2010
Market Commentary:

Stocks rose after the Labor Department said February’s jobs report topped estimates. Volume, a critical gauge of institutional demand, was reported higher than the prior session on the Nasdaq exchange and the NYSE.  Advancers trumped decliners by over a 4-to-1 ratio on the NYSE and over a 3-to-1 ratio on the Nasdaq exchange. New 52-week highs still overwhelmingly trumped new lows on both exchanges.

Mon- Friday’s Action:On Monday, the Nasdaq composite confirmed the latest rally attempt when it jumped +1.6% and produced a cautious follow-through day. On Tuesday, stocks edged higher after India said its economy surged last quarter and topped the Street’s estimates. On Wednesday, stocks were little changed after the latest economic data showed improvement in the US job market and service industries. The ADP said employers only cut 20,000 jobs last month which was above the Street’s estimate. Elsewhere, the Institute for Supply Management (ISM) said its service index enjoyed the fastest growth rate since October 2007 which bodes well for the economic recovery. So far, over +470 companies in the benchmark index have reported quarterly earnings and approximately +75% have topped analysts’ estimates. Barring some unforeseen event, the S&P 500 Index is on track to snap a record 9-quarter earnings slump.

Strong Economic Data Lifts Stocks:

Two important economic reports were released on Thursday: factory orders and pending home sales. Factory orders matched estimates and rose a very solid +1.7% in January. Orders for non-durable goods grew by +0.9% and durable goods orders, already released, were revised lower but still grew by +2.6%. Meanwhile, the National Association of Realtors said pending home sales, plunged by -7.6% to 90.4. The NAR blamed poor weather as the primary culprit for the poor reading. Stocks rose on Friday after the Labor Department said US employers cut -36,000 jobs last month which topped the Street’s estimate. The closely watched unemployment rate held steady at 9.7% which was another healthy sign.

Market Action- Confirmed Rally:

Looking at the market, since Monday’s follow-through day, the market and a batch of leading stocks, steadily rallied which is a healthy sign. The fact that we have not seen any serious distribution days show up since Monday’s FTD bodes well for this nascent rally. It is also a welcome sign to see the market continue to improve as investors digest the latest round of stronger than expected economic and earnings data. Remember that now that a new rally has been confirmed, the window is open to start buying high quality breakouts. Trade accordingly.
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