Week 1 of 2010; Stocks Rally
Friday, January 8, 2010 Market Commentary:
Investors digested a slew of economic data and sent stocks higher during the first week of 2010. Volume, an important indicator of institutional sponsorship, was reported slightly lower than Thursday’s totals which indicated large institutions were not aggressively buying or selling stocks. Advancers led decliners by a 23-to-15 ratio on the NYSE and by a 17-to-10 ratio on the Nasdaq exchange. There were 30 high-ranked companies from the CANSLIM.net Leaders List that made a new 52-week high and appeared on the CANSLIM.net BreakOuts Page, lower than the total of 32 issues that appeared on the prior session. New 52-week highs solidly outnumbered new 52-week lows on the NYSE and on the Nasdaq exchange, and new lows were again in the single digits which is a very healthy sign.
Monday was the first trading day of 2010 and stocks opened with a bang as the US dollar fell and healthy manufacturing data was released from the US and China. Before Monday’s opening bell, China announced stronger than expected manufacturing data which sparked a broad based rally in overseas markets. Manufacturing in China grew by the strongest level since April 2004 which helped allay concerns that the global economic recovery was waning. It is important to note that China was one of the first countries to recover from the first global recession since World War II. The buying continued in the US when the Institute for Supply Management’s (ISM) factory gauge rose to 55.9. The report topped estimates and was the highest level in more than three years, which suggests the US manufacturing sector is definitely in recovery mode.
On Tuesday, stocks ended mixed as investors digested two important economic data points: factory orders and pending home sales. First, the good news, the Commerce Department said that factory orders in November rose +1.1% which more than doubled the Street’s estimate for a +0.4% increase. Then, the National Association of Realtors said pending home sales plunged -16% in November, which was the lowest reading since June and fell short of the Street’s lowest estimate.
Stocks ended mixed on Wednesday after a private report from ADP showed employers cut more jobs than expected last month and some Federal Reserve officials said they are willing to entertain the notion of more stimulus measures in 2010. Before Wednesday’s opening bell, ADP Employer Services Inc., the country’s largest private payrolls firm, said US employers slashed -84,000 jobs in December which fell short of the Street’s estimate of -75,000. Elsewhere, the Institute for Supply Management (ISM) released a weaker than expected report on the service sector. Its non-manufacturing business index rose to 50.1, from 48.7 in the prior month. The reading topped the boom/bust level of 50 which shows growth but fell short of the 50.5 consensus. At 2:00PM EST, the Federal Open Market Committee (FOMC) released the minutes of its last meeting in 2009. The minutes for the December 15-16 FOMC meeting showed that several Fed officials are open to the notion of further stimulus measures, if needed, in 2010.
Thursday & Friday:
For a third consecutive session, stocks ended mixed on Thursday as investors digested mixed economic data: positive retail sales data and a modestly negative weekly jobless claims report. Finally, at 8:30AM EST on Friday, the Labor Department released December’s much anticipated jobs report. The report showed that U.S. employers slashed -85,000 jobs last month which fell short of the Street’s unchanged estimate. Meanwhile, the unemployment rate held steady at -10% which is near a 26-year high. However, November’s reading was revised to show a gain of 4,000 which was the first time US employers added jobs in nearly two years. It is important to note that since the recession began, the U.S. has lost –7.2 million jobs which is the largest on a percentage basis of all jobs since World War II ended in 1944-45.
Market Action- Price & Volume Remain Strong
After all was said and done, stocks remain strong as investors digested the latest round of economic data. The benchmark S&P 500, Dow Jones Industrial Average, NYSE, Nasdaq, mid-cap S&P 400, small-cap Russell 2000 and small-cap S&P 600 indices all enjoyed fresh recovery closing highs in the first week of 2010. The current rally ended its 44th week (since the March 12, 2009 follow-through day) and on all accounts still looks very strong. In addition, most bull markets last for approximately 36 months, so the fact that we are beginning our 10th month suggests we have more room to go. Until support is broken (50 DMA lines for the major averages) this rally deserves the bullish benefit of the doubt. Trade accordingly. Professional Money Management Services – A Complimentary Portfolio Review – Inquire today! Do you want better results? Are you looking for an edge? Do you have a difficult time separating your emotions from your buy and sell decisions? Are you ready for a change? Then submit your inquiry here for a complimentary portfolio review. *Accounts over $250,000. ** Serious inquires only, please.