Stocks End Volatile Week Higher

Friday, March 04, 2011
Stock Market Commentary:

Stocks found support near their respective 50 DMA lines for the second straight week and rallied as investors digested a slew of economic data. The Labor Department said U.S. employers added 192,000 jobs last month which matched estimates. The current crisis in the Middle East remains in flux which is putting upward pressure on oil and gold and some modest pressure on equities. The benchmark S&P 500 is up nearly 100% from its March 2009 low, and still about -16% off its all time high from October 2007. On average, market internals remain healthy as the major averages bounced after finding support near their respective 50 DMA lines in late February.

Monday- Wednesday’s Action: Stocks Find Support 50 DMA Line

Stocks rallied on Monday after consumer spending in the U.S. rose but fell short of estimates last month due to higher food and energy prices. The Commerce Department said purchases rose +0.2% which was the smallest gain since June and half the median forecast. The report also showed that personal income topped estimates which was largely due to a stronger economy and the recent tax-cut extension. Inflation remained at bay and below the Federal Reserve’s 2% target. Elsewhere, a separate report showed U.S. pending home sales fall -2.8% in January to 88.9. The pending home sales index fell -1.5%compared to the same level last year.
On Tuesday, stocks negatively reversed (opened higher but closed lower) and tanked after news spread that a former Goldman Sachs (GS) director was involved in an insider trading suit. The ISM Manufacturing index in the U.S. rose in February to the fastest pace since May 2004 as factories added workers and increased production. The ISM’s factory index jumped to 61.4 from 60.8 in January. Manufacturing data in Europe jumped to the highest level in 10 years while manufacturing data in China fell to a six month low. Elsewhere, Fed Chairman Ben Bernanke and Treasury Secretary Timothy Geithner testified on Capital Hill where they largely reiterated their recent stance on monetary policy and an improving economic recovery.
Stocks were relatively quiet on Wednesday after the ADP said U.S. employers added more jobs than expected last month. Before Wednesday’s open, ADP, the country’s largest private payrolls firm, said U.S. employers added +217,000 new jobs in February which easily topped the revised +189,000 gain in January and February’s median estimate of +180,000. Stocks opened higher but sold off after a television station in France said a Libyan airplane fired two missiles at a square in the town of Brega. This sent WTI crude higher (well over the psychologically important $100/barrel mark) and sent gold surging to a fresh all-time high.

Thursday & Friday’s Action: A Lot Of Volatility; Minor Price Progress:

Stocks surged on Thursday as investors digested a slew of economic data. Before Thursday’s open, European Central Bank President Jean-Claude Trichet held rates steady at 1% and said the ECB may raise interest rates in April to curb inflation. This sent the euro higher and the USD lower.  A slew of large U.S. chain stores released stronger-than-expected monthly comps which bodes well for retail sales and the ongoing economic recovery. The Labor Department said weekly jobless claims slid by -20,000 which brought the weekly total down to 368,000. Finally, the ISM released its service index which easily topped estimates. On Friday, stocks fell after the Labor Department said U.S. employers added 192,000 jobs in February, the unemployment rate eased to 8.9%, and oil prices closed above $104/barrel as the situation in Libya deteriorated.

Market Action- Confirmed Rally; Week 27

It was encouraging to see the bulls show up and defend the major averages’ respective 50 DMA lines in November, January, and late February and early March. From our point of view, the market remains in rally-mode until those levels are breached. The tech-heavy Nasdaq composite and small-cap Russell 2000 indexes continue to lead evidenced by their shallow correction and strong recovery. If you are looking for specific high ranked ideas, please contact us for more information.

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Dow Jones Newswire Quote: US Stocks Fall, On Pace For Second-Straight Weekly Drop

By Donna Kardos
NEW YORK (MarketWatch) — U.S. stocks tumbled Friday, putting the market on pace for its second-straight weekly drop, as investors fretted over the potential impact of oil’s climb above $100 a barrel.
The Dow Jones Industrial Average fell 139 points, or 1.1%, to 12119. All 30 of the measure’s components were in the red. DuPont led the decline with a 2.4% drop, while General Electric shed 2.3% and Hewlett-Packard lost 2.1%.
The Nasdaq Composite declined 0.8% to 2777. The Standard & Poor’s 500-stock index fell 1.1% to 1317, with all its sectors in negative territory.
The day’s declines put the market into negative territory for the week, with the Dow recently down 0.3% on the week. If the measure closes lower on the week, it would mark its second-straight weekly drop and its first time posting back-to-back weekly declines since August.
The slump came as crude-oil futures trade near $104 a barrel after Libya’s capital saw sporadic violence during antigovernment protests, as a heavy clamp-down on the city by Col. Moammar Gadhafi spread fear among residents.
Meanwhile, more than 100,000 protesters gathered in the Bahraini capital for the largest demonstration since protests erupted in the Sunni-ruled kingdom almost three weeks ago, escalating pressure on the ruling Al-Khalifa family to accept sweeping political reforms. And Yemeni soldiers fired rockets on protesters in the restive northern province of Amran, killing three people and injuring seven others, according to a Shia rebel spokesperson.
The escalating violence added to investors’ worries as they kept an eye on rising energy prices.
“The problem with higher oil prices is that it acts as an indirect tax on consumers and businesses,” said Adam Sarhan, chief executive of Sarhan Capital. He noted that the rise in oil prices comes as investors are also beginning to wonder how the economy will perform after the Federal Reserve winds down its stimulus program in June.
Sarhan added, “What we’re seeing now is a confluence of two factors: Can the economy continue growing without the Fed’s help, and how will the economy continue to grow if oil spikes higher?”
Investors were uninspired by government data showing nonfarm payrolls rose by 192,000 last month, missing expectations for a rise of 200,000.
However, the unemployment rate, which is obtained from a separate household survey, fell to 8.9% last month, the first time it has slipped below 9% since April 2009. It improved on expectations for the jobless rate rising to 9.1% from January’s 9%.
The data also showed average hourly earnings of all employees increased by a penny to $22.87.
Some said the mixed report might actually be positive for the market with regard to how the Federal Reserve might react.
“This is the best of all worlds,” Jim McDonald, chief investment strategist at Northern Trust said. “Having moderate, sustained job growth will allow the Fed to reduce the stimulus and liquidity programs at a deliberate pace,” whereas job growth in the 400,000 range at this point in the recovery would likely push the Federal Reserve off the sidelines, he said.
The U.S. Dollar Index, tracking the U.S. currency against a basket of six others, slipped 0.1%. Treasurys rose, pushing the yield on the 10-year note down to 3.49%. Gold futures rose.
Among stocks in focus, Marvell Technology tumbled 9.8%. The chip maker’s fiscal fourth-quarter earnings rose 8.8%, but came in at the low end of the company’s projections, and it forecast disappointing first-quarter results on weakness in the mobile and wireless markets.
Citigroup slipped 3.1%, and Goldman Sachs Group shed 2.2%, after Bank of America Merrill Lynch downgraded its investment ratings on the stocks to “neutral” from “buy.” The firm cited expected weakness in first-quarter results from the two banks.

Jobs Report: Why Does It Matter?

I was asked a very important question Friday morning by a very intelligent person: Why does Wall Street care about the employment report? This question inspired me to write this article because so many people simply do not understand how Wall Street works.

Jobs Report- What is it?

The first Friday of every month, the Labor Department releases its nonfarm payrolls report which illustrates how the labor market (and the broader economy) fared over the past 30 days. does a great job defining this report:

The employment situation is a set of labor market indicators based on two separate surveys in this one report. Based on the Household Survey, the unemployment rate measures the number of unemployed as a percentage of the labor force. Other key series come from the Establishment Survey (of business establishments). Nonfarm payroll employment counts the number of paid employees working part-time or full-time in the nation’s business and government establishments. The average workweek reflects the number of hours worked in the nonfarm sector. Average hourly earnings reveal the basic hourly rate for major industries as indicated in nonfarm payrolls.

The monthly employment report is one of the most anticipated economic reports released each month because it gives investors a look on how all major sectors of the economy are performing. Furthermore, the report is released at the beginning of each month and is comprehensive in nature. The report looks at the health of the jobs market and shows what happened to income and productivity during the past 30 days. As a result, investors are able to get a good read on the economy from which they can draw their own conclusions on what other economic reports will look like for that month.

Why Does Wall Street Care?

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