Friday, February 03, 2012
Stock Market Commentary:
Stocks and a slew of other risk assets were relatively quiet ahead of Friday’s much anticapitated nonfarm payrolls report. From our point of view, the major averages confirmed their latest rally attempt on Tuesday 1.3.12 which was Day 9 of their current rally attempt. It was also encouraging to see the S&P 500 break above its downward trendline and its longer term 200 DMA line. Looking forward, the S&P 500 is doing its best to stay above its Q4 2011′s high (~1292) and now has its sights set on its 2011 high near 1370. In addition, the bulls remain in control as long as the benchmark S&P 500 trades above 1292 and then its 200 DMA line.
Monday-Wednesday’s Action: Stocks Quiet Ahead of Jobs Report
On Monday, stocks and a slew of other risk assets fell as the month of January draws to an end. The news on the economic front did little to help stocks. Personal income rose by +0.5% last month in the U.S. which topped the Street’s forecast for an increase of +0.4%. Meanwhile, spending was flat during the final month of the year which just missed the average estimate for an increase of +0.1%. On Tuesday, stocks were quiet as investors digested the latest round of earnings and economic data. News on the economic front was less than stellar. The S&P/Case-Shiller index fell -1.3% in November which missed the Street’s estimate for a decline of -0.5%. Elsewhere, the Conference Board said consumer confidence unexpectedly declined in January, The index fell to 61.1, missing the Street’s estimate of 68. The Institute of Supply Management said its Chicago business barometer fell to its lowest level since August which is not ideal. Earnings continued to be released in droves with most companies meeting or slightly passing analysts estimates. After all was said and done, stocks and a slew of other risk assets (commodities and currencies) rallied in January, which bodes well for the global economy. On Wednesday, stocks and a slew of other risk assets were relatively quiet as the world awaited Friday’s jobs report.
Thursday & Friday’s Action: Jobs Report Is Strong!
On Thursday, stocks and a slew of other risk assets were relatively quiet as the world awaited Friday’s jobs report. Before Thursday’s open, the Labor Department said weekly jobless claims slid by –12,000 to a seasonally-adjusted 367,000. This bodes well for last month’s jobs report which analysts now believe U.S. employers added 150,000 new jobs with the unemployment rate remaining unchanged at +8.5%. A separate report released from the Labor Department showed that U.S. nonfarm productivity rose at a +0.7% annual rate but just missed the Street’s estimate for a gain of +0.8%. Stocks rallied on Friday after the Labor Department said U.S. employers added 243,000 new jobs last month and the unemployment rate fell to -8.3%.
Market Outlook- New Rally Confirmed
Risk assets (stocks, FX, and commodities) have been acting better since the latter half of December. Now that the major U.S. averages scored a proper follow-through day the path of least resistance is higher. Looking forward, one can err on the long side as long as the benchmark S&P 500 remains above support (1292). Leadership is beginning to improve which is another healthy sign. Now that the 200 DMA line was taken out it will be important to see how long the market can stay above this important level. If you are looking for specific help navigating this market, feel free to contact us for more information. That’s what we are here for!