Friday’s Market Commentary


Friday, February 4, 2011
Stock Market Commentary:

Stocks edged higher after geopolitical woes continued for a 11th day in Egypt and the latest economic and earnings data topped estimates. The fact that the major averages bounced back sharply earlier this week illustrates how strong this market actually is.

Monday-Wednesday’s Action: Stocks Rally

Stocks rose on Monday after Exxon Mobile (XOM) reported solid Q4 results and a slew of economic data topped estimates. The Commerce Department said consumer spending rose +0.7% in December, a tick above expectations and higher than the +0.3% gain in Nov. The Institute for Supply Management (ISM) said its Chicago purchasing managers index rose for a 16th month to its highest level since July 1988.  Another strong boost on Monday was that concern subsided that the “worst case scenario” would unfold in Egypt- and so far it has not.

Stocks rallied on Tuesday after the latest series of stronger than expected earnings and economic data was released. Baidu (BIDU) and UPS (UPS) were among some of the high profile stocks which rallied after reporting solid Q4 results. It was also encouraging to see the latest round of economic data top estimates. The ISM said its index of national factory activity rose to 60.8 last month from 58.5 in December. Stocks traded in a relatively narrow range on Wednesday as the protests in Egypt turned violent. In a bizarre turn of events, a group of thugs disguised as pro-regime supporters showed up in horses and camels with one purpose: to cause trouble. Wednesday was the first day of violence in Egypt’s two-week protest.

Thursday & Friday’s Action: Stocks Edge Higher

Stocks were quiet on Thursday as investors awaited Friday’s jobs report and digested the latest round of earnings and economic data. Before Thursday’s open, the Labor Department said jobless claims jumped 51,000 to 454,000 in the last week of January. In other news, factor orders rose +0.2% in December and the ISM’s service index rose to 59.4, topping the Street’s estimate. This was the fastest increase for the service index since August 2005. Before Friday’s open, the Labor Department said U.S. employers added 36,000 new jobs last month as the unemployment rate fell to 9%. The reaction was muted as the headline number missed estimates and the unemployment rate fell sharply.

Market Action- Market In Confirmed Rally; Week 23 Ends

It was encouraging to see the bulls show up and defend the major averages’ respective 50 DMA lines as this market proves resilient and simply refuses to go down. The market remains in a confirmed rally 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. However, it is important to note that stocks are a bit extended here and a pullback of some sort (back to the 50 DMA lines) would do wonders to restore the health of this bull market. If you are looking for specific high ranked ideas, please contact us for more information.

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