Friday, July 8, 2011
Stock Market Commentary:
It was encouraging to see stocks rally on Thursday as investors digested a slew of economic data from across the globe. It is also encouraging to see that all the major averages remain above their respective 50 DMA lines and are on track for a second consecutive weekly gain which suggests the bulls remain in control of this market. The next level of resistance is their respective 2011 highs.
Monday-Wednesday: Stocks Edge Higher
Stocks were closed on Monday in observance of the July 4th holiday. Overseas, stock markets edged higher as investors awaited Friday’s much anticipated jobs report. Stocks were quiet on Tuesday after the Commerce Department said U.S. factory goods rose+0.8% in May to $445.29 billion. The gain followed a large decline in April and bodes well for the ongoing economic recovery. The report also reiterated a series of stronger than expected economic data which suggests the economy is improving. Elsewhere, Moody’s Investors Service, a popular rating agency, downgraded Portugal’s debt to junk status which sparked fresh concerns regarding the European debt crisis.
Before Wednesday’s open, China decided to raise their key interest rate by 25 basis points to curb inflation and their robust economy. Keep in mind that a slowdown in China curbs demend for so-called risk assets. Therefore, this put mild pressure on a stocks and a slew of commodities. At 10am EST, the ISM released its service index which fell short of the Street’s estimates and bodes poorly for the economic recovery.
Thursday & Friday: Job Picture Improves; Stocks Rally:
Before Thursday’s open, the European Central Bank (ECB) raised rates by 25 basis points to help curb inflation. The ECB raised rates to +1.5% which is the highest level since March 2009. Germany, Europe’s largest economy, said industrial production rose by +1.2% which topped the Street’s estimate for a gain of +0.8%. In The U.S., ADP, the country’s largest private payrolls company, said U.S. employers added +157,000 which easily topped the Street’s estimate for a gain of less than 100,000. Even though the number topped estimates it was still below the +250,000 jobs needed each month to lower the unemployment rate. Several large U.S. retailers reported stronger than expected same store sales in June which bodes well for the economic recovery. The Labor Department said weekly jobless claims fell by -14,000 to 418,000 which is still above the dreaded 400,000 mark. However, a lower reading for the week bodes well for the overall employment situation. Before Friday’s open, the Labor Department said U.S. employers only added +18,000 new jobs last month which was sharply lower than the Street’s forecast for a gain of +105,000. The unemployment rate rose to +9.2%, up from last month’s reading of +9.1%. Equally worrisome, last month’s already low reading of +54,000 was lowered to +25,000.
Market Outlook- Market In A Confirmed Uptrend:
The last week of June’s strong action suggests the market is back in a confirmed rally. As our longstanding clients/readers know, we like to filter out the noise and focus on what matters most: market action. That said, the action remains bullish until the major averages and leading stocks violate their respective 50 DMA lines. Until then, the market deserves the bullish benefit of the doubt. Barring some unforeseen event, investors will likely be focusing on the jobs market this week and then spend the rest of the month focusing on the latest round of economic and Q2 earnings data. If you are looking for specific help navigating this market, please contact us for more information.