Permanent Value

Weekly Update: March 1- 5, 2010

Michael La Salle
March 5th, 2010

Employment Numbers Push Stocks Higher

Stocks closed higher this week as the S&P 500 and Dow Jones Industrial Average both closed the week in the black for the year.  The S&P 500 gained 3.1% and the Dow Jones Industrial Average gained 2.33% for the week.  This comes in a week that showed better than expected employment numbers.  Nonfarm payrolls declined by 36,000 jobs despite severe weather in February, far less negative than the market forecast of a decline of 63,000 jobs.  The unemployment rate also surprised this week as rate remained unchanged at 9.7%, beating expectations of a 10% unemployment rate.  Stocks gains were also inflated late Friday by reports that consumer borrowing rose unexpectedly in January for the first time since in over a year.

In earnings this week, Joy Global Inc., Fuel Systems Solutions, Inc., and PetSmart, Inc. all beat analysts’ expectations.  U.S. pay-television provider, DISH Network Corporation also surprised investors this week as the company posted earnings of 40 cents per share, coming in 25% higher than analysts’ estimates of 32 cents per share. 

What opportunities are ahead?

As this week comes to a close and we approach next week’s anniversary of the bottom of the U.S. stock market, it brings me back to a year ago and reminds me of all uncertainty surrounding the U.S. economy.  Taking a jump back to today, the mood in the U.S. economy and investors is much brighter, the dollar is getting stronger, job losses are slowing down, and consumer borrowing made its first move up in a year.

Although we lost jobs in the overall economy, the manufacturing sector actually added jobs during February.  This indicates an upturn in manufacturing output may be in the near future and a buying opportunity for investors.

The increase in consumer borrowing may be the most important economic indication of the week.  The increase shows that consumers are beginning to poke their heads out of their shells and start spending.  The increase also shows that banks may be becoming more willing to lend as the economy continues to recover. 

As companies begin to hire, and consumers continue to feel more comfortable spending money, we may see even more growth in the overall economy and markets.

Market Returns

  This Week Year to Date Last Year Last 5 Years
S&P 500 3.1% 2.12% 66.83% -6.83%
Dow Jones Industrial Average 2.33% 1.32% 60.23% -3.42%


Next Week’s Economic Releases

March 11 – International Trade

March 12 – Retail Sales