Market Digest – Week Ending 2/1
Stocks gained for a fifth straight week. Economic news and earnings were mixed, but positive on balance. US GDP unexpectedly contracted in Q4, but the decline was primarily driven by temporary factors such as hurricane Sandy and a decline in government defense spending. The Labor Department reported a 157,000 increase in payrolls for January and increased December’s estimate. These were both viewed as positive, though an increase in the labor force caused unemployment to tick up to 7.9%. Treasuries continued their declines for the year, despite no meaningful change in tone in the Fed meeting minutes released Wednesday.
S&P 500: 1,513 (+0.7%)
MSCI ACWI ex-US: (+0.5%)
US 10 Year Treasury Yield: 2.03% (+0.09%)
Gold: $1,667 (+0.5%)
USD/EUR: $1.365 (+1.4%)
- Monday – Orders for durable goods rose 4.6%, beating expectations.
- Monday – French and Malian forces recaptured Timbuktu without resistance, ending 10 months of control by forces loyal to al Qaeda.
- Tuesday – Amazon reported a 22% increase in 4th quarter sales.
- Tuesday – The S&P/Case-Shiller index of US home values rose 5.5% from a year ago, the largest gain since August, 2006.
- Wednesday – US GDP unexpectedly dropped 0.1% in Q4.
- Thursday – Peregrine Financial’s CEO Russell Wasendorf Sr., was sentenced to 50 years in prison after admitting to fraud.
- Thursday – The US Conference Board’s index of leading indicators rose 0.5% in December.
- Friday – The Labor Department said the US added 157,000 jobs in December, ahead of expectations. Numbers for November were revised upward. Stocks rose.
It’s getting harder to paint a dark picture of the US economy. Indeed, capitulation has occurred for many of last year’s bears in the media. With no scary headline topic de jour, investors are feeling more comfortable putting cash back to work. Anecdotally, we are seeing more individuals moving cash back into stocks. The good news is we have only seen the tip of the iceberg in terms of potential cash being redeployed. The concerning aspect is the sudden shift in sentiment. The best prospects for gains in stocks are when fear is prevalent, not an environment of complacency. But bull markets end with greed and euphoria, not complacency.