Market Digest – Week Ending 10/5

in Market Commentary by

In typical bull market fashion, stocks rose on mixed economic news. Friday’s monthly jobs report, the last before the Presidential election, was better than expected, pushing the unemployment rate down to 7.8% and giving Obama a boost. But the jobs report was not the driver of equity gains. More important were comments from ECB President Draghi reiterating the ECB is ready to buy bonds if the necessary conditions are met. Treasuries fell, as the jobs report suggested the economy may accelerate sooner than expected.

Weekly Returns

S&P 500: 1,461 (+1.4%)

MSCI EAFE: (+2.2%)

US 10 Year Treasury Yield: 1.73% (+0.10%)

Gold: $1,781 (+0.6%)

USD/EUR: $1.302 (+1.3%)

Major Events

  • Monday – The ISM manufacturing survey rose to 51.5, above most expectations.
  • Monday – Euro-area unemployment rose to 11.4%, the highest on record since the inception of the common currency.
  • Tuesday – Spanish Prime Minister Rajoy denied rumors that a bailout agreement was imminent. Stocks dropped.
  • Tuesday – A Pennsylvania state judge blocked a voter identification law from taking effect, saying it would prevent some eligible voters from participating.
  • Wednesday – Hewlett-Packard shares dropped 13% after announcing its turnaround will take longer than expected.
  • Wednesday – Romney surprised pundits and voters with a strong performance in the first debate against Obama.
  • Thursday – ECB President Draghi said the bank is ready to buy government bonds, putting pressure on Spain to decide if it will request a bailout.
  • Friday – The US Labor Department reported that the economy added 114,000 jobs last month and revised up the August numbers. Official unemployment dropped to 7.8% compared to a consensus estimate of 8.2%.

Our Take

Friday’s jobs report is a pretty big deal. These numbers tend to jump around somewhat erratically, so it’s too soon to declare a jobs recovery, but the results were much better than expected. If unemployment trends below 7% in 2013, it would be a large positive surprise–the kind that moves markets. Stocks would benefit and bonds would languish as the Fed would likely scale back its bond purchasing programs.

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Craig Birk, CFP®

Craig Birk, CFP®

Craig Birk is a member of the Personal Capital Advisors Investment Committee. He also serves as Vice President of Portfolio Management. Prior to Personal Capital Advisors, he was an integral leader within the portfolio management team at Fisher Investments. During Craig’s time there, the company increased assets under management from $1.5 billion under management to over $40 billion. His responsibilities included risk management, portfolio implementation oversight, and management of all securities and capital markets research analysts. Mr. Birk graduated from the University of California at San Diego and has earned the Certified Financial Planner® designation.

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