Investor’s are more optimistic
In spite of ongoing turmoil in Egypt and the Middle East, the markets continued their gain last week. For the period ending February 4th, the Dow, the S&P 500, and the Nasdaq all climbed reflecting elevated optimism in the markets. The AAII Sentiment Survey for last week shows that 51.5% of investors are feeling bullish, up 9.5% from the week of January 24th. That’s well above the historical average of 39%.
Indeed, this optimism is even more remarkable in light of last week’s jobs report which has been subject to conflicting opinions and interpretations. Case in point: According to a MarketWatch headline from Friday, the “job crisis isn’t over”, while a cnnmoney.com headline from the same day touted that, “the job market is getting better.” Each headline could be considered accurate, but clearly they offer different slants. Though the rate of hiring did not show a notable increase, the unemployment rate still fell to 9.0% - bad news and good news at the same time. Some analysts predict that bad weather across the U.S. is partially to blame, with more than 850,000 workers prevented from working at the time the survey was conducted. Other explanations have also been cited, and as a result, it appears that many are waiting for February’s report for clarification before jumping to conclusions.
Recent events, both within the U.S. and internationally, illustrate a noteworthy aspect of investing: It is impossible to predict how the stock market will react to news. Such an optimistic week in light of Egyptian strife and a conflicting jobs report is a pleasant surprise. It seems that the market has had time to price in geopolitical risks in Egypt and sluggish jobs growth and found such factors to be no immediate threat. Clearly, the headlines and the stock market do not always move in tandem. This is a good fact to remember when evaluating how much credence should be given to sensational news reports.
ECONOMIC CALENDAR
Tuesday – Redbook
Wednesday – Bank Reserve Settlement, EIA Petroleum Status
Thursday – BOE Announcement, Jobless Claims, Wholesale Trades, Treasury Budget Friday – International Trade, Consumer Sentiment
Data as of 02/04/2011 1-Week YTD 1-Year 5-Year 10-Year
Standard & Poor's 500 2.71 4.23 23.3 0.74 -0.29
Dow 2.27 4.45 20.9 2.41 1.13
NASDAQ 3.07 4.39 30.3 4.48 0.41
MSCI EAFE 3.16 3.93 15.7 -0.41 1.56
10-year Treasury Note (Yield Only) 3.33 N/A 3.61 4.53 5.14
Notes: All index returns exclude reinvested dividends, and the 5-year and 10-year returns are annualized.
Sources: Yahoo! Finance, MSCI Barra. Past performance is no guarantee of future results.
Indices are unmanaged and cannot be invested into directly. NA means not available.
HEADLINES:
The Green Bay Packers won its fourth Superbowl title in a 31-25 victory over the Pittsburgh Steelers. The Vince Lombardi Trophy is headed back to Titletown for the first time in 14 years.
Super Bowl-related consumer spending will reach $10.1 billion this year, the National Retail Federation says. The Washington-based trade group cites a survey conducted by its Retail Advertising and Marketing Association division that says the average consumer will spend $59.33 on game-related merchandise, apparel and snacks, up from $52.63 last year.
Hackers have repeatedly penetrated the computers running Nasdaq during the past year. Though the exchange’s trading platform was not violated and no information has been compromised, a federal investigation is underway.
Businesses’ unemployment-insurance payments rose 37% in 2010. Last year, the amount employers paid into state unemployment-insurance funds rose 34%. Combined with the increase in total wages, businesses paid out $43 billion.
On Friday, Bank of America appointed a new foreclosure and loan modifications czar, and created a new unit to oversee problem home loans. The new unit creates a seventh major division at the bank and will be overseen by Terry Laughlin. The move splits the largest U.S. bank by assets’ mortgage business: one focused on new and current mortgages, and another dedicated to foreclosures.
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The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
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