Records
are made to be broken
Markets
made history last week as the Dow set an all-time high above 14,400 and the
major indices all posted solid gains, buoyed by strong employment numbers and
renewed confidence in the economy.[1]
For the week, the S&P 500 gained 2.17%, the Dow
gained 2.18%, and the Nasdaq gained 2.35%.[2]
The
jobs report was the big market mover of the week. Employers added a
greater-than-expected 236,000 workers to their payrolls in February and the
jobless rate fell to a four-year low of 7.7%, providing the strongest signal
yet that the economy is coming back. However, digging deeper into the jobs
data, it’s not all good news. Despite gradual improvement over the past few
months, the labor force fell by 130,000 as people dropped out of the job
search. Had labor force participation remained at its previous level, the
unemployment rate would have held steady at 7.9%.[3]
This simply means that the labor market is improving overall, but not
everywhere at the same time. While economists were pleased with the news, they
caution that the economy still has a long way to go.
On
a more positive note, the average weekly hours worked increased from 34.4 in
January to 34.5 in February, meaning that Americans are working more hours (and
that businesses are seeing healthy demand). Hourly earnings also increased
slightly last month. Even better, the overall increase in hours, earnings, and
jobs caused aggregate wages to increase 0.7%, meaning that Americans are taking
home more money every month. The gain is more than enough to offset January’s
payroll tax increase, which is excellent news for consumer spending.[4]
Despite
the budgetary headwinds, the first quarter of 2013 is shaping up well. We still
need to watch out for a second quarter slowdown similar to what happened in
2011 and 2012, but analysts think that this year might be different. While we
are grappling with budgetary issues, the fiscal cliff is no longer ahead of us
and housing is no longer a headwind to growth, but a tailwind.
This
week’s calendar is relatively light on data, but analysts will be watching
consumer sentiment numbers as well as retail sales numbers to determine whether
there’s still additional upside. We’re very pleased to see markets picking up,
but we want our clients to be prepared for a potential short-term market
pullback in the future as traders take profits.
HEADLINES:
Fitch cuts Italy Italy Italy
Is U.S.
Wholesale inventories rose in January. The Commerce Department reported that
wholesale inventories have risen at their fastest pace since December 2011 as
construction companies, computer retailers, and car dealers stock up.
Inventories are a key component of GDP and are a bellwether of business
confidence.[7]
QUOTE OF THE WEEK:
“Be
a student by staying open and wiling to learn from everyone and anyone.” – Dr.
Wayne Dyer
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The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.
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[1] http://www.cnbc.com/id/100537377
[2] http://briefing.com/investor/markets/weekly-wrap/weekly-wrap-for-march-4-2013.htm
[3] http://briefing.com/investor/markets/weekly-wrap/weekly-wrap-for-march-4-2013.htm
[4] http://briefing.com/investor/markets/weekly-wrap/weekly-wrap-for-march-4-2013.htm
[5] http://www.cnbc.com/id/100538422
[6] http://www.cnbc.com/id/100538119
[7] http://www.reuters.com/article/2013/03/08/us-usa-economy-wholesale-idUSBRE9270PU20130308
[8] http://news.yahoo.com/china-data-show-uneven-economic-recovery-policy-dilemma-100033944--sector.html
