The US markets were up again for the 5th week in a row. All 3 major indexes (Dow Jones, S&P 500, NASDAQ) have posted gains for 5 consecutive weeks and are nearing their all-time-highs from back in 2007. The Dow Jones closed over 14,000 on Friday for the 1st time in more than 5 years and is currently only 155 points away from a closing bell record. The S&P 500 closed at 1,513 on Friday and is only 3.3% away from its all-time-high.
Most analysts believe the market activity from last week was driven primarily by positive manufacturing and employment data. On Friday of last week the January jobs report revealed that nonfarm payrolls rose by 157,000 for the month. In addition, analysts were pleased to see an upward revision in the jobs report for both November and December. November’s job gain increased from 161,000 (as initially projected) to 247,000 while December’s job gain increased from 155,000 to 196,000. Nevertheless, the unemployment rate ticked UP from 7.8% to 7.9% as the labor participation rate increased (the number of people actually looking for a job). The unemployment rate increase was not necessarily seen as a negative by most economists since it was accompanied by improving jobs data and an increase in the labor force participation rate. However, it’s important to remember that most analysts believe the US economy needs to add 150,000 jobs a month just to keep up with population growth…therefore, we will need to see much larger monthly jobs growth before the unemployment rate will decrease in any significant way.
In other positive economic news for the week, the ISM Manufacturing Index rose from 50.2 in December to 53.1 in January. Anything higher than 50 tends to signal expansion while anything below 50 tends to signal contraction. The increase in the index was good news for the economy as it indicates a strong manufacturing base which makes up a good chunk of the US economy.
The yield on the 10 year Treasury finally breached 2% on Monday of last week as investors continue to move away from the perceived safety of fixed income to the return opportunities of equities. According to the Wall Street Journal investors put $34.2 billion of new money into stock mutual funds and exchange-traded funds over the past four weeks. This marks the greatest 4 week inflow to stocks since 1996.
One surprisingly negative economic announcement hit the wire last Wednesday showing a DECLINE of 0.1% in 4th quarter US GDP. However, most analysts weren’t too concerned and blamed the unexpected report on “fiscal cliff fears” and Hurricane Sandy.
