Market Report – February 20, 2012

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In the Rear View Mirror:

The mere notion that Greece is inching close to a debt agreement to help the country skirt sovereign debt default and some solid economic data points courtesy of the U.S. helped propel stocks to another weekly gain. The S&P 500 jumped 1.4% for the week to 1,361.23. That was the broader market index’s sixth weekly gain in the past seven. The index is less than three points away from topping its highest levels since October 2008.

Good cheer was widespread this week as all ten industry groups in the index closed in the green. Not surprisingly, energy and technology issues led the way and the fact the Nasdaq closed higher for the week (up 1.65% to 2951.78) is nothing short of impressive when considering darling Apple (Nasdaq: AAPL), the largest U.S. company by market value and the largest component of both the S&P 500 and Nasdaq 100, closed fractionally lower for the week.

For the week, the Dow Jones Industrial Average surged 148.64 points, or 1.2%, to 12,949.87. On Friday, 19 of the Dow’s 30 components closed higher and five of the 11 losers lost just 0.1% or less. On Thursday, the blue chip index was even more impressive as only Kraft (NYSE: KFT) closed negative on the day.

The Markets @ 2/17/2012
Index Close Weekly % Change YTD Change YTD%
DJIA 12949.87 148.64 1.16% 732.31 5.99%
NASDAQ 2951.78 47.9 1.65% 346.63 13.31%
S&P 500 1361.23 18.59 1.38% 103.63 8.24%
NYSE Comp 8114.51 122.48 1.53% 637.48 8.53%
NYSE Amex 2441.26 23.27 0.96% 162.92 7.15%
RUS 2000 828.68 15.35 1.89% 87.76 11.84%
VANG INTL 14.6 0.29 2.03% 1.54 11.79%
USX CHINA 5215.76 82.97 1.62% 685.96 15.14%
EMERG MKTS 7024.47 152.73 2.22% 1019.16 16.97%

Market Report

In economic news, the Labor Department said consumer prices were up 0.2% in January following a flat reading in December. Excluding food and energy prices, the January reading was still higher by 0.2%.

The Conference Board’s gauge of leading economic indicators climbed 0.4% in January following a 0.5% increase in December. Those are the strongest back-to-back gains in nearly a year, Bloomberg reported.

On Thursday, the Labor Department told us weekly jobless claims fell by 13,000 to 348,000, easily surpassing the 365,000 new claims economists were expecting. More importantly, the four-week moving average, which economists pay more attention to because it’s less volatile than the weekly claims report, keeps falling and keeps staying under the 400,000 mark. Maybe, just maybe if U.S. economic news remains strong, it will be enough to overshadow Europe’s lingering sovereign debt woes.

This was a broad market recovery

Every index we follow was in the green and not by insignificant numbers either.

With the NYSE Composite gaining over 1.5% and the AMEX up close to 1%, all the major indices made impressive gains and the others were even more so.

Our small cap barometer, the Russell 2000, leaped up 1.89%, closing at 828.68…up 11.84% YTD.

The Vanguard International and Emerging Markets were up 2.03% and 2.22% respectively…while China turned in an impressive performance with the USX China Index moving up 1.62%.

These four benchmarks, along with the Nasdaq are into double digit gains for the year. This is very interesting indeed, considering the tenuous European situation and political reports that the economic sky is falling.

Gold made a marginal recovery this week, closing Friday at $1,724.60…up $1.30. WTI Crude oil continued to move up… +$4.57, to close at $103.24. If it continues thru the $105 level, we may see $110 oil pretty fast.

The dollar moved ever so slightly up (+0.0033 or 0.7610 Euros); the 10-year bond lost $0.141 to close at $99.984 and the 30-year bond lost $0.125 to close the week at $99.563.

The Bottom Line for Stocks

On a historical basis, the day before the long President’s Day weekend is usually a down day for stocks, so Friday’s modest gains can be viewed as somewhat impressive. Then again it should be noted that the first trading day after this long weekend is also usually a bad one as well. The danger heading into this weekend is that with U.S. markets being closed Monday, any bad news that may emerge courtesy of Europe will build up and lead to panic selling come Tuesday.

Without a crystal ball, there’s no way of knowing whether or not that’s going to happen and it may not. It is worth hypothesizing about, though.

All that said, the combination of no bad news or no news at all out of Europe and continued good news regarding the U.S. economy would remain a delicious recipe for U.S. stocks. Remember, prior to this week, in the S&P 500’s previous dozen attempts to break through 1,350 it was only successful once…we’ll see if this time it holds.

Research and Editorial Staff
MicroCap MarkePlace