Market Report – March 12, 2012

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In the Rear View Mirror:

The third anniversary of the March 9, 2009 market bottom failed to elicit much excitement in the markets. The same can be said of the February jobs report. When the smoke cleared on Friday’s trading session, two of the major U.S. indexes showed meager gains.

For the week, the S&P 500 and the Nasdaq were able to eke out small gains while the Dow Jones Industrial Average absorbed a small loss, though almost all of the Dow’s weekly loss can be tied to the 200-point loss incurred on Tuesday.

Greece gets the job done…for now!

In theory, the gains should have been much more impressive. On Friday, various media outlets reported that participation among Greece’s creditors in a debt-swap deal was better than anticipated. Not only that, but more importantly here in the States, the Labor Department said the U.S. economy added 227,000 new jobs in February and that the December and January readings were revised higher by a combined 61,000 jobs. Economists were expecting a February reading of 213,000 new jobs.

Apparently, the market wanted to see something in the order of 250,000 new jobs or higher because even though stocks opened higher on Friday, the gains wilted throughout the day. Even though stocks faltered somewhat following the jobs report, there was still a bit of a “risk on” feel to the day as oil and precious metals notched respectable gains on the day. The iShares Gold Trust (NYSE: IAU) added two-thirds of a percent while the iShares Silver Trust (NYSE: SLV) closed higher by 1.1%.

The Markets @ 3/9/2012
Index Close Weekly % Change YTD Change YTD%
DJIA 12922.02 -55.55 -0.43% 704.46 5.77%
NASDAQ 2988.34 12.15 0.41% 383.19 14.71%
S&P 500 1370.87 1.24 0.09% 113.27 9.01%
NYSE Comp 8102.11 -23.07 -0.28% 625.08 8.36%
NYSE Amex 2422.57 -32.94 -1.34% 144.23 6.33%
RUS 2000 817 14.58 1.82% 76.08 10.27%
VANG INTL 14.6 -0.15 -1.02% 1.54 11.79%
USX CHINA 5166.45 -111.51 -2.11% 636.65 14.05%
EMERG MKTS 6981.39 -134.83 -1.89% 976.08 16.25%

Market Report

Most of the other economic data points for the week were decent as well. There was a slight uptick in the weekly jobless claims number, but nothing too alarming. Consumer confidence continues to hover around multi-year highs and that’s critical to the U.S. economy as it is the consumer that accounts for two-thirds of GDP.

While the end result for U.S. stocks for the week may be a disappointment to some, the other side of the coin is that the week got off to a rocky start with China forecasting 2012 GDP growth of 7.5%. That’s China’s lowest forecast in several years and that’s definitely one of those data points that could have sent global markets sliding.

Again, there’s another side to the coin. Actually, a couple of sides.

China has a reputation for sandbagging its GDP numbers, kind of a “guide low, beat high” scenario and it has been seen several times. Second, there is speculation that a lower-than-expected Chinese GDP forecast may prompt Beijing to enact stimulus measures. That’s good news because, let’s be honest, China’s stimulus efforts have previously proven far more effective than what Uncle Sam has used and the better investors are feeling about Chinese stocks, the more the risk on trade is validated.

The “Mixed Results” continue

The Dow can’t break the 13,000 barrier and in fact gave back a few points this week…down 55.55, but is still in the green YTD at +5.77%.

Nasdaq and the S&P 500 inched forward to continued their impressive YTD gains…up 14.71% and 9.01% respectively.

The Russell 2000, our bench mark small cap index reversed fields and came roaring back with a 1.82% gain last week…up a very nice 10.27% YTD.

The Internationals, China and Emerging Markets all rolled back to the tune of -1.02%, -2.11% and -1.89% respectively. However, all are still hanging onto double digit gains.

Gold closed Friday at $1,710.90…up a mere $2.10.

WTI Crude Oil … up $0.70, to close at $107.40. ICE North Sea Brent Blend for April delivery closed Friday, up $0.54 at $125.98 per barrel. “Brent futures have rallied in recent weeks, as geopolitical and production issues in Iran, the North Sea, South Sudan, Syria and Yemen have led to tighter supplies.”

Further citing FOREXPROS, “Oil traders have been paying close attention to readings on U.S. employment levels because it offers insight into the economic health of the world’s largest crude oil consumer.
“An improving economy is generally correlated with increased demand for oil and fuel products like gasoline.”

The dollar was up 0.0043 or 0.7620 Euros; the 10-year bond closed down $0.469 at $99.750 and the 30-year bond lost 1.454 to close the week at $98.984.

The Bottom Line for Stocks:

It’s easy to get caught up in wondering why U.S. stocks didn’t soar on Friday and yes, an argument can be made for the rally showing some signs of weakness. Saying that much isn’t exactly going out on a limb and it must be acknowledged that the bears are currently low on ammunition. Selling for the sake of selling is rarely constructive and with economic data remaining supportive, further upside is probably the order of the day.

Europe is still the wild card that has the most legitimate potential to derail the rally, but as long as the news from across the Atlantic remains good or quiet, riskier assets should prevail.

Research and Editorial Staff
MicroCap MarkePlace