Jobs Data Supercharges Wall Street – Will This Draw More Investors Back Into Microcap Stocks Too?

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imagesMicrocap Market Report: May 6, 2013 – Jobs Friday turned out to be a very memorable Friday indeed as the S&P 500 surged above the psychologically important 1,600 area while the Dow Jones Industrial Average spent some time above 15,000. For the week, the S&P 500 and the Dow were up 2.03% and 1.78% respectively while the NASDAQ is finally showing signs of legitimately contributing to this rally by surging over 3%. The microcap sector cooled off somewhat but the Russell 2000 still gained 1.24% for the week

Late-week catalysts for riskier assets were plentiful.

On Thursday, the European Central Bank lowered interest rates to 0.5% from 0.75%. The ECB also hinted it may engage in a negative interest rate policy and those comments jolted markets higher in advance of Friday’s jobs report.

The U.S. Labor Department said 165,000 new jobs were created last month, topping expectations for the addition of only 140,000 jobs. The U.S. unemployment rate fell to 7.5% from 7.6%.

All of that was very good for risk appetite and that is good for microcap stocks

The iShares Russell Microcap Index Fund (NYSE: IWC) gained 1.5% on the week while the Guggenheim Wilshire Micro-Cap ETF (NYSE: WMCR) gained 0.8%.

The Markets @ 5/3/2013
Index Close Weekly % Change YTD Change YTD%
DJIA 14973.96 261.41 1.78% 1869.82 14.27%
NASDAQ 3378.73 99.47 3.03% 359.22 11.90%
S&P 500 1614.42 32.18 2.03% 188.23 13.20%
NYSE Comp 9340.47 170.57 1.86% 896.96 10.62%
NYSE MKT  2431.03 32.9 1.37% 75.37 3.20%
RUS 2000 950.59 11.61 1.24% 101.24 11.92%
RUS MICRO 58.8 0.87 1.50% 6.48 12.39%
VANG INTL 49.52 0.8 1.64% 3.22 6.95%
CHINA INDEX 4545.59 76.83 1.72% 107.07 2.41%
EMERG MKTS 7093.74 129.2 1.86% 53.77 0.76%

 

Market Report

Back to Back Weeks Like This Can Make You Giddy

Green numbers all over my spread sheet certainly has me smiling about “Sell in May and…well, you know the rest of that deal. It’s too early to tell, so enjoy the gains and consider protecting them with some intelligent stop-losses.

Oil prices continued their upward bias – WTI Crude Oil closed at $95.61 last week…+$2.61.
The US Dollar backed up slightly…off $0.0051 to close at 0.7624 euros.
Bonds were down too – The 10-year bond lost $0.65 to close at $102.33 and the 30-year bond gave back $1.81 to close at $103.36.
Gold continued to make the “GBs” happy… that’s “gold bugs” for you newbies…gaining $10.70 for the week to close at $1,464.30.

Even before the jobs report was delivered Friday, there were plenty of data points for traders to chew on. In economic news, the Standard & Poor’s/Case-Shiller 20-city home price index surged 9.3% in February with annual prices in all 20 major metro areas rising for the second consecutive month.

The Institute for Supply Management said its index of Chicago-area manufacturing activity fell to 49 in April from 52.4 in March. Economists expected an April reading of 52.5. Readings below 50 indicate contraction. The Conference Board said its April consumer confidence index climbed to 68.1 from an upwardly revised 61.9 in March. Economists expected an April reading of 60.8.

On Wednesday, the Institute for Supply Management’s manufacturing index fell to 50.7% from 51.3% in March. Economists expected an April reading of 50.8%. The April reading was the lowest since December. Readings above 50 signal expansion.

On Friday in addition to the jobs report, the Institute for Supply Management’s services index fell to 53.1% last month from 54.4% in March. Economists expected an April reading of 53.7%. Readings above 50% indicate expansion.

In any other non-jobs week, pundits would this batch of data a “mixed bag,” but stronger-than-expected jobs report has a way of making everyone look at the world through rose-colored glasses.

“Rising stock prices and gains in home prices have some Americans feeling more comfortable about their financial status for the first time in years. Good news begets good news, and Wall Street hopes it will draw more investors back into stocks.

‘As the market grinds higher, we think there are a lot of investors who … worry that they are being left behind’ said Richard Slinn, an investment specialist for JPMorgan Private Bank, which manages investments for a wealthy clientele.

Yesterday’s jobs report and the revisions it contained meant the economy had some tail wind going into the across-the-board reductions in federal spending, called the budget sequester, that started taking effect March 1. Kevin G. Hall; McClatchy Washington Bureau; Valley News

The Bottom Line for Stocks

The bottom line is that U.S. stocks are near all-time highs. That is the good news. The even better news is that the NASDAQ is finally starting to really chip in, increasing the allure of micro-cap technology names in the process.

With risk appetite increasing and low interest rates for as long as the eye can see, this looks like a fine time to consider micro-cap energy names as well.

We remain bullish on micro-cap health care names and are bold enough to say miners might be worth a trade, though not an investment…just yet. Micro-cap financials also look poised to run higher.

Research and Editorial Staff
MicroCap MarketPlace
Mike Casson, Executive Editor

 

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