The market has been extremely resilient lately. When bad news is reported, the market sells off slightly and then rebounds as investors buy up “bargain” stocks. These “bargain” stocks are attractive based on their fundamentals and past earnings performance. These companies have strong balance sheets with little debt and are not affected by the slowing
Friday, the unemployment number came in much worse than expected, but the market rebounded quickly. March non-farm payrolls declined by 80,000. This marked the third consecutive monthly decrease. The unemployment rate hit 5.1%. Last month’s reading was only 4.8% and economists were only expecting a reading of 5.0% for March. February’s non-farm payrolls number was revised to 76,000 from 63,000 (Source: Bloomberg.com). Off of this news, bonds rallied (yields decreased) as investors expect the Fed to cut rates more aggressively at its next meeting.
The only major earnings report came from fertilizer company Mosaic. Q3 earnings were 99 cents per share while analysts were only looking for 95 cents. The stock was up about 10% all day. Mosaic has incredible pricing power. “Phosphate prices more than doubled from a year ago to $487 per ton. Potash went up $77 a ton to $221 a ton” (Source: CNNMoney.com). All the agriculture names were strong Friday.
The financial stocks were the laggards on the day thanks to another round of earnings estimate cuts. JPMorgan cut estimates at Citigroup, Bank of America, and Wachovia. Deutsche Bank added JPMorgan and Citigroup to their “sell” list (Source: Briefing.com).
MBIA Insurance Corporation had its credit rating cut by Fitch. “MBIA Insurance Corp, the insurance arm of the world's biggest bond insurer, saw its ratings fall to ‘AA,’ the third highest, from a top rating of ‘AAA.’ Fitch also cut the parent company (MBIA) by three notches to ‘A,’ the sixth highest, from ‘AA’” (Source: Reuters.com).
The price action this last week was very bullish. We were able to maintain all of Tuesday’s gains and in the face of very bad economic news, we did not see panic selling.
Lately, tech has been very strong thanks to Apple and Research in Motion. The financials were all up huge this week. I think this move is over-exaggerated given that many of these companies will report earnings in two weeks and no one really knows what to expect. Oil continues to trade above $100 per barrel and all the energy names remain strong because of this. Before the market can make its big move higher, we need to get better economic data and I don’t see that happening for some time. Volatility will remain and we will continue to trade sideways.
DJIA 12,609.42 -16.61 (-0.13%)
Nasdaq 2,370.98 +7.68 (+0.32%)
S&P 500 1,370.40 +1.09 (+0.08%)
NYSE Volume 3,672,712,000
2-Yr Bond 1.83% -0.08
10-Yr Bond 3.50% -0.11
30-Yr Bond 4.32% -0.08
Crude Oil (May) 106.23 +2.40
Nat Gas (May) 9.322 -0.095
Gold (June) 913.20 +3.60
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