Stock Market News for February 6, 2012 - Market News


Investors were greeted with news of strongest jobs growth in nine months before the opening bell on Friday and it was expected that markets would register substantial gains. By the close of the trading session, markets not only soared higher, but the benchmarks also touched multi-year highs. Significant gains on Friday also enabled the markets to end strongly for the week, and the S&P 500 recorded its fifth straight week of gains.

The Dow Jones Industrial Average (DJI) managed a three-digit movement after swinging below 100 during most of the past sessions. The Dow leapt 157 points or 1.2% to close at 12,862.23. The Standard & Poor 500 (S&P 500) jumped 1.3% and closed Friday's trading session at 1,344.90. The tech-laden Nasdaq Composite Index posted robust gains of 1.6% and closed significantly higher at 2,905.66. The fear-gauge CBOE Volatility Index (VIX) dropped 4.9% to settle at 17.10. Reflecting subdued fears, the VIX dropped to its lowest level since July 2011. Advancers clearly outshined the decliners, as for 76% of the gainers on the New York Stock Exchange, 21% of the stocks traded lower. The remaining 3% of the stocks were left unchanged. Trading volumes on the NYSE were 3.2 billion shares.

Benchmarks had a lot more to offer to investors beyond its percentage gains on Friday. All three key benchmarks soared and hit their multi-year highs, raising hopes of an improving economy if not a complete recovery. The Dow hit its highest closing levels since May 2008 and the Nasdaq recorded its highest levels it last posted in 2000. The S&P 500 missed out on posting a multi-year high. Nonetheless, the S&P 500 is trading at levels last seen in July 2011. The S&P 500 also recorded its longest weekly gains since January 2011. With gains of 6.9% so far this year, the index is also enjoying the biggest yearly start since 1987. The tech-laden Nasdaq witnessed levels over 2, 900, the first time since the end of the dotcom era. The dotcom era was roughly between 1995 and 2000, with the Nasdaq hitting an intra-day high of 5132 points on March 10, 2000.

These developments helped the McDonald's Corporation (NYSE: MCD ), Home Depot, Inc. (NYSE: HD ), International Business Machines (NYSE: IBM ), Caterpillar, Inc. (NYSE: CAT ) and The Travelers Companies, Inc. (NYSE: TRV ) snatched the first five ranks, respectively. Since May 19, 2008, these stocks have gained 65.4%, 56.5%, 53.1%, 35.2% and 18.7%, respectively. Incidentally, none of these top five performing companies belong to any one particular industry. While McDonald's belonsg to the retail or the restaurant industry, Home Depot is from housing, IBM from the technology arena, Caterpillar represents the energy sector, and Travelers Companies is from the Property & Casualty Insurance industry. Notably, each of them is a bellwether stock for their respective industries. However, financial bellwether Bank of America Corporation (NYSE: BAC ) was the worst performer among the 30 Dow components as it slumped 78.3% from May 19, 2008.

The strong gains on Friday also helped the benchmarks rebound to register weekly gains, after losing out on a finish in the green last week. The Dow, S&P 500 and the Nasdaq were up 1.6%, 2.2% and 3.2%, respectively. Through the week, factors including global improvement in manufacturing data, hopes of a Greek debt deal and most importantly encouraging jobs data buoyed the US markets. The jobs market was a standout catalyst, as three key sets data were released through the week, each contributing towards the markets' uptrend.

Last Wednesday, the ADP National Employment Report suggested that the private sector had added 170,000 jobs in January. A day later, the labor department had another positive report to share and it reported a drop in initial claims. According to The U.S. Department of Labor, the advance figure for seasonally adjusted initial claims dropped by 12,000 from the previous week to 367,000 for the week ending January 28, 2012. However, all this while investors were waiting for the non-farm payroll data to come to the forefront and thus markets' gains were somewhat limited.

On Friday, much awaited nonfarm payroll data by the government was released, and it offered investors than one reason to be upbeat about. Jobs growth hit a nine month high, the rate of increase completely toppled consensus estimates, and the unemployment rate dropped once again January. The U.S. Bureau of Labor Statistics reported that the total nonfarm payroll employment had increased by 243,000 in January, toppling consensus estimates of an increase of 146, 000. The report stated: "Job growth was widespread in the private sector, with large employment gains in professional and business services, leisure and hospitality, and manufacturing. Government employment changed little over the month". Unemployment also declined to its lowest levels since February 2009, as it dropped to 8.3% in January from the 8.5% recorded in December 2011.

Separately, the 25th consecutive month of growth in the non-manufacturing sector also helped sustain the markets' strong rally. The Institute for Supply Management reported: "The NMI registered 56.8 percent in January, 3.8 percentage points higher than the seasonally adjusted 53 percent registered in December, and indicating continued growth at a faster rate in the non-manufacturing sector. The Non-Manufacturing Business Activity Index registered 59.5 percent, which is 3.6 percentage points higher than the seasonally adjusted 55.9 percent reported in December, reflecting growth for the 30th consecutive month. The New Orders Index increased by 4.8 percentage points to 59.4 percent, and the Employment Index increased by 7.6 percentage points to 57.4 percent, indicating substantial growth in employment after one month of contraction". With the NMI coming in at 56.8 last month, it clearly outshined consensus estimates of 53.4.


BANK OF AMER CP ( BAC ): Free Stock Analysis Report
CATERPILLAR INC ( CAT ): Free Stock Analysis Report

HOME DEPOT ( HD ): Free Stock Analysis Report
INTL BUS MACH ( IBM ): Free Stock Analysis Report
MCDONALDS CORP ( MCD ): Free Stock Analysis Report
TRAVELERS COS (TRV): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ, Inc.

This article appears in: Investing , US Markets

Referenced Stocks: BAC , CAT , HD , IBM , MCD

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