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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