The Dow Jones Industrial Average climbed 1.6% for the week and is up 8.9% year to date and the S&P 500 surged 2.2% this week and is up 14.3% in 2012
Links Worth Snacking On:
- Chart of the Week – FedEx made headlines because its earnings reflect the state of global commerce, but how do they stock up against UPS?
- Blackstone Blog – Market commentary from one of the most respected brains on the Street – Byron Wien
- Minyanville – Getting some more color on Friday’s major jobs report
- Blog Maverick – Mark Cuban’s musings on whether the economy is better off now than 4 years ago
- Money Box – How has the US labor market changed in the last 5 years? Construction workers become cocktail waitresses.
- Wall Street Oasis – For juniors and seniors looking into boutique investment bank options for taking a shot at…
- Inc - …and for our amigos in the working world, some tips for having a (relatively) enjoyable day
- Reuters – That Series 7 exam isn’t fun studying for, so these guys are finding a way around it
- Bloomberg – Stadium financing is fascinating
- DailyFinance – How Henry Ford battled a slow economy…by paying his workers more
- CNBC – If you moon your boss at Bank of America, should you get fired?
Goodbye Sperrys, goodbye lobstah rolls, hello flannel. We’re not quite ready to give up summer here at MarketSnacks headquarters, so this Labor Day-shortened 4-day week was a nice transition. Trading was slow early on, but Thursday’s European Central Bank policy meeting and Friday’s highly-anticipated Labor Dep’t employment report got markets moving.
First up – the Eurozone. European debt crisis has been popping its head into the US stock market every so often this summer like some kind of awkward, buzz-killing relative. This time though, it showed up in a tiny, Hawaiian tropic girl bikini – investors were thrilled. The European Central Bank (ECB) announced it would buy unlimited amounts of gov’t bonds from struggling Eurozone nations (Spain/Greece) in order to keep their borrowing costs down. Now Spain, Italy, or any other Euro country can ask the ECB to purchase its bonds if it is having trouble finding willing investors. This will add demand for the bonds and lower the interest rates the country will need to pay to fund themselves. Countries that want in on the deal will have to accept strict budget rules and austerity measures, but this reduces the chances of a Euro country going bankrupt to practically nothing. Healthy Germans aren’t happy about it (they think it’s a form of German funded sovereign charity), but the Dow jumped over 200 points on the news Thursday.
Next, the government’s employment report. The Labor Dep’t announced that jobs growth in August was a weak 96,000, far below the lukewarm 125,000 predicted. The unemployment rate, though, actually ticked down to 8.1% because so many people called it quits looking for a job, so fewer were measured as unemployed and *actively looking for work. And as long as there are millions on the streets looking for work, sitting down with the boss to ask for a pay raise is a tough sell. This is why stock markets fear high unemployment – it keeps wages low and limits the amount consumers can spend, which drives 70% of American GDP. Reception to the news was not exactly excitement, but investors are hoping this will push the Fed to enact more stimulus.
Kind of like “Icy-Hot” cream we used to pour over our quads after sports practices (we’ve experimented with it elsewhere and don’t recommend it), US econ data enjoyed 2 extremes. On the one hand, the ISM Manufacturing Index showed factory business is shrinking at a rate not seen since the recession officially ended in June of ’09 – evidence that the world manufacturing epidemic has spread to the shores of the America. But US Auto sales were the big surprise of the week as Ford, Chrysler and GM led the way – the industry is on pace to see 14 million cars driven off lots nationwide (the best year since ’07). These 2 data together paint a slowing manufacturing economy in the US, with car factories the one exception as they are steaming hot pumping out new cars.
Facebook reached a new low (again) after Morgan Stanley and JP Morgan (who both prepared its IPO) dropped their target prices of where the stock will be trading in the near future. MS and JPM released reports from their equity (another word for stock) research division to calculate what the price of FB stock should be in 12 months based on the company’s money-making muscle, and both cut the target price down by more than 15% to $32 and $30. Mark Zuckerburg is desperate to keep the price from falling more so he promised the world he won’t sell his stock for at least 12 months. FB was at $19 on Friday.
Meanwhile Amazon.com‘s video licensing deal with super-hero-themed cable channel Epix slammed online streaming competitor Netflix. The real focus of analysts though was on FedEx‘s corporate earnings – those guys deliver so much junk around the world that they’re considered an economic barometer for the state of global commerce. FedEx lowered its earnings forecast for the upcoming quarter citing economic slowdown in Europe and China, reigniting global growth concerns. Now time for some serious consumer data and the Fed policy meeting this week…
- Monday – July Consumer Credit
- Tuesday – August NFIB Small Business Survey, July US Trade Deficit
- Wednesday – July Wholesale Inventories, (rumored) Apple iPhone unveiling, Federal Reserve meeting Day 1
- Thursday – Weekly Jobless Claims, Federal Reserve meeting Day 2
- Friday – August Retail Sales, August Consumer Price Index, August Industrial Production, Preliminary Reuters/University of Michigan Consumer Sentiment Survey for September
© 2012 MarketSnacks