The Dow Jones Industrial Average gained 1.3% this week and is up 11.4% year to date and the S&P 500 climbed 1.4% this week and is up 16.2% in 2012.
Links Worth Snacking On:
- Graphic of the Week – 90% of new products fail (some stats on start-ups)…
- Wall Street Oasis – …But speaking of start-ups, college students interested in venture capital should read this
- NPR – After last week’s major employment report, here are 5 solid ways of analyzing the unemployment number
- Dealbook – Wall Street’s High Frequency Trading Firms are menacing the SEC, so they hired a New Jersey High Frequency Trading firm to enlighten them
- CNBC – This week Spain’s PM said they don’t need a bailout. And the fact that people laughed at that says a lot about the situation
- BusinessWeek – What’s going on with Canada’s missing maple syrup reserves?
- Slideshow of the Week – The bottled water companies provide clean quality, but the actual bottles are the opposite. Here are some insights into the industry…
- Video of the Week – Big demand for bourbon…Straight out of Deutschland
We’ve got a couple Italian-Americans on our MarketSnacks team and we’re always shocked that this glorious Columbus Day isn’t observed on the New York Stock Exchange (Fiat shareholders should cease trading and guzzle a well-rounded Chianti in protest). Stay tuned later today for your daily market summary, but first let’s recap the roller-coaster week. It was the beginning of a new month and that means focusing on all the September economic data released in the 1st week of October. Stocks advanced last week on mostly positive econ news ahead of Friday’s major government employment report.
If the week’s economic data was a hearty meal, then the Labor Department’s announcement on the unemployment rate/non-farm payroll job additions is the brownie ice cream sundae from NYC’s 5-Napkin Burger joint. The rest of the data though is filling too. The ISM Manufacturing Index surveys companies nationwide on new orders, inventories, and employment, and finally rose after 3 months of contractions, thanks to a September increase in hiring. The ISM Non-Manufacturing Index, which covers service sector industries, also helped move markets after surging last month. In the auto industry, US car sales at GM and Ford dipped in August, but have still improved to multi-year highs over the course of 2012. Huge increases in auto-sales this year have been as clutch as Derek Jeter in October by bolstering 2012′s wavering economic recovery (it’s only right that Detroit’s Tigers are up 2-0 in the playoffs thus far).
Nothing against Europeans (we love waffles, olive oil and Michael Caine), but it’s a nice break for the US stock market when their entire debt crisis isn’t flaring up. Last weekend, the Spanish banking system went through “stress tests” (hypothetical worst case scenarios that determine how much additional capital they’d need to survive) and calculated that los bancos would only require a 60 billion euro bailout instead of the 100 billion euro estimated. The ECB will supply the Spanish banks with billions of euros to ensure that there are no further bank failures so as to avoid another crisis, similar to the American bank bailout of ’08. Investors were happy at first, but concerned later in the week after the Spanish Prime Minister refused to request a bailout – for the Spanish Government – yet. Spanish banks need cash now, and a bailout for the government is probably inevitable, but Spain doesn’t want to deal with the harsh budget cuts & austerity measures demanded by the helping hand (at least the streets were free of riots last week).
Can you hear me now? Telecommunications stocks were some of the biggest market-movers this week thanks to some big corporate moves. T-Mobile‘s American operations will merge with Metro-PCS, producing a cheap competitor to AT&T and Verizon (Deutsche Telekom owns T-Mobile, just as a heads up). Hopefully this will improve the quality of those terrible T-Mobile ads. Facebook stock barely budged after the social network gained its 1 billionth user, but cousin-company Zynga dropped big after cutting its earnings outlook for the rest of the year. Speaking of concerning earnings, Hewlett-Packard dropped its revenue estimates so much that traders pummeled the stock. Fresh CEO Meg Whitman is still trying to turn the company around. Except she only has a paddle. And this aging tech giant looks like the Titanic.
Friday was the “jobs report of all jobs reports.” Due to the importance of the economy in the election, Dems and Reps were prepping their reactions to the report to promote their respective campaigns (limited to a 140 character tweet limit, of course). Up 1st was a survey of employers that revealed 114K new jobs were created in the US in September. Not an amazing number (the average monthly gain in ’12 is 143,000), but the key was the revisions. Oh the revisions. July and August’s totals were boosted by an additional 86,000 jobs. The more significant figure to the public was today’s unemployment rate, from a survey of American households. For the 1st time in 44 months the unemployment rate is less than 8%, at a psychological encouraging 7.8%. Unlike some other drops in the jobless rate this year, today’s decrease was not caused by unemployed people leaving the workforce, or just giving up, but by actual job creation (albeit lots of part-time jobs).
Despite significant drop in the unemployment rate investors reaction was tepid at best on Friday – the Dow was barely up and the S&P just in the red. Investors are more skeptical of the less consistent unemployment rate and want to see job growth of 200+ K/month before they believe the labor market is really improving. Now onto this week’s 3rd quarter earnings reports…
- Monday – The stock market is open, but the bond market is closed (eat chicken parm for lunch for Columbus Day)
- Tuesday – September NFIB Small Business Index, Alcoa earnings
- Wednesday – August Wholesale Inventories
- Thursday – Weekly Jobless Claims, August US Trade Deficit, September Federal Budget
- Friday – Reuters/University of Michigan Consumer Sentiment Poll (for 1st 1/2 of October)
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