J.L. Davis Weekly Market Update 3/7/2011

Quote of the Week:
“On what principle is it that when we see nothing but improvement behind us, we are to expect nothing but deterioration before us?”
Thomas Babington Macaulay, English historian

Many of us, surprisingly, should be feeling a bit better off these days. As evidence, this Wednesday, March 9th, will mark the 2-year anniversary of the start of the current bull market for the S&P 500 stock index. Remarkably, from its bear market low closing index on March 9, 2009, the S&P 500 has gained +95.3% through the close of trading last Friday 3/04/11.** Wow.

Of course, with Mideast unrest comes oil price fluctuation and subsequent market ups and downs. And all of this requires diligence, diversification, and a solid long term plan.


The Markets

As the bull market neared its two-year anniversary this Wednesday, domestic equities investors managed to stay afloat last week--but just barely. Despite some triple-digit intraday swings in the Dow, equities ended the week not far above where they began.


Last Week's Headlines

• U.S. manufacturers continued to see improvement, according to the Institute for Supply Management (ISM), whose index for the sector rose to 61.4 in February from January's 60.8. That level of growth was last seen in May 2004 and represented the 19th consecutive monthly increase in the index. Meanwhile, the ISM's services sector index hit 59.7, its 15th consecutive increase.

• For the first time in almost two years, the unemployment rate fell just under 9%. The addition of 192,000 jobs to nonfarm payrolls helped lower the January number to 8.9%, the Bureau of Labor Statistics' best reading since April 2009.

• American incomes rose 1% in January. According to the Bureau of Economic Analysis, the increase was partly the result of the 2% reduction in Social Security deductions from paychecks. Personal consumption was up 0.2% for the month.

• Construction spending fell 0.7% in January, according to the Commerce Department, and was 5.9% below that of January 2010. Private construction was down 1.2% from December, primarily because of a 6.9% drop in nonresidential building, while public construction rose 0.1%, mostly as a result of educational construction.

• The Commerce Department said new factory orders were up 3.1% in January, driven largely by a 27.3% increase in orders for transportation equipment.

• Positive economic data and the recent rise in oil and commodity prices helped renew inflation concerns, which sent gold to a new high above $1,435 an ounce. Crude oil prices continued to haunt the $100-per-barrel mark.

• European Central Bank President Jean-Claude Trichet shook up currency markets with tough anti-inflation talk, raising speculation that a rate hike might be imminent for the eurozone.


Eye on the Week Ahead

With the postponement of a congressional spending showdown and a week that's relatively light on economic data, the state of retail sales will be watched as an indicator of consumer mood. Oil prices also will continue to be a focus.

Key dates and data releases: international trade balance (3/10); retail sales, business inventories (3/11).


Data source: Includes data provided by Brounes & Associates. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results. Equities data reflect price change, not total return.

The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indexes listed are unmanaged and are not available for direct investment.

**The return calculation was based upon the change of the raw index and does not include any reinvestment of dividends. The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the US stock market