THE WEEK IN REVIEW
By Econoday:
This past week there was a steady barrage of economic indicators that mostly topped expectations—though generally by modest amounts. Nonetheless, the cumulative effect was to lift equities significantly—especially for small caps. At the start of the week, personal income was soft but the wages & salaries component posted a notable gain, trumping the ISM manufacturing index coming in a little below expectations. Motor vehicle sales edged down but the modest decline was seen as a win, given how hard snow storms cut into showroom traffic. ADP employment for February was down but only marginally—setting up hopes for a good payroll number on Friday. The ISM non-manufacturing index unexpectedly moved higher into positive territory.
On Thursday, two labor market indicators distracted traders from a plunge in pending home sales. Initial jobless claims dropped significantly and nonfarm labor productivity was revised up more than anticipated. The latter is good for profits prospects. Also on Thursday, monthly chain store sales topped forecasts. At week end, a better-than-expected employment situation for February boosted equities significantly. Shortly before close, markets got another lift from an unexpected rise in consumer credit—indicating that bank charge offs are easing and consumers may be picking up the pace for spending.
Also adding to the week’s gains was the increased belief that the Greek debt situation would be managed by various institutions in Europe and that there would be no default by Greece. Many stock indexes ended the week at 52-week highs.
Equities were up this past week. The Dow was up 2.3 percent; the S&P 500, up 3.1 percent; the Nasdaq, up 3.9 percent; and the Russell 2000, up 6.0 percent.
For the year-to-date, major indexes are up as follows: the Dow, up 1.3 percent; the S&P 500, up 2.1 percent; the Nasdaq, up 2.5 percent; and the Russell 2000, up 6.5 percent.
The bottom line
There are several cross currents in the economy. Manufacturing remains healthy and growing; the consumer sector is holding up reasonably well given the headwinds; but housing may be slipping from recent gains. Importantly, the labor market is still struggling to improve. The worst from the past recession is behind us but cost cutting by companies and modest demand is keeping unemployment high and consumer spending soft.
Source: Econoday
