Home / The Markets This Week

The Markets This Week

May 7, 2014 | Weekly Commentary

Another Friday fade wasn’t enough last week to reverse the market’s momentum, as stocks held on to a 1% gain for the five-day stretch, despite slipping in the final session. The Dow Jones Industrial Average finished the week slightly below a new record high reached Wednesday. As has been the case numerous times in the recent past, stocks fell Friday and investors sold down some positions ahead of a weekend of potentially renewed geopolitical tension.

Despite the release of mostly positive economic data, particularly on Friday, traders say that escalating tensions in Ukraine are causing investors to hesitate. In recent days, insurgents reportedly have shot down Ukrainian helicopters, and Russia warned Ukraine Friday of “catastrophic consequences” unless it halted a military operation against pro-Russian insurgents in the eastern part of the country.

During a week of low trading volume, the Dow finished up 0.9%, or 151 points, to 16,512.89. On Wednesday, it hit an all-time high of 16,580.84. The Standard & Poor’s 500 index increased nearly 18 to 1881.14. The Nasdaq Composite index added 48, or 1.2%, to 4123.90.

Friday, the Labor Department said American job growth in April was the biggest in more than two years. At the same time, the unemployment rate fell to 6.3% last month from 6.7% in March, a low not seen since the bad old days of September 2008. Payrolls grew by 288,000 from March and trounced expectations of about 210,000 to 220,000. There was some confusion in equity markets caused by the bond market’s rise in the face of Friday’s strong jobs report. Some argued that the data below the headline numbers, such as a decline in the participation rate, weren’t as good.

The problems in Ukraine “seem to be accelerating from rhetoric to reality,” says Jason Weisberg, a partner at Seaport Securities. That seemed to spook investors Friday. Troops are on the move, aircraft have been shot down, and suddenly things have worsened, he says.

“It seems like on every Friday since mid-February there has been a partial or full selloff,” says one investment strategist. That suggests traders are unwilling to hold stocks during the weekend. If Ukraine weren’t an issue, bond yields would have crashed through 3% instead of falling, as they did Friday. (Bond prices move inversely to yields.)

Stock investors have to be wondering about a clarification here.  Maybe the Ukraine issue will fade in the face of more good news on the economic front, but it’s hard to see how the situation will improve.

The data, at least, were good, says Michael Shaoul, chairman of Marketfield Asset Management. The April figures are strong enough to silence fears about the economy’s weakness in January and February. “There’s no sense that the economy is decelerating,” he says.

(Source: Barrons Online).

Visit www.theweeklycommentary.com for more posts in this category about the economy. DISCLOSURES