US Market posts strong weekly gains

Technology and oil stocks help indices combat the rising yield on10 year note fulled by Friday’s strong job report

Good economic reports, a number of deals and notable support from the Technology sector helped the US Market register good gains during the past week ending Friday, 6 July, 2007. Indices registered good gains despite the yield on 10 year note increasing to 5.2% on Friday, 6 July, and crude prices almost touching $73/barrel.

Barring Thursday, 5 July 2007, all the three indices gained on all the days during the holiday shortened week. Dow slipped on that day by mere 11 points. Market was closed on Wednesday, 4 July, 2007 in observance of Independence Day.

The Dow Jones Industrial Average gained 203 points for the week. Tech heavy Nasdaq gained 63 points while S&P 500 gained 27 points.

On Friday, 6 July, the Labor Dept. showed that nonfarm payrolls rose 132K last month. That was strong and above economists' forecasts (125K). Upward revisions in payroll figures for May and April amounting to an additional 75K jobs also eased worries about slowing growth.

The Labor Dept also showed that the unemployment held steady at a low 4.5% rate for a third straight month and the year/year hourly earnings rate slipped to 3.9%. Market took these figures also positively. Dow rallied by 46 points on that day.

Among tech stand-outs this week, Apple surged 8% to a new all-time high following the launch of the iPhone a week ago. Google also reached a new all-time high and gained 3.2% on the week.

Among the major deals announced during the week, the parent of Bell Canada agreed to be taken private for a total of $48.5 bln. It included nearly $16 bln in debt and marked the largest private equity buyout ever. Hilton Hotels agreed to be bought by the Blackstone Group at a $26 billion offer. Kraft announced that it is going to spend $7.2 billion for Group Danone's biscuit business.

Among other merger related news, The Carlyle Group announced that it plans to buy Manor Care for $6.3 billion while Apollo Management is going to take Huntsman private for $6.3 billion. AT&T is going to buy Dobson Communications for $2.8 billion.

Also, the Institute for Supply Management's manufacturing index for June showed increased activity and added to optimism about the economy.

Executive Summary

For the week, all the three indices registered good gains. DJIx is up by 1.5%, S&P 500 is up by 1.8% and Nasdaq is up by 2.4%. Crude prices soared above $72 but did not have much impact on the market, except that Energy stocks got a good boost. Yield on 10 year note increased from 5.1% during the beginning of the week to 5.2% at the week’s close.

Strong jobs report erased fears about slowing growth. Google and Apple stocks took Tech shares to new highs. Spate of merger news proved that private equity still has a long way to go. For the year, the Dow is up by 9.2%, Nasdaq is up by 10.4% while S&P 500 is up by 7.9%.

Trading volume was relatively light during the week with many traders enjoying vacation. The major U.S. stock exchanges closed early on Tuesday and remain closed on Wednesday in observance of Independence Day. Next week, earnings season will pick up after Alcoa kicks off the second quarter reporting season with its results after the close on Monday.