Good spirit at Wall Street

Dow manages to erase all of its year to date losses

Stronger than expected economic reports took US stocks higher for the week that ended on Friday, 05 June, 2009. Majority of the economic data that checked in were better than thought of. The most important of these reports was Friday's job report from the Labor Department. With the week's gains, Dow managed to erase all of its year to date loses and remains almost unchanged from prior year's ending mark. Crude prices rose substantially during the week. General Motors filing for bankruptcy was perhaps another major event of the week.

The Dow Jones Industrial Average gained 262 points (3.1%) for the week to end at 8,763.13. Tech - heavy Nasdaq gained 75.09 (4.2%) to end at 1,849.42. S&P 500 gained 20.95 (2.3%) to end at 940.09.

The indices rallied during start of the week after stronger international markets paved the way, as PMI manufacturing data came out all over the world. Markets in China and Hong Kong showed expansion for the third straight month, while UK and Eurozone showed modestly better-than-expected numbers.

Economic reports also gave further boost. Construction Spending surprisingly increased 0.8% month-over-month in April against an expected drop of 1.5%, personal income increased 0.5% for the month against an expected drop of 0.2%, and personal spending came in at a modestly better-than-expected -0.1% against an expected drop of 0.2%.

General Motors also lent good support to the Dow despite news that the company is filing for bankruptcy. According to GM CEO Fritz Henderson, GM believes it can complete bankruptcy in 60 to 90 days. Though GM remains a Dow component for now, Cisco is expected to replace GM in the Dow Jones Industrial Average from 8 June. As per latest reports, Citigroup will also get replaced by Travelers.

Economic reports dominated during the rest of the week. Pending Home Sales was reported on Tuesday, which showed a much larger-than-expected 6.7% month-over-month gain in April.

The Labor Department reported on Thursday, 04 June, 2009 that the number of continuing claims for state unemployment benefits declined by 15,000 to 6.74 million for the week ended 23 May, 2009. However, the four-week average of these claims rose by 88,750 to 6.69 million, a record-high level. First-time applications for benefits fell 4,000 to 621,000 in the week ended 30 May, 2009, reaching the lowest level since early May. The four-week average of these first-time claims rose 4,000 to 631,250. After reaching new weekly record highs since January, the number of continuing claims for state unemployment benefits has finally declined.

In the US market on Friday, 05 June, 2009, stocks surrendered early gains as enthusiasm for a better-than-expected nonfarm jobs report faded. For the rest of the session stocks generally traded sideways before closing in mixed fashion. The Dow Jones Industrial Average ended higher by 12.89 points at 8,763. The Nasdaq Composite Index, ended lower by 0.6 points at 1,849.42. S&P 500 ended lower by 2.47 points at 940. During session highs, Dow traded higher by almost 70 points.

The Labor Department reported on Friday that the intense pace of job destruction finally moderated in May as U.S. nonfarm payrolls declined by 345,000, the fewest jobs lost in eight months. While the payroll loss was much better than expected and hinted at some improvement in the economy, the U.S. unemployment rate jumped to a 26-year high of 9.4% in May as the number of jobless Americans rose by 787,000 to 14.5 million. The decline in payrolls was much less than the 500,000 forecast. However, the unemployment rate was higher than the 9.2% expected.

Weakness in the materials sector during the second half of trading, mainly due to the drop in commodity prices led to overall weakness in the market. The financial sector also witnessed substantial weakness.

A better than expected job report in US strengthened the dollar on Friday, 05 June, 2009, thereby pushing crude oil prices lower. The dollar rose on Friday following encouraging report that the intense pace of job destruction finally moderated in May, 2009 after the US economy witnessed one of the worst cases of layoffs in the past few months. On Friday, crude-oil futures for light sweet crude for July delivery closed at $68.44/barrel (lower by $0.37 or 0.5%). It had earlier risen to a high of $70.32. Despite Friday's loss, for the week, crude ended higher by 3.2%.

On Friday, Comex Gold for June delivery fell $19.5 (2%) to close at $961.7 an ounce on the New York Mercantile Exchange. For the week, gold ended lower by 1.8%. Comex silver futures for July delivery fell 50.7 cents (3.2%) at $15.388 an ounce. For the week, silver ended lower by 1.4%.

In the currency market on Friday, the dollar index, which weighs the strength of dollar against the basket of six other currencies, went up by 1%.

For the year 2009, Dow is down by just 0.2%. The Nasdaq and S&P 500 are up by 17.3% and 4.1% respectively.