Encouraging job report pushes US stocks higher

Unemployment rises les thane expected for last month

US stocks ended with good gains for the week that ended on Friday, 07 August, 2009. The gains were led by healthy economic reports, mainly in the housing and employment sectors. There were also a large number of earnings reports, and most of them beat expectations.

The Dow Jones Industrial Average gained 198.46 points (2.2%) for the week to end at 9,370.07. Tech - heavy Nasdaq gained 21.75 (1.1%) to end at 2,000.25. S&P 500 gained 23 (2.3%) to end at 1010.48. With this week's gains, the Dow, Nasdaq and S&P 500 have surely consolidated their positions to their best levels of the year.

Seven of the ten sectors gained during the week led by the financial, industrial and consumer discretionary sectors.

Among manor names that reported earnings during the week, Cisco reported a 18% year-over-year drop in revenue in fiscal Q4, matching expectations, with earnings slightly beating estimates due to the company's cost cutting measures. Cost controls helped Procter & Gamble (PG) top quarterly EPS estimates. But its revenue of $18.66 billion disappointed investors as it was well short of the $19.32 bln consensus.

Among economic data for the week, the positive tone was set early in the week as ISM Manufacturing Index made its seventh straight increase, coming in at 48.9 for July. While the sub-50 reading indicates contraction in the manufacturing sector, the number was still better than the 46.5 expected. Separately, construction spending data for June made a surprise 0.3% increase. It was expected to fall 0.5%.

In the housing data, the National Association of Realtors reported that Pending Home Sales rose 3.6% in June, better than the expected increase of 0.7%. Low prices, low mortgage rates, and the first-time buyer tax credit continued to be attractive inducements for prospective buyers.

In the US market on Friday, 07 August, 2009, The Dow Jones Industrial Average ended higher by 113.8 points at 9,370.07. The Nasdaq Composite Index, ended higher by 27.09 points at 2,000.25. S&P 500 ended higher by 13.4 points at 1,010.48.

The Labor Department reported on Friday, 07 August, 2009 that the unemployment rate, in July, 2009 unexpectedly fell to 9.4% as nearly a half a million people dropped out of the labor market. U.S. nonfarm payrolls declined by 247,000 to 131.5 million in July, the 19th consecutive month of job losses. It was the fewest lost payroll jobs since last August, 2008.

But the number of people who've been out of work longer than six months soared by a record 584,000 to 5 million, accounting for more than a third of all unemployment for the first time on record.

Among earning reports, AIG was a primary leader in the financial sector after posting its first profit since 2007. What's more, the company's earnings exceeded expectations. On the other hand, Ambac Financial
plummeted after reporting a considerable loss for the second quarter.

In the currency market on Friday, the dollar index, a six-currency gauge of the greenback's value, rose by almost 1.2%.

Crude prices ended lower on Friday, 07 August, 2009. Prices fell as the dollar strengthened following an upbeat job report from the Labor Department in US. Inspite of the drop, crude managed weekly gains. On Friday, crude-oil futures for light sweet crude for September delivery closed at $70.93/barrel (lower by $1.01 or 1.4%). During intra day trading, it rose to a high of $72. For the week, crude ended higher by 2.1%.

For the year 2009, Dow is up by 6.8%. The Nasdaq and S&P 500 are up by 26.8% and 11.9% respectively.