Job Loss Slow Down Encourages Investors as They Look to the Week Ahead
Friday saw the Dow Jones industrial average edge higher, gaining 12.89 points (0.15 percent) to an unofficial close of 8,763.13, while the Standard & Poor’s 500 dropped 2.37 points (0.25 percent), ending the day at an unofficial 8,763.13, and the Nasdaq Composite closing virtually static. This is the eleventh out of thirteen weeks that the Dow has ended on a higher note and one of the reasons cited for this continued rally was the slowing pace of job losses as reported by the Labor Department on Friday. Employers cut 504,000 jobs in April and analysts were forecasting a job loss figure of 520,000 for May, so when the job loss figure was reported as 345,000 for the month of May, it came as a pleasant surprise to stock market traders. There is no denying that this is still a huge number of job losses and far from the desired scenario of flat job loss figures, it nevertheless indicates that, while things are still bad, they are “less worse” – a term commonly used in financial circles today.
The summer months have historically proven to be somewhat slow-moving for Wall Street, but analysts agree that there is no reason that markets should not at the very least remain steady in the coming week. Some have even gone so far as to say that that the trend will remain upbeat right through the summer months, mainly as a result of the huge amounts of money the government has pumped into the US financial system in an effort to create a strong foundation to rebuild on.
Following the results of the “stress test” carried out by the government on major US banks, ten of these were instructed to raise additional funds. Monday is the due date for the submission of detailed plans as to how they are going to go about raising the required funds. Morgan Stanley and Bank of America have been at the forefront of cooperating with this requirement, thereby boosting investor confidence. On Tuesday, investors will have the government’s April wholesale inventories report to ponder over. Also of interest to investors, on Tuesday the Joint Economic Committee will review the progress of the bank bailout program, while the House Financial Services Committee will discuss regulating derivatives.
Midweek sees the release of several economic reports, including the Summary of Commentary on Current Economic Conditions, more commonly referred to as the “beige book”, from the Federal Reserve, a compilation of economic activity by sector as measured by each Federal Reserve Bank in its district. The April trade balance will be made available on Wednesday, as will weekly crude oil inventories and the May Treasury budget.
With the exclusion of auto sales, May retail sales are expected to have risen by 0.2 percent, which the report due to be released on Thursday will either confirm or deny. The Labor Department will make weekly jobless claims numbers available on Thursday, and the RealtyTrac foreclosure report will give an indication of the current state of the housing sector. Treasury Secretary Timothy Geithner is expected to address G8 finance ministers in Rome on Friday. Also on Friday, the University of Michigan will release its consumer sentiment index for June and the Labor Department will make May import and export prices public.