Market Week: December 7, 2009

The MarketsAn unexpectedly good employment figure helped equities leap to fresh year-long highs on Friday. Despite giving back much of that gain by the end of the day, stocks still ended the week in positive territory. The unemployment report also fueled speculation about the timing of a future interest rate hike, which helped strengthen the dollar and hit prices for Treasury bonds, gold, and commodities.

Market/Index	2008 Close	Prior Week	As of 12/4/09	Week Change	YTD Change
DJIA	8776.39	10309.92	10388.90	.77%	18.37%
NASDAQ	1577.03	2138.44	2194.35	2.61%	39.14%
S&P 500	903.25	1091.49	1105.98	1.33%	22.44%
Russell 2000	499.45	577.23	602.79	4.43%	20.69%
Global Dow	1526.21	1925.70	1978.67	2.75%	29.65%
Fed. Funds	.25%	.25%	.25%	0 bps	0 bps
10-year Treasuries	2.24%	3.21%	3.48%	27 bps	124 bps

Last Week’s Headlines

• Job losses not only slowed, but practically came to a standstill. Only 11,000 jobs were cut from nonfarm payrolls in November; that’s less than a tenth of the 135,000 average figure during the previous three months and far below the 190,000 jobs lost in October. The drop from 10.2% to 10% is the biggest drop in the unemployment number since September 2006. Temp jobs, often an indicator of employment to come, also were up. However, the number of people unemployed for more than 27 weeks rose by 2.7% to 38.3%.
• Though U.S. manufacturing continued to expand in November, it did so at a slightly slower pace than the month before. The Institute for Supply Management’s index fell to 53.6 from 55.7 (anything over 50 indicates expansion). However, ISM’s index for the services sector saw shrinkage, dropping to 48.7% in November–back in contraction territory after 2 months of expansion.
• Pending home sales rose for the ninth month in a row, according to the National Association of Realtors; the figure was up by 3.7%.
• In the third quarter, business productivity saw its largest gain in 6 years, increasing at an annual rate of 8.1%. Hours worked declined by 4.8%, while output rose 2.9%.
• October construction spending was flat compared to the month before. Residential construction was up 4.4%, offsetting a decline of 2.5% in nonresidential spending. Since last October, construction spending is down 14.4% on average.
• The National Retail Federation reported that Black Friday shoppers were plentiful but cheap. There were more people in the stores than last year, but the average shopper spent less.
• Bank of America announced plans to repay the $45 billion it borrowed as part of the TARP program.

Eye on the Week Ahead

With both credit usage and retail sales reports on tap, consumer spending behavior will be watched. The Copenhagen conference on global climate change begins.

Key data releases: Consumer credit (10/7); International trade, Treasury budget (12/10); retail sales, import/export prices, business inventories (12/11).