Markets Shake Off Jobs Report

by: Bill Cara

Equity markets surged in the final 30 minutes of the Friday session as traders figured a possible “positive surprise” in news over the weekend might catch them short. The February US Jobs Report at 8:30am ET, which was horrible news but close to expectations, did not impact the market as prices opened higher and even rallied a bit to start the session.

From 9:45 am through 3:30 pm, traders hit the bids across the board. Even after the closing pop of about +175 DJIA points, the DJIA 30 index closed up just +32.5 +0.49% to 6626.94, down from the previous Friday’s close of 7062.93. The S&P 500 added +0.83 +0.12% to close at 683.38, while the NASDAQ dropped -5.74 -0.44% to close the week at 1293.5, down from the previous Friday’s close of 1377.84.

The Toronto Composite dropped -37.70 -0.49% to 7591.47, while the Venture Board was almost flat, lost just -0.57 -0.07% to close the week at 829.12.

Earlier in the day Friday, Asia-Pacific equity markets were weak except for India (+1.56% to 8325.8): Australia (-1.18% to 3111.7); Japan (-3.50% to 7173.1, which was extreme); Shanghai China (-1.26% to 2193.0); and Hong Kong (-2.37% to 11921.5).

At the close for the week, the French CAC (-1.37% to 2534.5), the German DAX (-0.79% to 3666.4), and the UK FTSE 100 (+0.02% to 3530.7) were soft going into the closing bell.

By the end of the Friday session in NY, the sector winners and losers were not changed much from Thursday. Healthcare (XLV +1.5%), Basic Materials (XLB +1.3%) and Energy (XLE +1.1%) were strongest, while Industrials (XLI -1.1%) and Financials (XLF -1.0%) were weakest.

Among industry groups, Big Oil ($XOI +1.8%) was strong, while Broker-Dealers ($XBD -2.8%) and Banks ($BKX -1.9%) were not.

Traders spent the day discussing news stories such as the Bernard Madoff case, which saw new motions filed by prosecutors that appear to be setting up a guilty plea next week. The general public is becoming increasingly restless that the well-connected all-time king of financial fraud may receive lenient treatment.

Also back in the news is the proposed trader tax, which traders believe has been initiated by Congressmen who have no clue as to how capital markets work, and would unwittingly kill the market.

Whether or not the public likes the concept of nationalizing the leading banks, it’s happening. The UK government may have struck a deal to take ownership of Lloyds Banking Group up to 77% and to 95% for Royal Bank of Scotland in exchange for assuming almost all the forthcoming losses on assets that had the so-called insurance backing of some $30 trillion dollars of credit default swaps. Those CDS agreements are now clearly seen as a Ponzi scheme that was organized almost entirely by Bank of America (NYSE:BAC), JP Morgan (NYSE:JPM) and Citigroup (NYSE:C).

On the corporate front, both Dow Chemical (NYSE:DOW) and Rohm & Haas (ROH) confirmed that mergers and acquisition discussions are underway. Dow gained +9.9% on +143% of average daily trade volume.

Roche increased their offer to buy the remaining shares they do not already own in Genentech (DNA +11.3% to 90.86 on +589% average daily trade volume). The new bid is 93.

The US long bond ($USB +0.23% to 128.56) was strong and yields weakened, during the day long move to safe havens. Yields on the 30-, 10-, and 5-year Treasuries closed at 3.503, 2.828, and 1.839 percent, respectively. After the T-Bill yield cracked to 0.180 percent on Thursday, it remained in that zone on Friday, indicating no improvement in credit market issues.

Oil prices lifted +$1.91/bbl to 45.52, regaining Wednesday’s price, and holding the $45 level.

$GOLD futures (+$14.90/oz to 942.70) were bullish for a second day, although the goldminers were quiet. $GOLD contracts rallied hard (+$21.10/oz) on Thursday, so there was a lot of strength going into the weekend. The spot prices at the close for gold, palladium, platinum and silver were: 938.80; 203; 1065; and 13.34, off their highs for the day as the $USD strengthened into the close at 88.55 and the Euro weakening to 126.51

Crude Oil April futures closed at 45.52.

By the close, the DJIA and S&P 500 futures were at 6674 and 687.8 respectively, a bit higher than the cash market closes of 6626.94 and 683.38 respectively.