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  • Proprietary Trading Weekly Market Recap For Friday, Mar. 7, 2014 0 comments
    Mar 10, 2014 11:06 AM

    Geopolitical Tensions Takes Back Seat to Data

    Tensions in the Ukraine brought volatility back to the capital markets at the beginning of this past week, but as Russian troops pulled back, volatility declined. Tensions still persist as the parliament in the Ukrainian peninsula of Crimea voted to annex the area to Russia. The balance of the week was focused on manufacturing and employment data, which was mixed globally. For the week the S&P 500 index closed higher by 1%, and the Nasdaq notched up a 0.65% gain.

    News that Russian President Putin has recalled some troops back to their bases is seen as a conciliatory gesture by the Russian government. Equity bourses dropped on Monday but retraced nearly all of Monday's response to the weekend developments. The US push for a more assertive response toward Ukraine was softened by Europe's efforts for more diplomatic efforts.

    The Institute for Supply Management reported its index of national factory activity rose to 53.2 in February, up from January's read of 51.3, which was the weakest reading since May 2013. February's figure topped the median forecast of 52.0. January's weakness came on a steep drop in the forward-looking new orders index. That component rebounded to 54.5 from 51.2 in January. There were some caveats to the strong report, as the production sub-index sank to 48.2 from 54.8, notching its third straight month of declines and falling below 50 for the first time since August 2012. The employment index held flat at 52.3.

    Private sector employment, reported by Automatic Data Processing and Macro Economic Advisors, increased by 139,000 jobs in February according to Wednesday's National Employment Report. This compared to the 152,000 expected by economists. January's reported showed that private jobs created in the first month of the year were revised lower by 48,000 jobs. Service-providing industries added 120,000 jobs in February, up from a downwardly-revised January figure of 116,000. The ADP National Employment Report indicates that professional business services contributed the most to growth in service-providing industries, adding 33,000 jobs.

    U.S. service-sector expanded in February at a sharply slower pace driven by inclement weather. The Institute for Supply Management said its non-manufacturing index dropped to 51.6% last month from 54% in January. That was well below the 53% forecast of economists surveyed. The most interesting portion of the report was the weaker than expected employment sub-component. The employment gauge tumbled nearly 9 points to 47.5%, marking the lowest level since March 2010 as severe weather hindered hiring in some sectors such as construction and wholesale trade.

    Initial jobless claims dropped 26,000 to 323,000, according to the Labor Department. That was the lowest level since the end of November. Claims for the week ended February 22, 2014 were revised to show 1,000 more applications received than previously reported. Separately, Nonfarm productivity dropped to 1.8% versus the 3.2% expected by economists. Economists polled had forecast first-time applications for jobless benefits falling to 338,000 in the week ended March 1.

    On Friday, the Labor Department reported that U.S. nonfarm payrolls increased by 175,000 in February, compared to the 139,000 expected by economists. Weak employment data released earlier in the week had many economists revising down their expectations. Revisions by the agency showed the economy added slightly more jobs in recent months than previously believed. Employers added 129,000 jobs in January, up from 113,000 and 84,000 jobs in December, up from 75,000.

    The nation's unemployment rate ticked up to 6.7% in February from 6.6% in January. The labor force grew, but so did the number of unemployed. The labor force participation rate held steady at 63% in February. Economists surveyed had forecast that the unemployment rate would fall to 6.5%. The weakness in the report and most important element was the fall in the work week. It slipped to 34.2 hours, from 34.3 hours in January, but was revised down from 34.4. This is worth several hundred thousand full time equivalents. It is likely due to the weather. Those involuntarily working part-time actually fell by 71,000.

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