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  • Proprietary Trading Weekly Market Recap For Friday, May 2, 2014  0 comments
    May 4, 2014 1:47 PM | about stocks: ADP, T, FSLR, DTV

    Stocks Climb on Solid Economic Data

    Stocks move higher during the week as solid earnings and better than expected economic data lifted equity bourses. The Dow Industrials notched up new all-time highs but the Russell 2000 lagged the broader markets. There continues to be a sector rotation into large cap stocks, specifically the Energy and Utility sectors, while momentum and small cap stocks see capital flight. For the week, the S&P 500 closed up 1%.

    The week started with a strong regional manufacturing report, which showed that April could see an economic rebound. U.S. Chicago ISM surged 7.1 points to 63.0 in April after falling 3.9 points in March to 55.9. It is the highest since October's 66.6.

    The U.S. ISM rise to 54.9 leaves a three-month climb from 53.7 in March, 53.2 in February and a lean 51.3 in January, as the index is now again touching the lofty 54.9-57.0 Q3-Q4 range that included a 57.0 three-year high in November. The climb through April reinforces the broader firming in the factory sentiment data since the winter downswing, as discussed in our April 21 commentary.

    The ISM-index sits between the 49.9 cycle-low last May and the 59.3 cycle-high in February of 2011. The factory sector continues to outperform the overall economy in this expansion. The recovery in sentiment into Q2 after the winter lull reflects the Q2 bounce we expect in GDP growth to the 3% area after the Q1 slowing to an inventory-depressed 0.1% from 2.6% in Q4 and an inventory-boosted 4.1% in Q3.

    Also Wednesday, ADP's (NASDAQ:ADP) April National Employment Report showed that private payrolls added 220,000 jobs last month, on the high end of economists' expectations. ADP also revised its March reading up from 191,000 to 209,000 jobs added.

    The economic news during the week was anchored by a robust US jobs report. U.S. nonfarm payrolls surged 288k in April from a revised 203k in March (was 192k) and 222k in February (was 197k). The unemployment rate dropped to 6.3%, the lowest since 2008, from the 6.7% in February and March. The workweek was unchanged at 34.5. Average hourly earnings were flat after an upwardly revised 0.1% gain in March (revised from unchanged).

    The drop in the unemployment report resulted from a 73k slip in household employment and a 806k plunge in the labor force. The labor force participation rate fell to 62.8% from 63.2%. Private payrolls jumped 273k, with a 53k gain in the goods producing sectors, a 32k gain in construction and a 12k increase in manufacturing. Service sector jobs rose 220k. Government employment rose 15k.

    In corporate news, Pfizer (NYSE:PFE) has raised its bid for AstraZeneca to 84.47 a share in a cash-and-stock offer that values the U.K. drugmaker at $106.4B vs $100B previously. The new bid was shot down.

    AT&T (NYSE:T) has approached DirecTV (NASDAQ:DTV) about buying the satellite-TV provider in a deal that could be worth at least $40 billion. DirecTV, whose market cap is $39.5 billion, is open to a deal. The combined company would have almost 26 million pay-TV subscribers' vs the 30 million that Comcast would have if it acquires Time Warner Cable. As with the Comcast-TWC deal, a major question is whether regulators would authorize a tie-up between AT&T and DirecTV.

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