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One-Day Bounce Or Return To The Bulls?

 May 10, 2011 01:32 AM
 


The market was strong today, fueled no doubt by surging oil prices (up +5% for the day), a mildly weak dollar, and a fairly significant drop in the level of "fear" as measured by the VIX.  So the market moved boldly forward, with the S&P 500 closing at 1346.29, up +0.45%

Today's market strength was in direct contrast to the sell-off last week, which was surprising, in light of the positive news of Bin Laden's demise and a tide of good economic reports the  first half of the week. Construction spending was well above estimates (+1.4% vs. an estimated +0.5%); factory orders were outstanding (+3% vs. an estimated +2%); and the ISM manufacturing index was solid at 60.4 vs. an estimated 59.5.

[Related -Bank Stocks: The Misbegottenness of the Volcker Rule Truly Knows No Bounds]

The sell-off continued on Wednesday, this time in step with a couple of negative reports. The ISM non-manufacturing index showed a sudden slowing of business growth, with a reading of 52.8 vs. the expected 57.0; and Thursday's initial jobless claims came uncomfortably close to the half-million mark, rising to 475,000 vs. the estimated 400,000.  Although Friday's employment report showed non-farm payrolls increasing by 244,000 (vs. an estimated 185,000), that good news was tempered by a rise in the unemployment rate from 8.8% to 9%.

Despite the mostly positive news, the S&P 500 lost about 2% for the week, although it closed up slightly on Friday.  

Market stats.  Small-cap Growth, the leading cap/style for most of last year, was down a startling -3.9% last week, with the leading cap/style, Mid-cap Growth, still losing -1.6%.

[Related -Citigroup Inc (C) Q4 Earnings Preview: What To Watch?]

Oil prices fell throughout last week, so it was no surprise that Transportation rose to the top in sector performance  (+0.15%), and Energy sank to the bottom (-6.88%). Health Care, the only other positive sector for the week (+0.11%) came in second as predicted, and Technology, down -1.34%, was right in the middle and  only slightly lower than expected. (Here are the market stats.)

The surprise was the contrary behavior of the consumer-related sectors. All three were projected to be in the bottom 5 but lined up in the top 5 instead: Consumer Services, #3; Consumer Non-durables, #4, and Consumer Durables, #5.


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