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Market Update

Jobs, Core Capital Goods Orders Extend Rally, World Markets Cautious

Author: Bikram Pandey
Last Update: 2:01 PM ET March 06 2013

1:55 PM New York – Stocks on Wall Street extended gains and orders for machinery and factory goods that signal business investment surged in January. Private sector also added net new 198,000 jobs. The euro eased ahead of the ECB meeting. The Bank of Japan is expected to accelerate monetary easing.

In New York trading stocks inched higher after indexes traded near 5-year highs and investors appeared to add more risk based assets.

Stocks on Wall Street extended gains built in last five years after the Federal Reserve offered unwavering commitment to not repeat the mistakes during the Great Depression in 1929. At the time, the Dow Jones Industrial average took nearly 25 years to recover from the highs it had seen in 1929 after the government and Federal Reserve pursued austerity and tight money policy.

Fed in the last five years has pumped $4 trillion of liquidity to the financial system in the aftermath of housing market crisis that quickly morphed into broader economic decline.

Fed has also provided additional $1 trillion to support mortgage lending despite the vociferous criticism from the conservative Republicans and editorial pages of Wall Street Journal raising the prospects of runaway inflation and drawing the ire of bond vigilantes.

The inflation after five years, since the Fed’s aggressive actions, is still in the target range set by the Fed between 2% and 3% and the so called bond vigilantes are nowhere to be found and the government is able to borrow at historic low interest rates.

Fed deserves much of the credit for reviving the financial markets, stabilizing the banking and financial services sectors and initiating a revival in the home prices across the nation.

On the latest economic news, factory orders for January declined less than estimated 2% and December month fall was revised lower. Core orders increased 7.2% indicating confidence in the economy but durable goods orders declined 4.9%.

Private sector added net 198,000 new jobs in February according to the survey published by Automatic Data Processing and Moody’s Analytics. The increase was higher than in December month gain and ahead of expectations. Market is awaiting monthly job report scheduled for release on Friday.

In corporate news, American Eagle fourth quarter net jumped 85% and Big Lots net rose 5%. AeroVironment third quarter net declined 33% and Fresh Market second quarter net climbed 13%. Seaspan net surged 151%. VeriFone first quarter net swung to $11.84 million profit.

European markets traded higher as indexes across the region flirted with multi-year highs. In London and Paris indexes edged down and in Frankfurt indexes advanced 0.6%.

European Union fined software developed Microsoft for $732 million for failing to meet its commitment in providing a choice of rival Web browsers on its Windows systems

In European corporate news, Admiral Group fiscal profit jumped 17% to £258.4 million and Carrefour net for the year was flat at €404 million. Henkel fiscal year net surged 30.1% to €1.51 billion. Legal & General profit for the year soared 11% to £801 million.

In Tokyo stocks surged following the market advance in New York. The Nikkei soared to a new 4-year high and the yen eased as the central bank starts its last meeting under the present Governor Shirakawa.

In Mumbai, stocks gained and indexes advanced after a budget that focused on lowering current account deficit and keep the government spending in control.

In corporate news, Mavi Investment Fund sold 75 million shares of Adani Power. AstraZeneca India promoters reduce their stake in the company. Dish TV board approved divestment of Singapore arm. Central government divested 12.5% stake in Rashtriya Chemicals.

Australian GDP expanded at 0.6% in the December quarter and gained 3% in 2012, the fastest annual growth since 2007. However, the economic growth was uneven and growth drivers were softer than expected.

Sources: Data collected by 123jump.com and Ticker.com from company press releases, filings and corporate websites. Market data: BATS Exchange. Inc