Strong gains at Wall Street

Job Losses for April check in less than expected boosting sentiments

The financial sector led US stocks for a strong end to the week that ended on Friday, 08 May, 2009. Economic and earning reports continued to check in during the course of the week. The other main event that dictated market momentum during the week was the bank stress results. But it was mainly positive economic reports that helped market register very good gains for the week. The financial and energy sectors led the pack of winners. With this week's gains, it is only the Dow that is still in the red on a year to date basis.

The Dow Jones Industrial Average gained 362.24 points (4.4%) for the week to end at 8,574.65. Tech - heavy Nasdaq gained 19.8 (1.2%) to end at 1,739.20. S&P 500 gained 51.7 (5.9%) to end at 929.23.

Stocks kicked off the week on Monday, 04 May, on a strong mode. It was pending home sales data that came in at a better-than-expected at 3.2% in March (consensus 0.0%), while Construction Spending came in at a better-than-expected 0.3% in March. On Wednesday, 06 May, the ADP Employment change for the month of April was a better-than-expected -491,000 (consensus -645,000).

During the middle of the week, the bank stress results were declared. The stress results showed 10 of the 19 banks tested need to raise capital in the amount of $74.6 billion. The big banks came in as expected. Wells Fargo announced an $8.6 billion stock offering, Morgan Stanley announced an $8 billion stock and debt offering and Citigroup expanded its previously announced public exchange offer by $5.5 billion, which equals its capital needs.

Finally, on Friday, 08 May, 2009, stocks started and ended the day in the green. Nasdaq had slipped in the red for a brief period of time but recovered soon. The Dow Jones Industrial Average ended higher by 165 points at 8,574. The Nasdaq Composite Index, ended higher by 23 points at 1,739. S&P 500 ended higher by 21.9 points at 929.8. The financial and energy sectors led the gains on Friday.

Among major economic reports for the day, the April employment report was released at 8:30 ET on Friday. The April decline in payrolls of 539,000 was better than the expected decline of 600,000, but still represented bad economic news. Part of the smaller decline is explained by a 72,000 jump in government payrolls, compared to the sharp drop in the private sector, including a 149,000 decline in manufacturing and 110,000 in construction. Also on the negative side, several prior months were revised lower, and the unemployment rate jumped to 8.9% from 8.5%, as expected.

Among other reports for the day, wholesale inventories dropped 1.6% in March, after falling 1.7% in February. The decline was worse than the consensus estimate that called for a 1.0% decline. The major indices gave up some gains after the release but still Dow and S&P 500 near closed near the best level of the session.

Among other major corporate news, McDonald's rose reported that April same-store sales rose 6.9%, the 72nd consecutive monthly increase.

Crude oil ended higher little higher for third consecutive day on Friday, 08 May, 2009. Prices rose today as job losses in April, 2009 were reported much less than expected. The report increased the chances of faster economic recovery. Prices also rose due to the weak dollar.

On Friday, crude-oil futures for light sweet crude for June delivery closed at $58.63/barrel (higher by $1.92 or 3.4%) on the New York Mercantile Exchange. For the week, crude ended higher by 10.2%.

For the year 2009, Dow is down by 2.3%. Nasdaq and S&P 500 are up by 10.3% and 2.9% respectively.