Equities rallied this week on the heels of a positive jobs report and a spike in oil prices. The Labor Department said the unemployment rate rose to 5.7% from 5.6% on higher participation in the workforce, but payrolls and wage growth were strong. Oil rose 7% on the week to $51.69/bbl. from $48.23, but pundits are all over the place with predictions anywhere from $30.00 to $60.00 per barrel over the course of the year. The abundance of oil and slowing global economic growth do not bode well for a return to the $90/bbl. mark anytime soon. I predict that there will be some serious consolidation in the energy space for both oil and gas companies and oil service providers. Halliburton’s acquisition of rival Baker Hughes may just be the beginning of an industry-wide trend. For the week, the Dow Industrials were up a hearty 3.8% to 17,824 and the S&P 500 Index was ahead by 3%. On average, technology and biotech firms were lower and the NASDAQ was only able to manage a 2.4% gain. Small cap stocks rebounded with the Russell 2000 gaining 3.4%. Of the major sectors, telecommunication stocks were higher by nearly 7% on average followed by nice gains in energy and basic materials. Healthcare and utilities were underperformers, with utility stocks and REITS down sharply on the threat of higher interest rates taking the sails out of high-income paying stocks. Thebuttonwoodproject income portfolio, however, managed a decent 3.2% gain for the week, despite the weakness. And gold and gold mining stocks were sharply lower with the precious metal falling nearly $45/oz. In January, gold posted its biggest monthly gain in three years, ahead by about 8%. But the jobs number rekindled a sooner-than-later interest rate hike, taking off some of the shine. Mergers and acquisitions perked up with Staples looking to acquire rival Office Depot and Pfizer making a move for drug infusion therapy provider Hospira in a $17 billion deal. And aggressive candidate Harris Corporation will be taking over global aerospace and communications services provider Exelis in a transaction valued at $4.75 billion. Earnings reports this past week were erratic with many positive and negative surprises in social media stocks, which get most of the business press attention these days. On Tuesday we will hear from CVS Health with estimates of $1.20 for the fourth quarter vs. $1.12 a year ago followed later in the week by Applied Materials first fiscal quarter results ($0.27 vs. $0.23).
And two “sign of the times” technology revolutions: RadioShack decided to file for Chapter 11 bankruptcy and will close nearly half of their stores and re-brand the rest with Sprint in an effort to turn the nearly century old electronics chain into a mobile service retail provider. And the CME Group announced it will cease virtually all of its open-outcry floor operations at its iconic Chicago Mercantile Exchange and the trading pits at New York’s NYMEX in favor of electronic trading, doing away with over 165 years of tradition. Sad to see them go.