What was a rather lackluster market for the first four trading days of the week, a better than expected jobs number sent stocks reeling on Friday. The Labor Department said that 295,000 jobs were added last month and the unemployment rate fell to 5.5%, even though wage growth remained subdued. Traders rushed to the sell side fearing a June interest rate cut is now more likely – the thinking being that fixed income instruments will create competition for equities. So, dump your 4.5% yielding utilities to get into a six-month Treasury bill going up to a whopping 0.25% rate. Smart investing! In fact, the better employment number is good for the market on a long-term basis, indicating a better growth picture for companies. Hopefully, investors will see this knee-jerk reaction as an opportunity to get into some quality stocks at a bit of a discount. Why this inevitable rate hike isn’t already priced into the market is beyond me. For the week, the Dow Industrials lost 1.5%, while the S&P 500 dropped 33 points or 1.6%. The NSDAQ, which broke the 5000 mark for the first time since 2000, fell less than 1%. The 10 year Treasury note moved up on the employment news by nearly 25 basis points to 2.25%, as the yield curve flattened. There was nary a positive market sector for the week with utilities and REITS particularly hard hit. Declining stocks outpaced gainers nearly 3-to-1. Gold tumbled $48.50 to $1,164/oz., while crude oil stabilized at around $49.60/bbl. Merger and acquisition activity perked up this week with news from Hewlett-Packard planning a purchase of Aruba Networks, AbbVie picking up Pharmacyclics and NXP Semiconductor tying up with Freescale. In all, the bulls remain in charge as the outlook for steady economic growth, supportive earnings and a still accommodative Federal Reserve will likely keep the bidding up. Valuations are still on the high side, but over the long-term, growth in earnings for U.S. companies should normalize the earnings relationship to stock prices. Volatility will likely increase as we get closer to June and a likelihood for a possible interest rate increase, but the market is poised to go higher, albeit at a slower than the 2013-2014 rate. Separately, Apple will be replacing AT&T in the Dow Jones Industrials on March 19. The higher-priced Apple stock will offer a nice growth addition to the average, but it will come at the expense of some larger market swings, as the Dow is stock-price price weighed.
Here is the answer to last week’s trivia question: What was the highest price paid for a seat on the New York Stock Exchange? $4 million in early December, 2005. The lowest price paid for a membership seat on the NYSE was $4,000 in 1876 and 1878. However, with the New York Stock Exchange becoming publicly traded in 2006, there are no longer membership seats sold by the exchange.
Today’s Trivia Question: When were the first stock tickers and ticker tapes used?