February 2011 Archives

Markets rebounded today after the price of oil retreated and Federal Reserve Bank of New York President William Dudley gave a somewhat optimistic take on the economy and on the prospect of low interest rates for the short- to medium-term future. The major indexes recorded their third-straight month of trading gains.

The Dow advanced 95 points, with 25 of its 30 components higher; the S&P 500 was up 7; and the Nasdaq rose 1. Advancers led decliners by about five to two on the NYSE, and advancers and decliners were nearly in line on the Nasdaq. The prices of Treasuries strengthened. Gold futures rose 60 cents to close at $1,409.90 an ounce. The price of crude oil retreated after Saudi Arabia increased production to make up for the Libyan shortfall. Light sweet crude oil futures on the New York Mercantile Exchange fell 91 cents to settle at $96.97 a barrel.

In Other Business News:

• Pending home sales fell 2.8% in January, according to the National Association of Realtors. The housing market is still searching for a bottom, and with foreclosures continuing to rise, prospective home buyers might be waiting for prices to fall further.
• A strong 1% rise in personal income in January pushed the U.S. savings rate to 5.8%. However, consumer spending slowed down, rising only 0.2%, a sign that consumers are growing more cautious.

With something approaching a civil war erupting in Libya, oil prices skyrocketed and stocks fell in the face of growing uncertainty about disruptions to Libya’s significant oil production. The S&P 500 fell 1.4% for the week. The largely peaceful protests in Egypt that brought down Mubarak have given way to violent, unpredictable clashes in Libya, increasing uncertainty in the country and the region in the process. Light sweet crude at one point topped $100 a barrel, although the price retreated in subsequent trading. The main question now is what effect higher energy prices will have on the delicate economic recovery, a question explored by Brian Jacobsen last week.

On the U.S. economic front, investors got good news in the form of a significant drop in initial claims for unemployment, bringing the four-week average down to 402,000, the lowest level since July 2008.

Housing prices were a mixed bag. Existing home sales rose 2.7% in January, but new home sales dropped 12.6%. A main concern is the fall in prices caused by the flood of foreclosures still coming to market. The median sales price hit a nine-year low in January, a worrisome sign for those who are still waiting for the market to hit bottom.

The second estimate of fourth-quarter gross domestic product showed slower economic growth than originally thought. The first estimate of 3.2% was revised to 2.8% due to imports that were higher than first thought and slower state and local government spending.

The major indexes closed out a tough week with a rally. The Dow gained 61 points, the Nasdaq rose by 43, and the S&P 500 advanced 13. Twenty of the Dow’s 30 components gained ground, led by Boeing (BA) and Intel (INTC), each of which rose 2%. Volume was light, and advancing issues outnumbered decliners by almost five to one on the NYSE and by about four to one on the Nasdaq. The prices of Treasuries strengthened, while the price of gold futures declined 0.4% to $1,409.30 an ounce. The price of crude oil on the New York Mercantile Exchange gained 0.6% to $97.88 a barrel. For the week, the Dow and the Nasdaq both lost 1%, and the S&P 500 declined 0.7%.

In Earnings News:

• J.C. Penney announced that earnings increased 36% to $1.13 a share in the latest quarter. Revenue rose by 2.8%, as customers responded to the retailer’s brand-name offerings such as Liz Claiborne. The company also announced a $900 million share buy-back program, and the price of the shares (JCP) lost 6% in today’s session.

Companies that provide the technology to help improve mobility are big business, and some have good growth prospects. Here to explain is Thomas J. Pence, CFA. Tom is managing director and senior portfolio manager with Wells Capital Management's Fundamental Growth Equity team. He manages several Wells Fargo Advantage Funds, including the Discovery Fund, the Enterprise Fund, the Endeavor Select Fund, the Omega Growth Fund, and the Capital Growth Fund.

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As rumors swirled about events in oil-rich Libya, crude oil prices seesawed, prompting volatile trading in the stock markets. The Dow lost 37 points, and the S&P 500 declined by 1. The Nasdaq gained 14 points. Eighteen of the Dow’s 30 components lost ground, led by Hewlett-Packard (HPQ), which fell 3%. Volume was light to moderate. Advancers and decliners were nearly in line on the NYSE, and advancing issues outnumbered decliners by about three to two on the Nasdaq. The prices of Treasuries strengthened, while the price of gold futures gained 0.1% to $1,415.80 an ounce. The price of crude oil on the New York Mercantile Exchange lost 0.8% to $97.28 a barrel.

In Earnings News:

• General Motors announced earnings improved from a loss one year ago to positive earnings of 31 cents a share in the latest quarter. For the full year 2010 the automaker earned its first profit since 2004, and it was the company’s best year since 1999. The price of the shares (GM) lost 4% in today’s session.
• Target reported earnings improved from $1.24 a share one year ago to $1.45 a share in the latest quarter, thanks in part to strong sales during the holiday shopping season and to improvement in its credit card business. Revenue increased by 2.4% over a year ago. The price of the shares (TGT) gained 3%.
• Sears Holdings announced earnings slipped from $3.74 a share a year ago to $3.43 a share in the latest quarter as declining sales at Sears stores more than offset gains at its Kmart chain. The stock (SHLD) fell 5%.
• Kohl’s reported earnings rose 14%, from $1.40 a share a year ago to $1.66 a share in the latest quarter. The retailer also announced it would add $2.6 billion to its share buy-back program, and it declared its first annual dividend of 25 cents a share. But the company’s guidance for the full-year performance was modestly below Wall Street’s expectations, and the price of the shares (KSS) gained 3%.

European nations dependent on Libyan oil are rethinking their strategy.

This week’s S&P/Case-Shiller housing report was bad, but it wasn’t that bad.

What it’s like to live through a store closing: the case of Borders.

Apple’s shareholders reject succession plan proposal; Steve Jobs still recuperating.

Rent or buy? Here’s a breakdown of cities based on the price-to-income ratio and the price-to-rent ratio.

Mary Meeker looks at the USA as if it’s a big business. Bad news: She finds problems. Good news: They can be fixed.

How does the current median duration of unemployment compare with past recessions?

Quantum computing just got one step closer to reality (with many steps to go).

One question I’ve been asked is whether the price of oil—which is touching $100 per barrel—poses a risk to the economic recovery? I answer that it depends on whether the price increase is temporary or persistent—and I agree with those who believe that oil prices are going up temporarily due to political risk. This is not always the case. In July 2008, for example, the increase in oil to $145 per barrel was probably driven by the growth in emerging markets demand for oil. Today’s price increase, on the other hand, is not demand-driven but rather fear- and supply-driven: It’s based on the fear that Libya’s cut in production will not be offset by increased production in Saudi Arabia.

In fact, if Saudi Arabia increases production—which it could easily do—then supply will not be curtailed. However, just because Saudi Arabia can does not mean that it will. I don’t believe the political revolution will spread to Saudi Arabia because discontent is not as extreme as it was in Egypt or Libya. And as long as the revolution doesn’t spread, there is little likelihood that its supplies will be disrupted.

If the price increase sticks, new supplies of oil could come on the market. The U.S. is home to conventional oil, offshore oil, and oil sands. Canada also has oil shale. Extraction of these oils carries environmental issues, but as the price of oil goes up, it makes economic sense to use them. That’s what happened in 2008 and will likely happen again if the current price increases stick. That increase in supply would lead to a decline in the price of oil, making any economic drag from high oil prices temporary.

The crisis in Libya continued to exert downward pressure on stocks, and the major indexes fell for the second straight day. Oil, meanwhile, continued to spike, with light sweet crude at one point trading at $100 before retreating. Earnings reports today were mixed, with Hewlett-Packard providing a disappointing outlook.

The Dow finished down 107 points, with 24 of its 30 components lower; the S&P 500 fell 8; and the Nasdaq was lower by 33. On heavier volume, decliners outpaced advancers by about five to three on the NYSE and by about three to one on the Nasdaq. The prices of Treasuries were mixed. Gold futures rose $12.90 to close at $1,414.00 an ounce, a seven-week high, and the price of oil gained $2.68 to settle at $98.10 a barrel. 

In Earnings News:

• Hewlett-Packard reported that its fiscal first-quarter net income rose 16% but that it had a weaker-than-expected outlook on computer sales. HP reported profit of $2.6 billion, or $1.17 a share, up from $2.3 billion, or 93 cents a share, in the year-ago period. Revenue was $32.3 billion. Its shares (HPQ) dropped 9%.
• Saks Inc. swung to a fiscal fourth-quarter profit on increased sales of full-priced goods. For the quarter that ended January 29, the department store chain reported profit of $25 million, or 14 cents a share, compared with a loss in the year-ago quarter of $4.6 million, or 3 cents a share. Same-store sales in stores open at least a year rose 8.4%. Saks shares (SKS) fell 2% in today’s trading.
• Cost-cutting helped Lowe’s Cos.’ profit grow 39% in its fiscal fourth quarter. The home improvement retailer reported profit of $285 million, or 21 cents a share, on net sales of $10.5 billion. Comparable same-store sales suffered in the quarter due to the severe winter storms, although Lowe’s said it expects to see a pickup in repair-related purchases because of the storms. Lowe’s shares (LOW) were off 1%.

One of the great mysteries in finance is what determines an interest rate. There are a lot of different frameworks for thinking about this, but the most basic resort to arguments about supply and demand. In this brief note, I look at the determinants of 10-year Treasury note rates. This rate is sometimes considered a “benchmark rate” because many other rates are assumed to depend on it. Thus, it seems like an appropriate rate to analyze.

The popular view among strategists seems to be that the 10-year Treasury note rate reflects an expectation of future growth of the economy. Typically, the suppositions run as follows: If you assume that real growth of the economy will be 3% per year over the next 10 years and that inflation will average 2% per year, then the 10-year Treasury should be about 5%.

The problem with this line of reasoning is that it ignores many important complexities of the bond market—assuming not only that the government has some preordained right to a fixed share of economic growth, but also that we live in a world of certainty and homogeneity, where every investor has the same expectation of growth and inflation and is on average correct about those expectations.

Consumer confidence in the U.S. hit a three-year high, but that bit of good news couldn’t offset the considerable tensions arising in Africa, and particularly Libya, where the situation threatened to escalate into an all-out civil war. As the crisis in Libya grew deadly, oil prices skyrocketed on the possibility of supply disruptions in the country. Airline stocks, which are sensitive to oil prices, took a big hit, with the AMEX Airline index dropping 5%. Stocks in general staged a significant pullback in their worst performance of the year.

The Dow lost 178 points, with 27 of its 30 components lower; the S&P 500 fell 27; and the Nasdaq was off 77. Decliners led advancers by about five to one on both the NYSE and the Nasdaq. The prices of Treasuries strengthened. Gold futures rose $12.50 to close at $1,401.10 an ounce, while the price of crude oil’s April contract spiked $5.71 to settle at $95.42 a barrel. The more lightly traded March contract, which closed today, rose $7.37 to settle at $93.57 a barrel.

In Earnings News:

• Wal-Mart Stores Inc. reported 27% higher fourth-quarter earnings in a report that in other respects underwhelmed analysts. Profit was $6.06 billion, or $1.70 a share, up from the year-ago quarter’s $4.76 billion, or $1.25 a share. However, inventories rose 11% during the quarter, and Wal-Mart gave a signal that it would come in under expectations for the first quarter and for the full year of 2011. Meanwhile, sales at its flagship Wal-Mart chain of stores fell 0.5% during the quarter. Its shares (WMT) fell 3%.
• Home Depot Inc.’s fiscal fourth-quarter profit jumped 72% on higher sales. For the quarter that ended January 30, profit was $587 million, or 36 cents a share, on $15.12 billion in revenue. The home improvement retailer raised its sales outlook for 2011 and also said it is working with its vendors to deal with commodity price rises. Home Depot’s shares (HD) lost 1%.

Bad headlines don’t necessarily mean bad investments. In many cases, it’s just the opposite, according to Lyle Fitterer and Robert Miller, portfolio managers of the Wells Fargo Advantage Municipal Bond Fund. We’ve been covering the dust-up over munis for the past few weeks on the blog, and Lyle and Robert have put together a nice piece that puts the muni market in perspective. How much state revenue is really dedicated to debt servicing? What’s been the trend for state revenues lately? And, more to the point, how have munis actually been performing at different credit levels? It’s an interesting read and worth checking out if you’re invested or are considering investing in the muni market.

The world was digesting the resignation of President Mubarak of Egypt, and protests in Bahrain briefly got in the international headlines.  U.S. attention turned from the Middle East to the Midwest.  Specifically, Wisconsin was in the headlines again.  This time, it wasn’t because the Green Bay Packers won the Super Bowl, but because newly elected Governor Scott Walker was taking a hard-line stance with the public unions.  Walker’s proposed budget is being heralded (by some) and condemned (by others) as a test case of the future of public sector unions.  Considering the Democrats in the Wisconsin Senate fled the state to avoid bringing the proposal to a vote, this issue will linger for a while.  It doesn’t do a lot to engender confidence in the municipal bond market, since the ability of states to balance their budgets and reform pension obligations are front and center on investors’ minds.

This past week, the economic lens was mainly focused on inflation:  import prices rose by 1.5%, producer prices rose 0.8%, and consumer prices rose by 0.4%.  Food and energy were the main drivers of price increases.  In general, the cost of labor-intensive services has flat lined while the cost of commodity-intensive goods has gone up.  This divergent behavior isn’t resulting in overall “inflation,” since that refers to a general increase in the price level, but instead to “dispersion,” where some prices increase faster than others. 

Even though food and energy price increases can be uncomfortable, they can also be self-correcting.  Sometimes, the best cure for a high price is a high price:  higher prices encourage farmers to plant more or extractors to extract more.  Higher prices also encourage consumers to change their consumption behavior.  Both of these responses—on the supply-side and the demand-side—can result in what is called a “cobweb,” where prices crawl around, first overshooting to the high side and then to the low side.

The major indexes closed higher and completed their third consecutive week of gains. The Dow gained 73 points, the Nasdaq rose by 2, and the S&P 500 advanced 2. Twenty-one of the Dow's 30 components gained ground, led by Caterpillar (CAT), which rose 2%. Volume was light. Advancing issues narrowly outnumbered decliners on the Nasdaq and advancers led decliners by about four to three on the NYSE. The prices of Treasuries weakened, while the price of gold futures gained 0.2% to $1,388.60 an ounce. The price of crude oil on the New York Mercantile Exchange gained 0.9% to $89.71 a barrel. For the week, the indexes each gained 2%.

Federal Reserve Chairman Ben Bernanke told an audience in Paris that nations with large trade surpluses like China should let their currencies float to higher valuations and nations with large trade deficits like the U.S. should reduce their deficits to help head off a future global financial crisis. Some nations have criticized Bernanke's "easy money" policy (known as "QE2"), saying it is generating global inflation, but today Bernanke defended the policy, noting that stimulating the U.S. economic recovery benefits other nations. His remarks preceded the opening of talks of the G20 nations in London this weekend.

In Earnings News:

• Campbell Soup announced earnings fell from 74 cents a share a year ago to 71 cents a share in the latest quarter. Revenue declined 4% as the company reduced the prices of its soups in order to boost sales, but the resulting increase in sales was more than offset by the lower prices. The company reduced its guidance for the second time in three months, and the price of Campbell shares (CPB) lost 3% in today's session.

After a strong rally off the lows in 2009, high-yield bonds are becoming expensive—some say too expensive. But even in what some call a frothy market, there are unique opportunities to be found. Here to explain is Thomas M. Price, CFA, managing director and senior portfolio manager with Wells Capital Management's Fixed-Income team. Among other funds, Tom manages the Wells Fargo Advantage Short-Term High Yield Bond Fund.

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The major indexes continued to move higher: the Dow gained 29 points, the Nasdaq rose by 6, and the S&P 500 advanced by 4. Twenty of the Dow's 30 components gained ground, led by Coca-Cola (KO), Du Pont (DD), and Intel (INTC), each of which gained more than 1%. Volume was light. Advancing issues outnumbered decliners by about two to one on the NYSE and by about three to two on the Nasdaq. The prices of Treasuries strengthened, while the price of gold futures gained 0.7% to $1,385.10 an ounce. The price of crude oil on the New York Mercantile Exchange gained 1% to $88.84 a barrel.

In Earnings News:

• Toro announced earnings increased from 32 cents a share a year ago to 53 cents a share in the latest quarter as unusually heavy snowfalls this winter boosted sales for the company's snow removal equipment. The company also raised its estimate of full-year earnings by 20 cents a share to $3.40, and the price of the stock (TTC) rose 2% in today's session.
• Timberland reported earnings rose by 89% to 82 cents a share. Revenue jumped by 17% in North America, 32% in Europe, and 59% in Asia. The price of the company's shares (TBL) rose 30%.
• Dr. Pepper Snapple, the nation's third-largest beverage company, reported earnings per share increased from 44 cents a year ago to 49 cents in the latest quarter as revenue gains overcame the negative impact of tax and debt-related charges. The price of the stock (DPS) rose 5%.
• Nvidia, a maker of semiconductors used in mobile devices like tablet computers, announced earnings climbed from 23 cents a share a year ago to 29 cents a share in the latest quarter. The results beat the Street's estimates by about eight cents a share, and the shares (NVDA) gained 9% in today's session.

The equity markets have continued to generate solid gains thus far in 2011, despite all the geopolitical friction in North Africa and the Middle East. Indeed, with the S&P 500 Index eclipsing the 1,332 level in intraday trading on February 14, the index doubled its move from the intraday low of 666 on March 9, 2009. While the year-to-date gains for the domestic major market indexes have been impressive, international indexes have been mixed. See chart 1.

CHART 1: EQUITY MARKET INDEX PERFORMANCE YTD (AS OF 2-15-11)

Source: Bloomberg
Past performance is no guarantee of future results.

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Google’s search dominance isn’t a given.

Segway has a competitor: the YikeBike.

European Central Bank President Jean-Claude Trichet to eurozone countries: don’t rely on the ECB to stop your countries from overheating.

The secret recipe of Coke may be revealed.

The co-author of “Dow 36,000” is telling people to invest in bonds.

Housing prices fall in unexpected places.

Alex Tabarrok on the difference between Keynesian economics and Keynesian politics.

Although commodity prices have been on a tear recently, they haven’t pulled up all consumer prices. Over the past 12 months, food prices have increased 1.8%, energy prices have gone up 7.3%, and gasoline prices have gone up 13.4%. However, a typical consumer purchases more than food, energy, and gasoline. As a result, the year-on-year increase in the Consumer Price Index—a common measure of inflation—was a scant 1.6%.

Producer prices have been increasing faster than consumer prices, which points to a slowing of corporate profit growth. But the possibility of profit compression overall doesn’t mean that every company’s profits will be squeezed. That’s why in times like these, good old-fashioned, bottom-up stock picking matters.  

An eventful day was capped off by the release of more optimistic-sounding minutes from the latest Fed meeting. Dell Inc. released a stellar earnings report and housing starts made an impressive showing in January, while wholesale prices continued to edge higher, with an unexpectedly strong rise in the Core Producer Price Index, or PPI.

The Dow finished up 61 points, with 23 of its 30 components higher; the S&P 500 gained 8; and the Nasdaq rose 21. Advancers led decliners by three to one on the NYSE and by about two to one on the Nasdaq. The prices of Treasuries weakened. Gold futures rose $1 to close at $1,375.10 an ounce, and the price of crude oil gained 67 cents to settle at $84.99 a barrel.

In Earnings News:

• Dell Inc.’s fourth-quarter net income nearly tripled, easily beating analysts’ expectations and sending its stock (DELL) 11% higher on the day. On lower component costs, higher margins, and increasing sales, Dell’s net income was $927 million, or 48 cents a share, compared with $334 million, or 17 cents a share, in the prior-year period.

One group of investors that is probably very interested in attempting to preserve income against unexpected changes in inflation is retirees. Wages typically keep pace with inflation, but wages, sadly, tend to go away in retirement. Instead, retirees must rely on investment income to adjust for changes in inflation.

Treasury Inflation-Protected Securities (TIPS) provide investors with an investment that not only guarantees a risk-free nominal rate of return, but a risk-free real rate of return. TIPS do this by adjusting the principal amount of the security every six months by the percentage change in the Consumer Price Index for All Urban Consumers (CPI-U) for the previous six months. At first glance, TIPS appear to be a potential investment for retirees’ portfolios, but there’s more to the story.

One way to think of the difference between TIPS and a nominal Treasury is in terms of a “break-even” rate. If the rate of inflation exceeds the difference, then an investor is better off holding a TIPS than a nominal Treasury security. If the realized rate of inflation is lower than the break-even rate, then the investor would have been better off with the nominal security.  For example, the chart below shows the five-year TIPS break-even rate and the actual, realized inflation rate over the following five years. When first issued in 2003, the five-year TIPS break-even rate was almost always much lower than the actual rate of inflation, suggesting that investors in TIPS did quite well. In 2005, the TIPS break-even rate suddenly went higher than the realized rate of inflation, meaning investors would have been better off owning normal Treasury securities.

Retail sales were up in January, but the amount of the increase and the fact that much of it came from higher gas prices was disappointing. In the energy sector, a report by ExxonMobil showed that the company is adding far more natural gas to its reserves than oil, an unwelcome prospect for investors that helped drag down the stock and the Dow. Exxon’s shares (XOM) fell 2%.

The Dow lost 41 points, with 23 of its 30 components lower; the S&P 500 fell 4; and the Nasdaq was down 12. Decliners led advancers by five to three on both the NYSE and on the Nasdaq. The prices of Treasuries were mixed, with the 30-year strengthening and the 10-year weakening. Gold futures rose $9 to close at $1,374.10 an ounce, and the price of crude oil lost 49 cents to settle at $84.32 a barrel.

In Other Business News:

• January U.S. retail sales rose 0.3%, making it the seventh straight month of sales increases, according to the Commerce Department. The 0.3% increase was the smallest since July 2010 and less than the 0.6% consensus expectation of economists. Much of the increase came from gasoline purchases due to higher prices.
• NYSE Euronext and Deutsche Börse AG have agreed to merge, with the merger completed by the end of 2011, pending shareholder and regulatory approval. Deutsche Börse shareholders would own 60% of the combined company, with NYSE Euronext getting the other 40%. The exchange would be the world’s largest. NYSE Euronext’s shares (NYX) fell 3%.

Baseball great and philosopher extraordinaire Yogi Berra allegedly once said that, “Predictions are hard, especially about the future.” Well, it’s the beginning of a new year, so investors and strategists have been making their predictions for the major market themes that will play out in 2011. One of the common threads in many investors’ outlooks is that large caps will outpace small caps. Many predicted the same thing last year, and alas, the small-cap Russell 2000 Index outpaced the S&P 500 Index by a wide margin, returning 26.85% and 15.06%, respectively. There are reasons to believe that they may finally be proven right this time, however. A recent article in the Weekend Edition of The Wall Street Journal highlighted some of the main reasons for investors to favor large caps over small:

Investors awoke to the Obama administration’s new federal budget proposal and the beginning of a long fight over how much of government to cut. After spending most of the morning in negative territory, the indexes clawed back to close mixed.

The Dow finished down five points, with only 12 of its 30 components higher. The S&P 500 gained three points, putting the index one point shy of exactly doubling the intraday low it reached on March 6, 2009. The Nasdaq was up seven. Advancers led decliners by about four to three on the NYSE and by about six to five on the Nasdaq. The prices of Treasuries strengthened. Gold futures gained $4.70 to close at $1,365.10 an ounce, and the price of crude oil lost 77 cents to settle at $84.81 a barrel.

In Other Business News:

• The Obama administration released its fiscal-year 2012 budget. The proposed budget comes to $3.73 trillion and includes $1 trillion in deficit reductions over a 10-year period. More than 200 programs are scheduled to be eliminated or cut back in fiscal 2012. However, discretionary spending accounts for only 12% of the national budget, and the Obama administration admitted that making cuts only to discretionary spending will do little to lower the federal deficit and that he will have to work with Congress to make changes to the big-ticket items of Social Security, Medicare, and defense spending.
• Japan’s economy officially contracted in the fourth quarter of 2010, according to Japan’s Cabinet Office. The economy slowed down 1.1%. Also, full-year gross domestic product data showed that China overtook Japan as the second-largest economy in the world behind the U.S.

A week that was light on economic news made up for it with the momentous resignation of President Mubarak in Egypt on Friday after weeks of unease and protests. The major indexes kept up their momentum, with the Dow advancing nine of the last 10 days and the S&P 500 gaining 1.4% for the week. The Dow’s bad day came after a dismal earnings report from Cisco, which reported 18% lower fourth-quarter net income on reduced government spending.

Last week’s employment releases only added mud to the already muddy waters of employment. Economists are still uncertain how to read the latest jobs report, with big discrepancies between the household survey (in which the employment rate fell from 9.4% to 9%) and the establishment survey, in which a measly 36,000 jobs were added. Workers dropping out of the workforce and the disruptions of rough snowstorms are a couple of the likely causes behind the muddy picture. For the week ending February 5, initial claims for unemployment dropped 36,000 to 383,000, making it the lowest number of claims since July 2008 (again, possibly, the low number was weather related). Job openings fell as well, but then so did separations.

This week, the much-watched retail sales numbers for January are released on Tuesday. Retail sales have risen for six straight months, with a 0.6% increase coming in December. Estimates are that retail sales will increase by 0.5% in January.

Industrial production for January comes out on Wednesday. December showed a 0.8% rise in industrial production, with manufacturing output, new orders, and backlogs continuing to rise, all good signs of a manufacturing recovery. The consensus estimate of economists is a rise in industrial production of 0.5% in January.

The week’s biggest release will likely be the consumer price index on Thursday. There’s a debate brewing over just what inflation means right now, with the Fed’s take seeming to be that there is no near-term inflation threat, even though food and commodity prices are rising (rapidly, in some cases). Core CPI, which strips out food and energy prices, rose only 0.1% in December. The full CPI, however, rose 0.5%, largely due to higher gasoline prices. Estimates are that it will rise 0.3% in January.

Notable earnings reports include Barclays PLC and Dell Inc. on Tuesday and CBS Corp., Comcast Corp., and Daimler AG on Wednesday.

The major indexes opened lower but then rallied strongly in mid-morning on news that Egypt’s President Mubarak had stepped down and left Cairo. The Dow gained 43 points, the Nasdaq rose by 18, and the S&P 500 advanced 7. Eleven of the Dow’s 30 components lost ground, led by Kraft (KFT), which fell 1%. Volume was light to moderate. Advancing issues outnumbered decliners by three to one on the NYSE and by almost two to one on the Nasdaq. The prices of Treasuries strengthened, while the price of gold futures lost 0.1% to $ 1,360.40 an ounce. The price of crude oil on the New York Mercantile Exchange lost 1% to $85.58 a barrel in apparent relief at the retirement of Mubarak of Egypt.

In Other Business News:

• Consumer morale is continuing to improve: According to the University of Michigan, the consumer sentiment index rose from 74.2 at the end of January to 75.1 so far in February, marking the index’s highest point in eight months.
• The U.S. trade deficit with the rest of the world increased by almost 6% to $40 billion in December, according to the Commerce Department. Exports increased by 1.8%, but that was more than offset by a 2.6% increase in imports, due mainly to the rising price of imported oil. For the full year 2010, the trade gap increased by almost 33%, the biggest jump in 10 years.

It's amazing how connected we are to the unfolding events in Egypt by way of the internet, electronic media, blogs, and the like. News coverage is nonstop. But what impact are current events having on investing and Egypt's economy? Here to help shed some light is Derrick Irwin, Senior Equity Portfolio Strategist covering Egypt for Wells Capital Management's International Emerging Markets Equity team. Led by Jerry Zhang, the team manages the Wells Fargo Advantage Emerging Markets Equity Fund.

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Related blog posts:

• Egypt's regime change
• Keeping an eye on events in Egypt
• Egypt: How will unrest affect the markets?

At around 9%, the unemployment rate is still very high. Weekly initial unemployment claims dropped to 383,000 last week—the lowest level since July 2008. But July 2008 was a full seven months into one of the worst recessions on record, and it's been 30 months and we're just now back to where we were then. That's nothing to celebrate, but it is an improvement.

A bigger sign of an improving labor market is in the Extended Mass Layoffs report from the Bureau of Labor Statistics. A "mass layoff event" occurs when there is a layoff from a single employer of at least 50 employees that lasts for at least 31 days. Not only are these significant events for the individuals involved, they add up to a lot of unemployment claims for society to shoulder. In 2010, there were a total of 1,288,750 initial claims for unemployment insurance resulting from these mass layoffs. A disproportionate number of the individuals affected were minorities or were over the age of 55. Manufacturing, construction, and educational services were the industries most heavily hit.

When there is a mass layoff, sometimes it is because the employer is moving work to a different location. In 2010, only 225 mass layoff events of the 7,158 reported were associated with moving work from one location to another. Most employers reported that the reason for the layoff was due to inadequate demand for the company's product or service. This is actually an improvement from 2009 when inadequate demand and financial issues tied for the #1 reason. Also in 2010, more than 50% of the employers reported that they expected to recall the laid-off workers within six months. That was up from 34% in 2009.

Layoff data is only available going back to 1995, but in the fourth quarter of 2010, history was made: Only 6% of mass layoff events were because worksites were permanently closing. Most employers were expecting to recall workers within six months. I interpret these numbers as meaning business owners are getting more optimistic about the future. Consumer confidence surveys indicate consumers are also getting more optimistic. This all augers well for the labor market, consumer spending, and economic growth.

President Mubarak is no longer president of Egypt. Some people have analogized the events in Egypt to the crumbling of the Berlin Wall. That may be accurate, but only time will tell considering we still don't know who will actually be in charge, what policies will be imposed, or if the events will embolden people in other countries to rebel. From my perspective, I think this shows that political transformation can be exciting, but it can also create new risks and unknowns for investors.

The process of political transformation and revolution can take a long time and can be very costly. I don't think this historic event is a call for action for investors to jump in to Egyptian equities. If anything, because of the uncertainty and risks, I think investors could be better served by investing in U.S. companies that can help rebuild Egypt.

The major indexes traded modestly, with the Dow retreating for the first session out of nine. The Dow lost 10 points, the Nasdaq gained 1, and the S&P 500 gained just under a point. Sixteen of the Dow’s 30 components lost ground, led by Cisco (CSCO), which fell 14%. Volume was light on the NYSE and heavy on the Nasdaq. Advancers edged out decliners by narrow margins. The prices of Treasuries weakened, while the price of gold futures lost 0.2% to $1,362.50 an ounce. The price of crude oil on the New York Mercantile Exchange gained 0.02% to $86.73 a barrel.

In Earnings News:

• PepsiCo announced earnings fell from 90 cents a share one year ago to 85 cents a share in the latest quarter, thanks in part to the rising cost of raw materials. The acquisition of two bottling companies and a Russian food company contributed to a 37% increase in revenue. The company also reduced its estimate of 2011 income, saying earnings should expand between 7% and 8% instead of the 10% to 11% previously forecast. The price of Pepsi shares (PEP) fell 1% in today’s session.
• Sprint Nextel Corp. reported it reduced its losses from a loss of 34 cents a share last year to a loss of 31 cents a share in the latest quarter. The nation’s third-largest wireless provider also said it added contract subscribers for the first time since 2007. The shares (S) gained 5%.
• Goodyear Tire announced earnings fell from 44 cents a share one year ago to a loss of 73 cents a share in the latest quarter. Revenue rose 14%, but that was more than offset by the costs of closing a plant in Union City, Tennessee. The stock (GT) gained 14%.
• The price of Cisco shares (CSCO) lost 14% after the internet bellwether reported late on Wednesday that income in the fourth quarter fell by 18%, thanks in part to a decline in government spending for the company’s products. The report raised worries on Wall Street about future technology spending.

Credit Suisse thinks the shipping industry threw off the employment numbers in January’s nonfarm payrolls report and expects a brighter hiring future.

The economy weighs on the Super Bowl.

New study tries to get in the heads of successful entrepreneurs to see what makes them tick.

Hewlett-Packard enters the tablet wars.

Speaking of tablets, don’t let your eight-year old get your iTunes password and then get on your iPad.

All those cotton Super Bowl t-shirts might be driving up the cost of food.

Is Twitter worth $10 billion? Facebook and Google are reportedly kicking the tires.

Stocks took a break from their recent run, spending most of the day either flat or down slightly. Fed Chairman Ben Bernanke kept to his script in Congressional testimony today, saying that the Fed would continue QE2, its $600 billion bond-buying program. The big news was the wave of consolidation that could happen among exchanges, with news breaking of two potential mergers.

The Dow swung higher in the last few minutes of trading to keep its streak alive, gaining six points, with 16 of its 30 components higher; the S&P 500 lost three; and the Nasdaq was down seven. Decliners led advancers by five to three on the NYSE and by almost five to three on the Nasdaq. The prices of Treasuries strengthened. Gold futures gained $1.40 to close at $1,365.50 an ounce, and the price of crude oil fell 23 cents to settle at $86.71 a barrel.

In Earnings News:

• The Coca-Cola Co.’s fourth-quarter profit soared over the prior year on strong sales and fewer charges. The beverage giant reported profit of $5.77 billion, or $2.46 a share, up from $1.54 billion, or 66 cents a share, in the year-ago period, much of which was due to benefits of its acquisition of one of its bottlers. Adjusted profit was 72 cents a share, in line with estimates. Revenue jumped from $7.51 billion to $10.49 billion on strong volume in emerging markets. Coca-Cola’s shares (KO) rose 0.45%.

When most of us struggled through our first course in macroeconomics, we learned (I thought) that rising interest rates are eventually associated with slower economic growth and falling rates help accelerate growth. Imagine my surprise last Thursday when Fed Chairman Bernanke told us we had it backwards. In his speech to the National Press Club, he cited the rise in yields on Treasury notes and bonds since November as evidence that the latest round of purchases of Treasuries (dubbed QE2) is a success. His reasoning was that the rather sharp rise in Treasury yields after the Fed announced QE2 showed that investors had become more optimistic about economic growth. He noted that the markets had reacted in a similar fashion in March 2009 when the Fed announced a big expansion of its securities purchases. Back then, the yield on the 10-year Treasury note rose from around 2.60% in March to 4% in June. Since the announcement of QE2 in November, that yield has increased from 2.40% to 3.50%.

While expectations of better economic growth might, indeed, have been a factor pushing that yield higher, Mr. Bernanke chose to ignore the negative effects of higher Treasury yields. Rising yields on the 10-year Treasury note get translated directly into higher rates on 30-year fixed rate mortgages, the most popular mortgage financing vehicle. That rate rose a percentage point in 2009 and again from November 2010 to today. In response, mortgage applications for refinancing plummeted to the cycle low in 2009 and have declined just as dramatically since November. They are now at levels that can only be described as dreadful.

The major indexes continued their advances today, extending their multi-year highs. China’s announcement of another rate hike held back the markets in early morning trading, but strong sales at McDonald’s and some mixed earnings reports pushed the major indexes higher for the day.

The Dow rose for the seventh straight day, up 71 points, with 24 of its 30 components higher; the S&P 500 gained 5; and the Nasdaq advanced 13. Advancers led decliners by five to three on the NYSE and by four to three on the Nasdaq. The prices of Treasuries weakened. Gold futures bounced following China’s rate hike, gaining $15.90 to close at $1,364.10 an ounce, while the price of crude oil fell 54 cents to settle at $86.94 a barrel.

In Earnings News:

• Sara Lee Corp.’s adjusted profit fell in the company’s fiscal second quarter on higher food ingredient prices and flat revenue. Excluding sales of business units in a restructuring, Sara Lee earned 24 cents a share, compared with an adjusted 27 cents a share in the year-ago period. Revenue of $2.3 billion came in under expectations. Sara Lee is breaking up its North American and international businesses into two companies. Its shares (SLE) gained 1%.

I suppose I could go into all the complex issues involved in the muni market, the potential for muni defaults, and interview our very own Lyle Fitterer again, or I could just let Bloomberg do it for me. (Video here). And not to brag (alright, I'll brag, but only on Lyle's behalf): Bloomberg names him the best muni manager in the last decade. It's a great article that covers in more detail some of the issues Lyle discussed on the blog a few weeks ago. So take a quick read, and let us know your reactions to all this speculation about muni defaults.

Consumer credit rose $6.1 billion in December, according to the Federal Reserve. For the first time since the recovery officially began in June 2009, both revolving credit and nonrevolving credit increased. Even though the increase was higher than the consensus estimate of $2.0 billion, I'm not too concerned about this recent uptick in borrowing. In fact, I view this as a slight positive, as it shows that lenders are indeed willing to lend.

Another positive is that December's numbers increased at a healthy, noninflationary pace. As I've explained before, the Federal Reserve's monetary policy is not inflationary, considering the amount of money and credit in the economy matters—as well as the quantity of bank reserves. The Fed can control the quantity of bank reserves in the financial system, but it's ultimately up to borrowers and lenders to create money and credit. If credit—especially consumer credit—starts growing too quickly, then I think future inflation will be indicated.

Nonrevolving credit is dominated by auto loans, and December's increase may not be good news for auto companies. Because they're offering 0% financing, it shouldn't be too surprising that along with car sales, the car loan market is also recovering. My concern is that consumers are getting too accustomed to 0% financing. If a consumer borrows at 6% for five years on a $20,000 car, being able to borrow at 0% for five years on the same car is equivalent to cutting the purchase price by 13.8%. If 0% financing goes away, car companies might find themselves in the unenviable position of having to cut prices. That could be a hit to auto companies' profits in the years ahead.

With lenders writing off bad loans, consumers losing access to credit, and Americans in general becoming more thrifty, revolving credit had been declining for 27 months, making December's increase the first in more than two years. Because revolving credit is mainly credit card debt and a lot of that debt is incurred to pay for retail purchases, December's increase signals future strength in retail sales. I wouldn't want to see revolving credit increase too quickly, as it would point to inflation or future credit problems. But December's increase was mostly encouraging and not too much of a good thing.

Mergers and better-than-expected earnings reports propelled the markets forward, helped along by a quieter day in Egypt, where banks reopened after shutting down during the crisis last week.

The Dow advanced for the sixth straight day, gaining 69 points, with 21 of its 30 components higher; the S&P 500 was up 8; and the Nasdaq was higher by 14. Advancers led decliners by 11 to 5 on both the NYSE and the Nasdaq. The prices of Treasuries strengthened. Gold futures fell 80 cents to close at $1,348.20 an ounce. The price of crude oil fell $1.55 after the crisis in Egypt appeared to ease, settling at $87.48 a barrel.

In Earnings News:

• Hasbro Inc.’s fourth-quarter net income fell 16% in the fourth quarter on slowing demand for games. Net income was $140 million, or 99 cents a share, still comfortably ahead of analysts’ estimates of 93 cents a share. Games and puzzles sales fell 22%. Hasbro’s shares (HAS) gained 1%.
• Higher expenses led to a 57% drop in net income for health insurer Humana Inc. Fourth-quarter net income was $107.3 million, or 63 cents a share, compared with the prior year period’s $250.7 million, or $1.48 a share. December’s $790 million acquisition of Concentra Inc. was a major expense in the quarter. Humana’s shares (HUM) fell 2%.

The uprising in Egypt dominated news during the week, with investors unsure what to make of the rapidly changing developments on the ground. Our emerging markets analyst for Egypt, Derrick Irwin, gave us his analysis of where events stood last Thursday. On the domestic front, the big news was a pair of jobs reports. Payroll processor ADP said 187,000 jobs were created during the month. Analysts haven’t put much faith in ADP’s reports, so the attention was really on the nonfarm payrolls report released on Friday, which showed an anemic 36,000 jobs were created. The weather may have played a role in hampering job creation, but as Brian Jacobsen noted, it’s not a good number, either way. The unemployment rate, meanwhile, dropped from 9.4% to 9%, a surprising result that was hard to square with the dismal absolute number of jobs created.

Apart from jobs, other areas of the economy continue to do well, according to several reports released last week. The Institute for Supply Management’s manufacturing index rose to 60.8 in January, a very strong reading. Particularly strong were the employment and new orders components. U.S. consumer spending and personal income were both up in December, 0.7% and 0.4%, respectively.

This week’s economic releases are fairly light. Consumer credit for December is released on Monday, wholesale trade report on Thursday, and the international trade report for December on Friday. These typically aren’t the biggest market-moving reports, but they might yield some interesting information nonetheless. The trade deficit narrowed slightly in November, so look to see if that trend continues or if it was an aberration.

Notable earnings releases this week include Gartner, Hasbro Inc., and Humana Inc. today; ArcelorMittal, Sara Lee, Toyota Motor Corporation, and Walt Disney on Tuesday; Cisco Systems, MetLife Inc., Northrop Grumman, The Allstate Corporation, and The Coca-Cola Company on Wednesday; and Kraft Foods and PepsiCo on Thursday.

The major indexes advanced in choppy trading after a tepid employment report. The Dow gained 29 points, the Nasdaq rose by 15, and the S&P 500 advanced 3. Twenty of the Dow’s 30 components gained ground, led by Kraft (KFT), Du Pont (DD), and Procter & Gamble (PG), which each gained 1%. For the week, the Dow and the S&P 500 each rose by 2%, and the Nasdaq advanced by 3%. The volume in Friday’s session was light, and declining issues edged out advancers by a nose. The prices of Treasuries weakened, while the price of gold futures lost 0.2% to $1,349.00 an ounce. The price of crude oil on the New York Mercantile Exchange lost 1.6% to $89.03 a barrel.

The Labor Department issued a big monthly employment report that confounded the experts, leaving some optimists smiling and some pessimists frowning. On the one hand, the nation’s nonfarm payrolls expanded in January by only 36,000 jobs, far fewer than expected. On the other hand, the unemployment rate fell to 9%, down from 9.8% at the beginning of December. That 0.8% decline is the biggest two-month drop in unemployment in 53 years. Although the two data points—small payroll expansion and a big decline in unemployment—are hard to reconcile, analysts note that the payroll count misses very small companies, which may be hiring. In any case, 600,000 people who reported that they were unemployed a month ago now say they have found jobs, and that’s encouraging. Many economists add that the terrible winter storms sweeping the nation are skewing the numbers, so it may be spring before the true employment situation becomes clear.

In Earnings News:

• Tyson Foods announced earnings jumped by 86% from 42 cents a share a year ago to 78 cents a share in the latest quarter thanks to strengthening prices for pork and beef. The company also forecast stronger-than-expected results for 2011, and the price of the shares (TSN) gained 5% in today’s session.

Some investors fear the worst for the municipal bond market, citing rising interest rates and increased defaults. And they're selling. But that creates a buying opportunity at bargain prices for investors who take a strategic approach. Joining us is Lyle Fitterer, CFA, CPA, and managing director of Wells Capital Management's Municipal Fixed Income team. Among other funds, he manages the Wells Fargo Advantage Strategic Municipal Bond Fund.

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The unemployment rate fell by 0.4 percentage points to 9%, a pleasant surprise considering Bloomberg’s consensus was that the rate would rise to 9.5%. On the other hand, nonfarm payrolls increased by a mere 36,000, a markedly weak gain compared with the consensus expectation of 140,000. No doubt people will end up blaming the weather for the confusing employment situation report, but I think it’s more important to focus on the trend.

The increase in payrolls came mainly from durable goods manufacturing (such as automobiles, machinery, fabricated parts, and computers) as well as retail sales. Employment in nondurable goods manufacturing declined, as did construction. On average, total payroll employment has increased by 93,000 per month since February 2010. When the most recent data point is below average, it indicates a slowing labor market recovery—the last thing we need right now when the jobs recovery has barely gotten up to speed.

That’s why I don't take a lot of comfort in the drop in the unemployment rate. If payrolls increase by 36,000 and more than 130 million people are already on payrolls, that increase represents a scant 0.028%. The average workweek contracted by 0.1 hours. The labor force was unchanged, which is not a vote of confidence on the part of the people who dropped out of it during the economic downturn. The long-term unemployed (those jobless for 27 weeks or more) remain above 6 million (at 6.2 million), and they make up 43.8% of the unemployed. These statistics show that despite a longer-term trend toward more jobs, the road to a lower unemployment rate will continue to be a long one.

Unemployment is a persistent problem with no quick and easy solution, as the disparity between those with and without a college education shows. Those with less than a high school diploma have an unemployment rate of 16.5%, which is up from 15.7% in December. High school graduates have an unemployment rate of 10.7%, which is up from 9.8% in December. Those with some college education but who have not completed a bachelor’s degree have an unemployment rate of 8.5%, which is up from 7.9% in December. Only those with a bachelor's degree or higher had a drop in the unemployment rate from December to January, going from 4.6% to 4.5%. A higher education clearly matters—but that’s no consolation for those who don't have one.

The major indexes opened higher after strong retailing news, but then they fell into the red for most of the session and recovered before the close. The Dow gained 20 points, the Nasdaq rose by 4, and the S&P 500 advanced 3. Twenty-three of the Dow’s 30 components gained ground, led by Cisco Systems (CSCO), which rose 1.3%. Volume was light. Advancing issues outpaced decliners on the NYSE but they were nearly in line on the Nasdaq. The prices of Treasuries weakened, while the price of gold futures gained 1.5% to $1,353.00 an ounce. The price of crude oil on the New York Mercantile Exchange lost 0.3% to $90.54 a barrel.

In Earnings News:

• MasterCard reported earnings increased from $2.24 a share a year ago to $3.16 a share in the latest quarter, thanks in part to strong gains in credit card use abroad. Overall, revenue improved by more than 10%. A company spokesman said: "These are signs both that banks are issuing cards, and cardholders are using their cards again … so we're getting back to normal." The price of MasterCard shares (MA) gained 2% in today’s session.
• Dow Chemical reported earnings grew from 8 cents a share one year ago to 37 cents a share in the latest quarter as rising energy costs were more than offset by the company’s ability to raise prices. Revenue rose 11%, and the price of the shares (DOW) gained 0.2%.

Egyptian President Hosni Mubarak will not run again, but he’s announced he’s staying on to the end of his current term. The decision led to sometimes violent clashes between pro-Mubarak supporters and protestors. To get a sense of what’s going on in Egypt and what events warrant investors’ attention, I went to Derrick Irwin, the analyst for Egypt for the Wells Fargo Advantage Emerging Markets Equity Fund (managed by Jerry Zhang). Derrick thinks the situation is obviously too fluid to move beyond the speculation phase, but he sees a number of outcomes that are more likely than others.

The most likely scenario is that Mubarak eventually leaves and the military takes power on at least a transitional basis, and perhaps longer than that. If this is the case I would expect some limited policy change that will not completely mollify the Egyptian public, leading to longer-term instability in the region. The worst-case scenario would be along the lines of the 1978 Iranian Revolution, which is unlikely. The Army offers significant stability, and has so far been able to mitigate the tensions between factions. Egypt is fundamentally a more diverse and modern country than Iran was in 1978. A best-case scenario would be that the military rapidly transitions to a government of unity, and that a responsible opposition party rises from the demonstrations.

Check out the January Market Roundup from our Capital Markets Strategists:

January was an interesting month, to say the least: flooding in Australia, revolts in Tunisia and Egypt, and signals that China will continue to slow its rapid growth. Yet the markets seemed to shrug off a lot of this news by continuing to march higher. We do not think the markets are irrationally exuberant—yet—but they do seem to be throwing caution to the wind. We believe there is upside potential in many equity and even fixed-income markets; however, we also think the sooner investors err on the side of caution, the better.

Read more.

Egyptian President Mubarak’s announcement that he would finish his current term led to intensifying clashes today, as pro-Mubarak supporters fought protestors. In the U.S., snow and freezing rain shut down travel and businesses in a huge swath of the country from Oklahoma to the Midwest to the Northeast. Unrest in Egypt and weather worries were balanced by a handful of good earnings reports, and the markets were essentially flat on the day.

The Dow finished 1 point higher, with 11 of its 30 component gaining ground; the S&P 500 lost 3; and the Nasdaq fell 1. Decliners led advancers by six to five on the NYSE and by about four to three on the Nasdaq. The prices of Treasuries weakened. Gold futures fell $8.20 to close at $1,332.10 an ounce, and the price of crude oil gained nine cents to settle at $90.86 a barrel.

In Earnings News:

• A recovering advertising market helped send Time Warner Inc.’s fourth-quarter net income 22% higher to $769 million, or 68 cents a share. Advertising revenue jumped 21%. The cable company gave an optimistic 2011 outlook, expecting double-digit earnings growth and an 11% dividend increase. Its shares (TWX) jumped 8%.

Egypt news: Moody’s cuts Egypt’s debt rating. Also: Will the crisis in Egypt lure speculators into the oil market?

Effective corporate tax rates broken down by industry.

If you build it, it will sink. Dubai’s artificial islands are sinking into the sea.

The IMF is not happy with the level of U.S. and Japanese debt.

A brief look at the fourth-quarter earnings season through the end of January.

Volunteering rate falls slightly in 2010.

Jordan’s King Abdullah replaces his prime minister in an attempt to stay a step ahead of protests.

Massive winter storms across the U.S. could inflict major agricultural damage to winter wheat and cattle.

A couple of weeks ago we wrote about the Anybot teleconference robot. Fast Company got their hands on one and videotaped it roaming the office and inhibiting productivity.

Overnight the turmoil in Egypt spread to Jordan, where King Abdullah II dismissed his cabinet in response to growing protests in Amman. Geopolitical concerns appeared to be trumped by strong earnings reports and economic data, however, and stocks posted strong advances. The Institute for Supply Management’s manufacturing index handily beat expectations, and UPS’ strong fourth-quarter results were reassuring to investors. The S&P 500 closed above 1,300 for the first time since August 2008.

The Dow gained 148 points, with 27 of its 30 components higher; the S&P 500 was up 21; and the Nasdaq rose 51. Advancers led decliners by about four  to one on the NYSE and by about three to one on the Nasdaq. The prices of Treasuries weakened. Gold futures rose $5.80 to close at $1,340.30 an ounce, while the price of crude oil futures fell $1.42 to settle at $90.77 a barrel.

In Earnings News:

It’s hard for workers to find jobs even if they have all the right skills. It’s even harder if they don’t. Yet that’s the situation many people find themselves in after they’ve been forced out of stalled industries and are starting from scratch by looking for jobs in fields new to them. That’s stressful, to say the least, and more power to anyone striking out in new directions in response to these dismal economic times.

The problem is that there’s a shortage of companies saying they’ll “train the right candidate.” They don’t have to. There’s such an abundance of over-qualified people in most fields that companies think they can wait for already-trained candidates to fall in their laps, leaving relatively inexperienced career-switchers and the long-term unemployed out in the cold. What’s needed is a labor shortage to change that way of thinking. 

The Bureau of Labor Statistics was interested in studying labor shortages at the national level, so in December 2000 it started collecting data on job openings and layoffs. Labor shortages! Oh, to be living in those halcyon days once again. But as it is, job openings are ticking up in an almost V-shaped recovery. Well, maybe a V that’s feeling kind of lazy.