Bull Market Turns 4

The Dow Jones Industrial Average (Dow) rose 2.18%, the Wilshire 5000 Total Market IndexMSM (Wilshire 5000SM) gained 2.29%, the Standard & Poor's 500® Index (S&P 500) added 2.17% and the NASDAQ Composite Index (NASDAQ) tacked on 2.35%.

March 11, 2013

Performance for Week Ending 3/8/13:

The Dow Jones Industrial Average (Dow) rose 2.18%, the Wilshire 5000 Total Market IndexMSM (Wilshire 5000SM) gained 2.29%, the Standard & Poor's 500® Index (S&P 500) added 2.17% and the NASDAQ Composite Index (NASDAQ) tacked on 2.35%. Sector breadth was positive with all 10 of the S&P sector groups finishing higher. The Financials sector (+3.39%) led the way followed by Consumer Discretionary (+3.16%) and Materials (+2.75%).

Index* Closing Price 3/8/2013 Percentage Change for Week Ending 3/8/2013 Year-to-Date Percentage Change Through 3/8/2013





Wilshire 5000




S&P 500








*See below for Index Definitions

MARKET OBSERVATIONS: 3/4/13 - 3/8/13

The major market indices finished the week solidly higher with the Dow hitting a new all-time high. The new high also happened to coincide with the 4-year anniversary of when the Dow troughed at the closing level of 6547 on March 9, 2009. Last week’s gains were driven by a batch of solid U.S. economic data, fading concerns over the Italian elections and ongoing reassurance from U.S. central bankers that they will keep their foot on the monetary gas pedal. Investors were also encouraged by a 21.8% surge in Chinese exports, more than double analysts forecast. The data was viewed as a sign that the pace of global economic activity may be gaining some traction.

As expected, policymakers were unable to find middle ground in the sequester debate, and the mandatory cuts in spending were allowed to kick in. Despite ongoing doomsday talk, the fact that there has been little collateral damage up to this point was viewed favorably by investors. As mentioned in these missives, the U.S. economy and markets have exhibited incredible resiliency over the past several years even in the face of a credit rating downgrade, the lead up to the fiscal cliff negotiations and the perennial worries over a double dip recession. Importantly, none of these events knocked the recovery or the markets off kilter, which suggests that the sequester should not either as the fundamentals of the U.S. economy remain strong enough to power through any fiscal contraction.

Payroll Report
On Friday, the Labor Department reported that nonfarm payrolls during the month of February expanded by a much stronger than expected 236K. The unemployment rate dipped to 7.7% (from 7.9%) while private payrolls—which filter out government hiring/firing—rose by 246K. All reported metrics were solidly ahead of economist’s expectations. The payroll data followed reports earlier in the week from ADP that showed a surge in private company payrolls and from the Labor Department that showed the 4-week moving average on initial jobless claims dropping to the lowest level in 5 years. Bottom-line, the recent labor related data suggests the U.S. job market is on solid footing.

New High on the Dow -- What to expect based on history: While in the very near-term, the new high is likely to help restore investor confidence and could prompt “fence sitters” to reallocate funds back into the equity markets. However, an examination of history suggests that the market could hit a rough spot in the coming weeks/months before ultimately pushing higher. Data compiled by the WSJ Market Data Group shows there have been 14 instances since 1896 in which the Dow initially eclipsed a previous record (this week was the 15th occurrence). In the following three months, the Dow has averaged a 0.4% decline, illustrating how the market typically experiences some short-term profit taking after surpassing record levels. Longer-term trends tell a different story. The Dow has averaged a 1.3% increase in the six months after it hits a new record. One year after such milestones are eclipsed, the Dow has averaged an 8.1% gain. Prior to Tuesday, the last time the Dow crossed through its all-time high was Oct. 3, 2006. Back then, the Dow was up 6% over the ensuing six months. It rose 19% over the following one-year period – stay tuned.

Beige Book
Last week the Federal Reserve (FED) released its Beige Book report. The report, which compiles snapshots of business conditions in each of the 12 FED bank districts, indicated that economic growth was “modest to moderate” during January and the first few weeks of February reflecting stronger housing, consumer spending, and auto sales in most regions. Residential real estate strengthened in “nearly all districts,” with home prices rising and inventories falling across much of country. Most regions reported expanded consumer spending and modest improvement in manufacturing. Labor market condition showed modest improvement in the majority of most districts although hiring intentions were limited in several areas. Respondents also expressed concerns related to fiscal policy as the payroll tax increase that took effect at the start of the year is starting to create some headwinds. Many districts also reported that uncertainty surrounding future federal spending cuts weighed on activity growth. 

The Week Ahead:
The economic calendar will take center stage this week with the focus on retail sales, inflation, consumer confidence and regional manufacturing. The earnings calendar continues to wind down with only 2 members of the S&P 500 scheduled to report results.  FED speeches will be minimal as we are about to enter into the “quiet period” ahead of the March 19/20 FOMC meeting.


The Dow Jones Industrial Average is a price-weighted average of 30 blue-chip stocks that are generally defined as the leaders in their industry. It has been a widely followed indicator of the stock market since October 1, 1928.

Wilshire 5000 Total Market IndexSM represents the broadest index for the U.S. equity market, measuring the performance of all U.S. equity securities with readily available price data. The index is comprised of virtually every stock that: the firm's headquarters are based in the U.S.; the stock is actively traded on a U.S. exchange; the stock has widely available pricing information (this disqualifies bulletin board, or over-the-counter stocks). The index is market cap weighted, meaning that the firms with the highest market value account for a larger portion of the index.

Standard and Poor's 500© Index is a capitalization-weighted index of 500 stocks. The index is designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

The NASDAQ Composite Index is a broad-based capitalization-weighted index of stocks in all three NASDAQ tiers: Global Select, Global Market and Capital Market. The index was developed with a base level of 100 as of February 5, 1971.

The S&P/TSX Composite Index is a capitalization-weighted index designed to measure market activity of stocks listed on the Toronto Stock Exchange (TSX). The index was developed with a base level of 1000 as of 1975.

Indices do not include any expenses, fees, or sales charges, which would lower performance. Indices are unmanaged and should not be considered an investment. It is not possible to invest directly in an index.

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