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Archive for March, 2010

Great First Quarter for US Stock Market Ends

Wednesday, March 31st, 2010

Just a few moments ago the United States major stock indices finished off the first quarter with some very nice gains. Over the three month period, all of the major indices were up strongly. In fact, the United States stock market outperformed the rest of the world, which is a big change from what had been the norm before this quarter.

The biggest winners were the smallest stocks. The Russell 2000 Index, which is a basket of small companies, went up an astounding 8.6% in the first quarter alone. The NASDAQ stock market gained 5.7%. The Dow Jones Industrials gained 4.0% for the quarter. The S&P 500, largely seen as the broadest measure of the market, gained about 4.9% on the quarter. The S&P 500  is now up about 11% from its February lows, so the comeback from the initial selloff has been strong.

Interestingly, the banking sector was one of the huge winners in the first quarter. The banking sector as a whole gained almost 22% over the first three months of 2010. Retailers were also big winners as retail sales and consumer spending numbers perked up better than most investors expected during the quarter.

It is important to remember that this was just one quarter, and the stock market can be very fickle. I tend to think the long-term prospects of the stock market are solid, but they rely very heavily on the employment situation improving fairly quickly. Housing numbers have also been disappointing, and concerns about interest rates could weigh on the market in the months to come. If you have followed the stock market much at all, you should know that there are always plenty of worries to go around. In the first quarter there were worries abound, but the market was able to overcome those and have a great quarter. Let’s hope it continues through the rest of the year and beyond!

Take Responsibility for your Personal Finances!

Tuesday, March 23rd, 2010

The single biggest tip that I can give individuals looking to improve their personal finances is to hold yourself accountable for every single action you take. In all other aspects of life we are accountable for the decisions we make, and our finances should be no different. Let’s take a look at some ways to hold yourself accountable and make yourself more responsible when it comes to your finances.

First of all, you must always stay up to date on what is going on with your finances. It’s difficult to hold yourself accountable if you don’t keep track of what your current situation is. Every time you get any kind of bank, credit card, or any other financial statement, make sure you take a close look at it and see how you are doing and if any changes have been made. Many consumers end up paying because they don’t stay on top of fees and expenses that change over time, so make sure you aren’t one who does this.

Another important way to hold yourself accountable is to set goals and then track your progress. Setting personal finance goals are recommended by almost all of the top financial advisors. This allows you to sit down and plan out where you want to be in the future, then check to see how you are doing as far as reaching your goal. I think it is wise to set both long-term and short-term goals so you have intermediate goals to try to meet along the way.

Finally, make sure you understand that you are in control of your personal finances. This means you need to take the reigns and accept all responsibility. There is no reason you should be blaming other people or complaining, but rather you should be making the most of your situation and trying to improve your situation in the future. You are accountable, so make wise financial decisions for your future!

S&P 500 Churns to Highest Level in 17 Months

Thursday, March 11th, 2010

Today the S&P 500 squeaked to the highest level in 17 months, finishing the day at 1150.24. The previous high was set on January 19th at 1150.23. In late January and early February the market slipped by more than eight percent as investor took profits and worries about Greece and the debt crisis took center stage. For a while it seemed that a new correction may have been starting, but at least for now it seems that was just a temporary bump in the road to the recovery.

Over the last few weeks I have heard a lot of complaints about the volume in the market being lighter than most people would wish. While I understand those concerns, I think the process the market has been going through is a very normal one. After a huge run last year many investors took to the sidelines in late January, but over the last few weeks the market seems to not want to go lower. A television commentator wisely called what has happened the last few weeks a “melt up of the market.” The market hasn’t been setting any records on speed of a gain, rather it has just slowly moved higher as investors digest the current news.

After a great run like the market had over the past several months I think it is a good step to see a period of market digestion, and it certainly is encouraging that during that time it seems that even negative news hasn’t been that much of a drag on the stock market. The slow churning of the market right now might be boring and difficult for some traders, but the truth is it is a very healthy process for the long run. So long as the market holds it own during the quiet period I think the  signs are positive for the next big move in the market.

February Jobs Report Better Than Expected

Friday, March 5th, 2010

The stock market is rising nicely today after the February non farm payrolls report showed that the economy lost just 36,000 jobs in February, much less than the 70,000 or so analysts had expected to be lost. Severe weather throughout February gave the month a very bad backdrop, especially for groups such as retailers and those most exposed to the consumer. The weather would also hurt construction hiring since many jobs were not able to be completed due to the inclement weather during the month. December’s number was revised to just 109,000 jobs lost, from an initial estimate of 150,000. In January there were 26,000 jobs lost. The unemployment rate held steady at 9.7%.

The breakdown of jobs gained or lost does indeed show the hardest hit area was construction, which shed 62,000 in the month of February. Unemployment in the construction is estimated at a stunning 27.1%. Retail employment held steady after gaining 40,000 jobs in January. On the encouraging side of things, 47,500 temporary workers were added in the month. Private business services, often seen as a barometer for the jobs market overall, added 51,000 jobs in the month of February.

Clearly the jobs market is on the mend from where it was several months ago. Right now we are talking about nearly break-even jobs gained and lost, which is a big improvement over 600,000 jobs being lost per month. There definitely needs to be more improvement and it will be interesting to see what the spring brings for the job market in the United States. Temporary workers being picked up tells me that employers are starting to edge back onto the side of hiring, but they are doing so cautiously. March’s employment report has a chance to be our first month of gains in quite some time, so stay tuned and see if the economy can get back on the path of creating jobs!

M&A Increases a Great Sign for Economy

Tuesday, March 2nd, 2010

Mergers and acquisition activity, often called M&A, can be a great sign of the economic times. When the economy is in the dumps companies don’t want to open up their books and spend, so activity is slow. As companies become more confident about the economic environment they usually start to look for business opportunities that can help them grow. Both yesterday and today there has been a huge increase in the M&A activity on Wall Street, and there is no doubt that investors are taking notice.

Yesterday it was the Prudential and AIG deal that took center stage and for good reason. Prudential purchased the Asian operations of AIG for a whopping $35.5 billion. That certainly doesn’t sound like something that a company would do when they believe the global economy is in shambles. The simple fact that AIG was involved in this transaction also lifted the spirit of investors, since AIG is one of the main culprits for this financial crisis that has occurred in the past couple of years.

Today we have word that the fertilizer industry is ripe for M&A activity between major players. This is another space where companies with cash on hand appear willing to wheel and deal in an improved economic environment.

As individual investors the increase in mergers and acquisitions should definitely encourage you. Large companies that are stocked full of cash are often very careful with this cash, but when they start opening up their balance sheet and making deals, it is a true sign of increased optimism. If large companies with a stockpile of cash are more optimistic about the future of the economy then that makes me feel more confident about the direction we may be heading.

As more cash is spent and businesses take a leap of faith, the end result should be a positive one for the stock market and consumers as a whole!

Consumer Spending Increases

Monday, March 1st, 2010

Little bit of good news is pushing up the market today. Commerce Department said that the personal income has gone up six straight months and spending has increased four straight times. Consumers’ personal spending rose by 0.5 percent in January, slightly better than expected. But incomes edged up only 0.1 percent, significantly lower than the 0.4 percent gain that economists had expected. Consumer spending is closely watched because it accounts for 70 percent of total economic activity.

On the inflation side core price index (CPI) for personal consumption expenditures, which excludes volatile food and energy, rose 1.4% compared to January 2009. CPI is slightly decreased compared to December last year. It was 1.5% in December 2009. This means that prices are in check and inflation is not a big danger yet.

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