nasdaq Archives • Rutherford Investment

Market In Rally Mode In Third Quarter

Published October 15, 2012
U.S. equity markets have staged a strong rally since hitting a low point on June 1. At that time investors feared a global recession, Europe was facing disaster and the general outlook was despondency.

The market closed at 1,278.04 on June 1. It has since risen 12.7 percent through the third quarter in a stealth rally. The market closed at 1,440.67 on Sept. 30. In September, usually the worst month for markets, the S&P rose 2.6 percent, the Nasdaq rose 1.6 percent and the Dow rose 2.75 percent.

At the conclusion of the quarter, the Dow had risen in 11 of the past 12 months, falling only in May. The last time this happened was in 1959. The Dow has had a remarkable one-year run in which it has gained about 2,500 points, or 23 percent.

It was not all smooth sailing, because most of the September gains came in the first two weeks. Durable goods orders in July-August fell 13.2 percent. At the end of September, consumer sentiment fell. The nonmanufacturing index rose to 55.1, but less than the 55.3 expected. Second-quarter GDP was revised lower to 1.3 percent growth.

However, jobless claims fell slightly and the economy in September added 162,000 jobs – well short of the 250,000 needed to absorb new workers let alone those out of work for extended periods. By the end of September, government statistics showed that the unemployment rate was below 8 percent, for the first time during the Obama administration.

The market got a lift from the announcement by the Fed of another round of quantitative easing. Both the anticipation of QE3 and the implementation […]

Markets’ Solid Starts Bode Well For 2012

Published February 10, 2012

There is an old saw about the equity markets: As January goes, so goes the year. But like many old saws, there is a basis in fact for this one. Note that the S&P jumped 4.4 percent for the month, with the tech-heavy NASDAQ up 8 percent.

In addition, the “first five days” theory holds that the S&P has never fallen in a year when the first five days of the year see gains of 1.8 percent or more. In the first five days of 2012, the Dow rose 1.8 percent.

The Dow index has matched the direction of January performance in 92 percent of years since 1970. In 85 of the Dow’s 114 years – 75 percent of the time – the January effect has held true.

Reasons for optimism have emerged. Most recently, the unemployment rate fell to 8.3 percent from 8.5 percent a month earlier and 9.1 percent as recently as August.

This is because net job creation in January was 243,000 – more than expected. Moreover, December job growth was revised upward, as was November from 100,000 originally to 157,000.

These jobs were created in the private sector; business added 257,000 jobs as the public sector continued layoffs. Small businesses added 95,000 jobs, while medium-size firms added 72,000. Large companies added only 3,000 jobs. Most Americans work at businesses ranging in size from small to medium; these are the ones that banks are becoming more willing to lend to.

Factory orders are up for the second consecutive month. Factory orders grew in Germany for the first time in four months. Orders also grew in Austria, Britain, Norway and Sweden. Northern Europe’s […]