{+++}Clarity on the Greek debt situation, incremental improvements in the US employment picture and other positive economic data kept markets moving in the right direction all week long. The US Feb ISM non-manufacturing index hit its highest level since Oct 2007, February same-store sales and auto sales figures were relatively strong, and January consumer credit figures registered their first increase in 12 months. In another sign that companies are raising output without adding many jobs, productivity rose sharply in Q4. Unsurprisingly, the January pending home sales data followed in the footsteps of several recent housing numbers to the downside. Friday’s Feb employment reports showed that annualized unemployment held steady at 9.7%. Non-farm payrolls nearly turned positive despite fears last month’s blizzards would white out over 100K jobs. Administration officials made the rounds after the data were released, insisting that the numbers would have been even stronger if not for the dire weather in February. Fed Governor Fisher said the US is far away from a pickup in hiring and said he expects unemployment rate to remain around 10% for a while. As expected, President Obama said the Democrats would push healthcare reform through the Senate using budget reconciliation rules, formally launching the “nuclear option.” Speculation about an overheating Chinese economy was in the background all week. US press articles discussed whether the country is facing a real estate bubble or not, while government and PBoC officials all insisted that inflation would not get out of hand this year. Nearly everything went right for investors, and sharpening risk appetite pushed the Nasdaq out to a 52-week high by Friday afternoon, while the DJIA gained triple digits. For the week, the Nasdaq rose 3.9%, the DJIA increased 2.3%, and the S&P500 climbed 3.1%.
Merger activity continued at a healthy clip this week, with a concentration in the pharmaceutical sector. Japanese drugmaker Astellas launched a $3.5B hostile takeover offer for OSI Pharmaceuticals, bidding $52 a share in cash, and Germany’s Merck KGaA snapped up biotech supplier Millipore for around $6B in cash, at $107/share. Biotechs Geron and Cephalon, which are often the subject of market rumors, were mentioned as potential targets.
The market has been hot and I hope it keeps going, but we have to be cautious here. It does look like we want to tag and maybe even break through the January highs though. If things start to look sketchy we will raise stops, but at all costs, respect the existing stops that are in place.
I’ve added some new longs as a result. I like the oil patch here and we saw OIH barely trigger on Friday, adds this week include HAL and OXY in that sector. V (Visa) looks good again and may make a run, MA (Mastercard) is running so that is a good sign for V and the chart looks great.
SQNM is an add and could go ballistic if it can break through the trigger price with volume.
GRA has an interesting chart and is certainly in the right group.
I saw that Barrons had a bullish piece on CHRW which is on our short list so we may have a headache in the morning.
I will be updating regularly on the blog and twitter if I see a move that needs to be made as I am in the foxhole all week.
Please see the P&L for the new additions and any stop adjustments that may have been made.
Hope you had a great weekend and rest up tonight.