Less than a point separated the S&P 500 from its ninth straight week of highs but it was still a very strong end to the trading week. Sparked by an encouraging employment report for November, the S&P 500 jumped 20 points, or 1.1%, on Friday.
Looking back to the entire trading week, the week made its mark on Friday. Earlier in the week, market analysts were preoccupied with whether the November employment report would prompt the Fed to make a tapering decision at its December meeting.
The report featured a 203,000 increase in nonfarm payrolls and a drop in the unemployment rate to 7.0% from 7.3%. This increase was not driven by a decline in the labor force participation rate and was solid enough to convince participants that the labor market is improving but not strong enough necessarily to force the US Federal Reserve’s hand into tapering this month.
S&P 500 (December 2nd – 6th, 2013)
Whatever unfolds, the overriding message of the market on Friday was either that it didn't believe there would be a tapering in December or that it doesn't fear a tapering this month (or even into January).
Every sector in US trading finished higher on Friday and so did every Dow component. For the week, the best-performing sectors were the utilities (+0.8%) and the technology (+0.7%) sectors.
In terms of the US GDP report, it wasn't as robust as the jobs report was. The change in inventories accounted for 1.68 percentage points of the change in GDP. Also, personal consumption expenditures were up just 1.4% - their lowest since Q4 2009 – while final sales, which exclude the change in inventories, were revised down to 1.9% from 2.0% in the first estimate. The budget negotiations promise to be a focal point in the week ahead in the US along with the Retail Sales report for November and Q3 GDP data for Europe.
On Friday, US telecommunications firm AT&T was under fire for ongoing revelations that it was sharing and selling customers' communications records to the National Security Agency (NSA) and other US intelligence offices. The firm said it isn't required to disclose to shareholders what it does with customers' data. In a letter sent Thursday to the Securities and Exchange Commission (SEC), AT&T said it protects customer information and complies with government requests for records only to the extent required by law.
The letter was a response to shareholder’s asking heated questions that were sparked on November 20th by the New York State Common Retirement Fund, the ACLU of Northern California and others. The groups are demanding that AT&T and Verizon be more transparent about their dealings with the NSA.
In the letter, AT&T said information about assisting foreign intelligence surveillance activities is almost certainly classified. The company said it should not have to address the issue at its annual shareholders meeting this spring.
AT&T (December 2nd – 6th, 2013)
After the September 11th terror attacks, American agencies established a warrantless program to monitor phone calls and e-mail between individuals in the United States and other countries that are suspected of having links to terrorism. However, disclosures in recent weeks from former intelligence contractor Edward Snowden have exposed the breadth and depth of US government surveillance programs on the Internet and over other telecommunications networks.
AT&T has been fighting its case by also stating that AT&T argues that the issue of their disclosure practices with the NSA has not been a topic of sustained debate over the last several years.
After all this activity in the market, AT&T dropped from its weekly high on Monday of $35.15 to a low of $34.23 on Thursday.
Equities/indexes: the S&P 500 index experienced a wobbly week, with it ending on a high. Those that traded binary options based on the value of this index on Friday morning through a binary call option would have been “in the money” by the afternoon of the same trading day.
USD/JPY: the USD/JPY currency pair experienced a range of movement following the range of economic announcements. Those that traded binary options based on the value of this currency pair on Tuesday morning through a binary put option would have experienced successful results by midday of the same trading day.
AT&T: with a lot of attention focused on AT&T’s sharing of information with the NSA, shareholders have been concerned with its long-term viability. Those that traded binary options based on the price of this stock first thing on Thursday morning through a binary call option would have been “in the money” by midday of the same trading day.
Overall, the markets reacted positively to the US jobs data that was released on Friday. News was well received as the data showed an increase but also wasn’t enough to create a major movement in the US Federal Reserve’s position on its stimulus program just yet. Hopefully this positive yet conservative element will continue in the markets in the weeks ahead.
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