The major indices were all up modestly today, capping the best week for stocks since 2008. Today’s gains were largely connected to the newest jobs report that showed unemployment dropping to 8.6 percent, but rumors of a $270 billion loan from the European Central Bank (ECB) to the International Monetary Fund (IMF) also helped boost stocks.
Mixed Reactions to Job Report
The Labor Department’s household survey revealed that unemployment in the United States has fallen to 8.6 percent, the lowest level since March of 2009. While the initial numbers may appear positive, a more in depth look at the report revealed that those figures are not entirely positive. The nation did create jobs in November, with 140,000 new jobs created by private employers for a net job gain of 120,000 after considering the 20,000 public sector jobs that were lost. What’s more, revisions to previous surveys revealed that 72,000 more jobs were created in September and October than initially reported.
However, the reason for the decline in unemployment had as much to do with the 315,000 people who left the labor force last month, deciding to stop actively looking for work. Analysts have said that the economy needs to create some 125,000 jobs a month to hold unemployment steady.
Wall Street Reacts to {Another} Rumor About Europe
The bigger news pushing the markets today came from Europe as still more reports of a bigger deal on securing the debt crisis soothed investors worries and helped markets move up. German Chancellor Angela Merkel addressed parliament to call for more immediate action in ending the debt crisis, likening the effort to a marathon that would require all parties to understand the level of difficulty before setting out. Merkel called for treaties to be amended to include means for enforcing regulations requiring European Union members to keep budget deficits within 3 percent of GDP and overall debt under 60 percent of GDP. “In order to win back trust, we need to do more, where we today have agreements, we need in the future to have legally binding regulations,” Merkel said. She also insisted that the EU should not expect to find a quick or easy solution to their problems. “The German government has made it clear that the European crisis will not be solved in one fell swoop…” she said. “It’s a process, and this process will take years.”
Marginal Gains Cap Big Week
The modest gains in the job market paired with Merkel’s reassuring if gloomy speech joined reports that the ECB may be lending $270 billion to the IMF to aid ailing European countries. Taken as a whole, it helped boost the major indices all up over 1 percent in early trading before leveling out and dropping by mid-day. On the whole, though, stocks gained more this week than in any single week since 2008, marking hope for some that the long winter of a depressed US economy and European crisis may be nearing an end.
Among the stocks driving the week’s gains were technology company Zoltech (ZOLT), which gained nearly 55 percent on the week after releasing a strong Q4 earnings report, and Eastern European vodka producer Central European Distribution Corp (CEDC), which jumped over 60 percent this week on news that Russian Standard was acquiring a 10 percent stake of their shares. However, some of the biggest gainers were major European banking institutions, reacting to improved confidence that a plan for resolving the debt crisis was on the way. On the week, Royal Bank of Scotland (RBS) gained over 17.5 percent, ING Groep (ING) was up over 28 percent, Deutsche Bank (DB) spiked almost 25 percent, and Barclays (BCS) saw gains approaching 24 percent.
