Weekly Market Recap: DJIA Rockets 7%, Unemployment Improves

DJIA 12,019 S&P500 1,244 Nasdaq 2,627 Gold 1,749 Oil 101

The S&P 500 (NYSEARCA:SPY), Nasdaq (NASDAQ:QQQ), and Dow Jones Industrial Average (NYSEARCA:DIA) shot the moon this week as investors felt Europe made strides. On the commodities front, Oil (NYSEARCA:USO) closed over $100 and Gold (NYSEARCA:GLD) made some gains as well.

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Now, for our analysis of the 15 reasons markets moved this week:

Monday

Today’s markets were up because:

1) Europe. Markets rallied today on hopes that euro-zone leaders will stitch together a new fiscal union mean to stabilize European Union. Investors hope the plan, being pushed by German Chancellor Angela Merkel and French President Nicolas Sarkozy — leaders of the euro zone’s two biggest economies — will open the way for the European Central Bank to bail out Italy and Spain.

2) Consumer spending. Reports of strong Black Friday weekend sales contributed to today’s broad rally. Major retailers reported record sales of $52.4 billion over Black Friday weekend — up 16% from last year — according to a survey by the National Retail Federation released Sunday. Retailers like Wal-Mart (NYSE:WMT), Home Depot (NYSE:HD), Best Buy (NYSE:BBY), Macy’s (NYSE:M), and Saks (NYSE:S) were trading higher today on the news.

3) Banks. As is the case with most broad rallies, the financial sector was the biggest beneficiary. Investors seem to have been left unfazed by a report today exposing the biggest financial firms’ reliance on the Federal Reserve’s bailout program, as the country’s six biggest banks –  Morgan Stanley (NYSE:MS), Citigroup (NYSE:CS), Goldman Sachs (NYSE:GS), JPMorgan (NYSE:JPM), Bank of America (NYSE:BAC), and Wells Fargo (NYSE:WFC) — were all trading higher, though they reportedly borrowed $460 billion from the Fed just to survive the crisis.

BONUS: Judge Throws Out Citigroup Settlement, Case Goes to Trial

Today’s markets were mixed because:

1) Europe. U.S. stocks edged higher early in the day extending gains from yesterday’s rally as investors remained hopeful that euro-zone leaders are making progress in addressing the region’s debt crisis. Finance ministers from the euro zone’s 17 member nations have converged on the European Union headquarters in Brussels today in a desperate bid to save their currency and to protect the global economy from a debt-induced financial crisis. European leaders are working on a new plan to ensure fiscal discipline across the euro region while keeping down borrowing costs on sovereign debt. 

2) AMR. American Airlines’ parent company AMR Corp. (NYSE:AMR) announced early this morning that it had filed for Chapter 11 bankruptcy protection, causing the company’s stock to plunge more than 80%. The news gave rival airlines some traction, with Delta (NYSE:DAL), United Continental (NYSE:UAL), and US Airways (NYSE:LCC) among the day’s hottest stocks. JetBlue (NASDAQ:JBLU) shares climbed more than 10% by closing bell.

3) Banks. Though the financial sector led Monday’s rally, they were among today’s biggest losers. Bank of America (NYSE:BAC), JPMorgan (NYSE:JPM), Morgan Stanley (NYSE:MS), Wells Fargo (NYSE:WFC), and Goldman Sachs (NYSE:GS) all declined.

BONUS: Obama and EU Leaders Consider Bilateral Trade Agreement

Wednesday

Today’s markets were up because:

1) Central banks. Stocks staged a huge rally today after theFederal Reserve and five of the world’s major central banksissued a joint statement saying that they would take coordinated steps to prevent a global liquidity crunch as the euro zone fights to end the debt crisis. The Federal Reserve said it will work with the European Central Bank, as well as the central banks of Britain, Canada, Japan, and Switzerland, to boost liquidity and support the global economy.

2) Jobs. The private sector added 206,000 jobs in November for the biggest gain since December 2010, according to the ADP National Employment Report. Figures reported Wednesday far surpassed economists’ expectations for a gain of 130,000 jobs, prompting them to raise their forecasts for Friday’s more comprehensive report from the U.S. Department of Labor, which includes both public and private sector employment.

3) Banks. Bank stocks rallied on news of the central banks’ plans as investors ignored Standard & Poor’s downgrade of big bank stocks that came Tuesday evening. Goldman Sachs (NYSE:GS), Morgan Stanley (NYSE:MS), Citigroup (NYSE:C), JPMorgan (NYSE:JPM), and Wells Fargo (NYSE:WFC) all shot up more than 7% in trading today, while Bank of America (NYSE:BAC), which hit a 52-week low on Tuesday, moved up 7.30% by closing bell.

BONUS: Euro Leaders Will Seek Greater Role for IMF and ECB in Fighting Crisis

Thursday

Today’s markets were mixed because:

1) Mario Draghi. Investors were also focused today on comments from European Central Bank president Mario Draghiwho, speaking before the European Parliament, said Europe needs a “new fiscal compact” to ensure that budget rules are respected and enforced. Some investors interpreted Draghi’s suggestion that “other elements might follow” the compact’s adoption as a hint that the ECB would then be willing to step up its rescue efforts and intervene in euro-zone sovereign debt markets on a large and unlimited basis. Though investors have been clamoring for the central bank to take action, it has been reluctant to prop up government finances, not only because it would risk inflation, but because it would let profligate nations off the hook for unsound fiscal practices.

2) Unemployment. The number of people filing for initial unemployment benefitsunexpectedly rose by 6,000 to 402,000 last week, Labor Department figures showed today in Washington, well above the 390,000 jobless claims economists had been forecasting for the week ending November 26. Markets are now awaiting Friday’s monthly jobs report

3) Autos. Lower gas prices and wider availability of Japanese models made November the American auto industry’s best sales month in more than two years. Today Chrysler, Ford (NYSE:F), General Motors (NYSE:GM), Nissan, and Toyota (NYSE:TM) all reported year-over-year improvements in U.S. sales, with only Honda (NYSE:HMC) reporting a decline. Honda and Toyota were the two companies that experienced the biggest disruptions related to the earthquake and tsunami that struck Japan in March. However, unlike Honda, Toyota has been able to claw its way back, with November sales up 6.7 percent compared to last year. November’s results represent Toyota’s first year-over-year sales increase in the U.S. in seven months.

BONUS: EU Bank Writedowns May Exclude Debt Issued Before 2013

Friday

Today’s markets were mixed because:

1) Unemployment rate. The mood on Wall Street was positive after the Labor Department said the U.S. unemployment ratehad eased to 8.6% in November as employers added 120,000 new jobs. Last month’s unemployment rate is the lowest since March 2009. Though the 8.6% figure is skewed by the number of people dropping out of the workforce, and my temporary holiday hiring, investors were still satisfied with the pick up in hiring, and markets opened sharply higher Friday morning, with all three of the major indices topping 1% in early trading.

2) Europe. News out of Europe dampened that early euphoria, putting investors on edge and leading to sharp declines off the morning’s highs. Talk of a possible downgrade to Spain’s credit rating spooked investors and sent the Spanish 10-year yield up to 5.7%. Also, reports that Republicans would try to block any move by the European Central Bank to lend funds to the International Monetary Fund to aid Europe’s cash-strapped countries further worried investors who have become disillusioned with the government and partisan politics. Conservative lawmakers are against the Washington-based IMF’s involvement because it could leave U.S. taxpayers footing the bill.

3) Banks. Bank stocks were among the top gainers today, with Bank of America (NYSE:BAC) and JPMorgan (NYSE:JPM) leading the Dow’s early advanc. Morgan Stanley (NYSE:MS), Goldman Sachs (NYSE:GS), and Citigroup (NYSE:C) shares all closed the day sharply higher despite the market’s general decline in the afternoon.

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