Weekly Market Recap: Job Market Improves, Yahoo the Talk of the Town

DJIA 12,359 S&P500 1,277 Nasdaq 2,674 Gold 1,617 Oil 101

The Nasdaq (NASDAQ:QQQ), S&P 500 (NYSEARCA:SPY) and Dow Jones Industrial Average (NYSEARCA:DIA) rallied a bit more during the last short trading week of the holiday season. On the commodities front, Oil (NYSEARCA:USO) found more support to tack on $2, and Gold (NYSEARCA:GLD) had a relatively positive weak on Euro weakness.

Trending Now: Are Investors Getting Physical With Gold and Silver?

Now, for our analysis of the 12 reasons markets moved this week:

Tuesday

1) Manufacturing. Stocks climbed higher today — the first trading day of the New Year — on positive manufacturing reports on China, India, and the United States. An Institute of Supply Management report showed U.S. manufacturing activity, which accounts roughly 12 percent of the economy, expanded in December at the fastest rate in six months. Manufacturing growth figures in China and India came in better than expected over the weekend, suggesting a strengthening in the global economy, though concerns over a slowdown in Europe continue to weigh on the global outlook.

2) Europe. A new year doesn’t mean a blank slate as far as Europe is concerned, and markets will remain as vulnerable to concerns about the debt crisis in 2012 as they were in 2011. Europe has been the main driver of stock prices for several months, and today’s lack of any breaking economic policy developments, as well as a drop in Germany’s unemployment rate and the euro gaining ground on the dollar, allowed major markets in Europe, Asia, and the U.S. to climb higher.

3) Banks. Bank stocks led the Dow higher today, with Bank of America (NYSE:BAC), Citigroup (NYSE:C), and JPMorgan (NYSE:JPM) all posting strong gains after tumbling on Friday, the last trading day of 2011. In fact, Bank of America and Citigroup both closed today with their highest share price since early December, while JPMorgan had its highest close since October 28.

BONUS: FAO: Food Price Volatility Threatens Rise in Hunger.

Wednesday

1) Europe. Early reports that Spain (NYSE:EWP) might seek rescue funding dampened sentiment, but a spokeswoman for the Spanish government told CNN such reports were “a complete lie” and “radically false.” But while a purchasing manager’s index showed Germany’s private sector to be recovering, demand for Italian debt declined and Greek Prime Minister Lucas Papademos warned that if his government is unable to secure an agreement with international creditors on a new economic plan, Greece could be forced into disorderly default as soon as March.

2) Factory orders. Though new orders for factory goods rose in November, business spending on capital declined, the Commerce Department reported today. After two consecutive months of declines, orders for manufactured goods increased 1.8 percent in November, the most since July, on demand for transportation equipment, but closely-tracked shipments for non-defense capital goods excluding aircraft, considered a measure of business confidence and spending plans, fell 0.8 percent in November following a 0.9 percent drop in October, indicating that businesses may be pulling back on capital spending.

3) Stocks. In a relatively thin day of trading, individual stocks became the center of attention as Yahoo (NASDAQ:YHOO) appointed a new chief executive officer and Eastman Kodak (NYSE:EK) prepared to file for Chapter 11. Today, Honda (NYSE:HMC) reported a 19 percent decline in sales for December, while Boeing’s (NYSE:BA) announcement that it would be shutting down plants and laying off thousands of workers demonstrated the economic reality of a shrinking defense budget.

BONUS: December Retail Sales Popped 4.5%.

Thursday

1) Euro. Stocks fell sharply in early trading today after the euro declined to a 15-month low versus the dollar. The sell-off came as investors were rattled by more turmoil in European sovereign debt markets. French borrowing costs climbed at a bond auction today where the government fell slightly short of its fundraising goal. Spanish bond yields popped after a government official said Wednesday that Spanish banks would need to set aside another 50 billion euros as part of a restructuring of the nation’s financial sector, and Italian yields again jumped back above the key 7 percent level. And though the European Financial Stability Facility received decent demand for its new three-year bonds, it paled in comparison to demand for its 10-year bond offering last January.

2) Jobs. The Labor Department today reported that initial claims for unemployment benefits declined last week to 372,000, while the four-week moving average fell 3,250 last week to 376,500 — the lowest since June 2008. On Friday, the Labor Department will issue its monthly employment report, but today ADP released its monthly report on private-sector employment, which estimates that the U.S. economy added some 325,000 private-sector jobs in December.

3) Auto. Strong auto sales helped support stocks throughout the day, with Detroit’s big  three — General Motors (NYSE:GM), Ford (NYSE:F), and Chrysler — on track to be profitable in 2011 when they report earnings in the coming weeks, something they haven’t achieved since 2004. And industry analysts forecasting even better industrywide sales in 2012.

BONUS: Obama Outlines New Defense Strategy Amid Pentagon Spending Cuts.

Friday

1) Jobs. Markets again focused on jobs today as the Labor Department released its monthly employment report for December. According to the report, the U.S. economy added 200,000 jobs last month, pushing down the unemployment rate from a revised 8.7 percent in November to 8.5 percent in December. The private sector reportedly added 212,000 new payrolls, while the government cut some 12,000 payrolls. Yesterday, ADP reported that the private sector had added some 325,000 new payrolls in December, though the Labor Department report is generally considered to be more accurate.

2) Europe. Unfortunately, worries about Europe’s ongoing debt crisis dampened enthusiasm over the better-than-expected payrolls report. Retail trade fell a worse-than-expected 0.8 percent in November, the European Union’s statistics office, Eurostat, reported on Friday. The European Commission’s measure of consumer confidence fell 0.7 points in December, while its overall reading of economic sentiment fell 0.5 points to 93.3, its lowest level since November 2009 — data that has “recession written all over it,” according to ING economist Martin van Vliet. The region is also facing high unemployment — well above that in the U.S. — with a joblessness rate of 10.3 percent of the working population in November.

3) Banks. Caught in the crosshairs between improving fortunes in the U.S. — including speculation about a government refinancing program for troubled homeowners that led financials in a rally on Thursday — and the problems in Europe, banks continued their balancing act today, forfeiting yesterday’s gains to close markedly lower. Still, many stocks, including JPMorgan (NYSE:JPM), Bank of America (NYSE:BAC), Wells Fargo (NYSE:WFC), Citigroup (NYSE:C), and Morgan Stanley (NYSE:MS), are still closing the four-day week in the green.

BONUS: Obama to Propose Half-Percent Pay Increase for Federal Employees.