Labor Day and stock market prospects

US stocks are volatile

In brief: The U.S. stock market is trying to recover in the week’s beginning. Investors are increasing trading volumes today.

As if to commemorate the Labor Day, the long-awaited report has brought some optimism in the U.S. labor market somewhat lessening fears of a repeated national economy recession. With the exception of the agricultural sector, the employment level fell by 54 thousand jobs, with almost double figure predicted earlier.

In this regard, the recent report by the FED chairman Bernanke in which he noted that “the economic conditions are preconditioning revitalization of economic growth in 2011” sounds reasonably optimistic. It is natural that Bernanke’s report raised a surge of demand for high-yield assets leading to a fall in value of the U.S. dollar (although at first it led to market’s rocking back and forth). However, the report on activity in the U.S. service sector turned to be a bit disappointing. The sector growth is experiencing a maximum slowdown for the last 7 months. The ISM index for the sector making up nearly 90% of the national economy went down from 54.3 points in July to 51.5 points. One should view it as a signal to slowing recovery in the second-half year. At the same time, if the Congress takes a series of stimulating measures, such as tax cuts and extension of tax credits, a revival of activity will surely follow.

Now this week isn’t likely to present us with reports of interest from the U.S. The Labor Day celebrated today, September 6, will cause low liquidity. Later in the week one should pay attention to the Beige Book review and to trade balance data report. Yet, most likely none of these will spark a burst of activity. Rather, these two events will allow estimate the current state of things in the market.

Dmitriy Srebnev
2010-09-06 20:24, Economics.

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