After a 36% rise of the Dow Jones Industrials, a 40% rise of the broader S&P 500 and a 55% rise of the NASDAQ, investors decided to take a breather.  The first stocks to succumb to selling pressure were last year’s market leaders; technology and biotechnology companies comprising the majority of the NASDAQ index.  It reached a peak on January 29th suffering three periods of 6% declines each since then.  The index is currently off just under 10% from its high.   The Dow reached a 52-week high on February 19 at 10,753, but has fallen 5.6% since then.  The S&P 500 was last to succumb, peaking on March 5th and falling 4.4% from that level. 

Tuesday’s Consumer Confidence numbers reported an unexpected erosion of confidence in the economy.  During February as the Democratic candidates marched through each state in their presidential quest their criticism of the economy grew louder and more focused.  As jobs or the inability of the current economy to create substantial job growth seems to resonate so well with some voters, politicians’ criticisms of the economy and the current administration have grown louder and, on occasion, outlandish.  Political experts suggest that negative campaigning is not only effective, but may be the only way to win modern elections.  But, there is a cost – the words are carried far and wide and more people than ever seem to accept them at face value.  

Remaining economic and market bears may soon be forced into hibernation.  Even the most obstinate of naysayers may have to acquiesce to the improving economic outlook.  As is the case every four years, the primaries have taken center stage in the media and most of what we hear is the obligatory bashing of the economy and the current administration’s economic policies. 

In his testimony before committees of the House of Representatives on Wednesday and the Senate yesterday, Federal Reserve Chairman Alan Greenspan delivered essentially the same message.  The extraordinary pace of productivity has reduced the need for companies to hire workers, but the lengthy spell of jobless growth is "atypical" compared to previous cycles.  In his view employment should be "expanding at a reasonably good clip within a short period of time." 

The headline Unemployment Rate, announced this morning, fell by a tenth of a percent to 5.6%, the lowest since January 2002.  But today’s focus is on the number of jobs created.  The change in non-farm (service) payrolls was up by 112,000 jobs, the biggest jump in three years, but less than expected.  Everyone from economists, to analysts, from bond traders to stock traders, and I suspect the White House expected a bigger number.  Why?  Virtually every measure of growth in theU.S.economy points to increased job formation.

If you watched any financial news or commentary at all this week you could not have missed the attention given to whether or not the Fed would continue to use the phrasing “considerable period” in their prepared comments.  The words have appeared in their remarks for several months conveying to the financial world that they were prepared to keep interest rates low for an indefinite period to sustain a less-than-robust economic recovery.  The phrase was dropped on Wednesday and replaced with the words can “be patient” before raising rates. 

This holiday-shortened week has been a busy one for corporate earnings reports and management comments.  The World Economic Forum inDavos,Switzerlandhas also been a major focus of investors.  Almost without exception the numbers have been exceptionally positive, but the ever-present cautionary tone kept market enthusiasm in check.

Earnings and economic reports are coming in more consistently than was the case several weeks ago.  The recovery looks to be sustainable with some noticeable trends taking shape.

This week stocks investors started the year with conviction as the NASDAQ reached a 2 ½ year high yesterday and a few companies saw their stocks rise more this week than all of last year.  Early selling this morning gave way to buying as investors were cheered by the announcement by TomRidge

Amidst the continuing threats of terror attacks, the War inIraq, the erosion of trust of corporate chieftains and mutual fund managers, the dollar’s continuing decline, and a host of other worries, the S&P 500 index managed the broadest advance in 23 years.  Over 90% of S&P 500 stocks rallied during the year, according to Bloomberg.  The S&P and the Dow Jones Industrials were each up over 28%, including dividends, while the technology and biotech-heavy NASDAQ was up over 50%.