Why Stock Owners Should Like the New Super Bowl Champs
The market had another strong showing last week as the bulls jacked the indices higher on Friday. Stocks jumped after nonfarm payrolls showed a 243,000 pop, which was much more than the widely anticipated 121,000 addition. The staggering growth also resulted in a decline to the unemployment rate, which at 8.3% was less than 8.5% from December.
Many indices made new highs bolstered by the strong employment report. And in the case of the Nasdaq, it not only made a new rally high, but the index also traded above the high from last year.
The Dow Jones Industrial and SPX also stand within a few percent of their 2011 highs. While bank stocks are, and have been, the rally leaders, that index trades well below the highs last year.
As the indices pushed to new rally highs, implied volatility hit new lows. The rally over the past two months has taken the VIX, which measures market volatility, to near its lowest level in years.
The sense of complacency in the equity world is astounding given that it was earnings season in the U.S. and that there are still clear problems in Europe.
Unlike the past several weeks, this week has almost no important economic news set for release. Also, earnings season is mostly over for now. The biggest story today might be the return of Madonna and the Super Bowl victory for New Yorkers.
The New York Giants Super Bowl victory may have more implications than you believe. History shows that the champion of the big game can actually predict the direction of the stock market.
According to my colleague Chris Preston, the Super Bowl winner accurately predicts the movement in the stock market that same year over 81% of the time. While the reason is unexplainable, the market likes it when the "original" NFL team wins the Super Bowl. (The Patriots are one of 10 former AFL teams.)
Later this week we will receive rate decisions from Australia, Britain and the ECB. While it's widely expected that the U.K. and ECB will hold interest rates steady, Australia is expected to drop their rate tomorrow. It is also possible that we will have an update regarding the negotiations in Greece.
Thursday looks to be the most important day this week, but barring any surprises, it's only important by comparison.
Other noteworthy economic announcements would be the GDP update from England on Thursday and Michigan Sentiment in the U.S. on Friday. After a rip-roaring past few weeks, you can let your guard down a little bit given the passive news this week.
