The week started off on the upside as markets cheered the death over the weekend of Osama bin Laden but then got back to the business of earnings and economic news.  While the news certainly was good, it didn’t take long to realize his demise would not help solve the strong increases in gas prices affecting every day Americans or the issue of whether to raise the debt ceiling or not. US Treasury Secretary Tim Geithner announced Monday that the debt ceiling debate would be extended until August from the original July 8th deadline as tax revenues were higher than expected. Oil prices started their slide Monday which were a drag on the large Dow Jones Industrial components Exxon Mobil and Chevron.  News of the European Central Bank not having the ability to restructure Greek debt pulled all the indices down by days end. The decline in oil prices followed through all week with other commodities following suit.

Tuesday markets ended flat even as oil stocks again took a hit coupled with Pfizer being the biggest Dow loser declining 2.8% to $20.44. While earnings were better than expected, revenue numbers were disappointing to analysts. Crude oil futures fell 2.2% to $111.05 again taking Exxon Mobil and Chevron down with it.  The offset on the positive side was a gain in MetroPCS Communications with shares up 10% with strong first quarter earnings and MasterCard adding 2.6% on a better than expected earnings report.

Economic news and continued lower commodity trades pulled the Dow down 83.93 points by mid-week with the biggest loss since April 18. Wednesday morning met a deluge of earnings drags from Europe with the German DAX 30 index dropping 1.7% after Seiman’s slowing growth prospects spooked investors and the stock lost 2.8%.  In London, mining stocks began to falter with Rio Tinto off 3.3% as weaker commodity prices began to settle in. In the US, the Institute for Supply Management’s index was weaker than expected along with the Automatic Data Processing job numbers report which showed 179,000 jobs added in April which was again, below expectations. 

When all the economic data sunk in by Thursday and oil continued its fall, the markets continued to decline with the S&P500 down 0.90% to close at 135.10 and the DJIA shedding 139.41 points with Exxon Mobil and Chevron again being the big decliners.  The airline stocks welcomed the lower oil prices and had gains for the day with AMR adding 46 cents or 7.5% but that was not enough to counter the lingering economic fears. Oil wasn’t the only culprit in the commodity sector with the iShares Silver Trust ETF falling 12% or $4.55 Thursday and closing at $33.72. The VIX or Chicago Volatility Index gained ground Thursday ahead of the US jobs report for Friday.

The report turned out to be better than expected with jobs data for the Labor Department showing a gain of 244,000 versus 185,000 expected by economist.  However, the unemployment rate grew again to 9% for the first time since November of last year, when the rate ticked up to 9.8%.  Markets had a strong start with the job news only to be dampened by more European sovereign debt concerns.  A Der Spiegel article Friday spooked the markets with a report that Greece would be leaving the euro and ministers from the euro nations were having an emergency meeting this weekend.  By Friday, the two big stories in the market - Bin Laden’s death and the silver bubble bursting had faded to be replaced by concerns over the unemployment rate ticking back up to 9%.  Commodities stabilized Friday, but the euro currency swooned on the news regarding Greece. The Dow ended the week with a gain of 54.57 points on Friday, the NASDAQ closed at 2827.56 and the S&P500 stock index added 5.10 points Friday to close the week at 1340.20 with all sectors in positive territory.

Banking Sector Focused On Economic Data

All eyes were on the economy for banks this week.  While most financials traded higher on Monday with the Bin Laden news, by days end the SNL Bank index closed lower than the Dow Jones Industrial index with a retreat of 0.55% versus the DJIA loss of .02% to start the week.  The Institute for Supply Management reported that its purchasing manager index grew during April and the PMI index was 60.4.  However, growth slowed from March when the index rose to 61.2.  Concerns surrounding inflation, a slowing economy, a pending jobs report and margin pressures put a damper on the banks and thrifts to start the week.

By Tuesday, the banks cheered news of loan demand strengthening and news of factory orders increasing for the fifth straight month. While the broader markets were flat the SNL US Bank Index was able to add 1.02% and close at 288.31. A Federal Reserve report from an April survey of bank lending officers showed an increase in demand for commercial mortgages and commercial and industrial loans.  Demand for residential loans is still weak with higher interest rates for mortgages but, the C&I demand is encouraging to the sector as manufacturing increases.  The US Commerce department reported factory orders are increasing due to capital spending which banks anticipate will lead to stronger C&I demand going forward.  Banks of all sizes gained on the news with Bank of America Corp adding 2.11% to $12.60 and Fifth Third Bancorp gaining 2.68% to close at $13.40 on Tuesday.

By Wednesday, bank stocks fell with the overall markets but out-shot the DJIA on the downside. A number of economic reports were mixed with a positive report from outplacement firm Challenger, Gray and Christmas announcing that projected layoffs in businesses will be lower than expected as companies begin to have more faith in a turnaround in the economy.  ADP reported that private sector employment increased by 179,000 jobs between March and April but that was not enough to rally the markets.  

The banking sector continues to be nervous about the possible nomination of Elizabeth Warren to head the Consumer Financial Protection Bureau which is due to be voted on in July.  While a number of bank managements have showed support for her nomination a number of analysts believe the reaction will be a sell-off in the bank stocks due to overriding concerns about more regulation in the industry.  Wells Fargo & Co. was the hardest hit of the large cap banks and lost 2.47% to close at $28.78 and in the regional space Prosperity Bankshares were lower by 3.12% on a Wall Street Journal article warning of its high valuation at 4 times tangible book value per share. 

Unemployment data dragged down the banks with the overall markets and a strong dollar and weak oil didn’t help matters for the sector. Uncertainty ruled again as unemployment figures from the US Labor Department showed an increase of 43,000 from the prior week’s data while the Monster employment index of online job demand increased 7% in April. Banks were also wary of news form the European Central Bank that interest rates would remain unchanged at 1.25% and the dollar rose sharply against the euro on the news.  Well Fargo and Co. again fell over 2% as they settle claims with the Financial Industry Regulatory Authority related to complaints in their brokerage division. The bank did not admit to wrongdoing.  Also Thursday the Federal Reserve Bank of Minneapolis President Narayana Kocherlakota said it would be “desirable” to lift the targeted benchmark US interest rate by a “modest amount” this year based on his inflation forecast. 

Banks and thrifts started with a positive run on Friday morning only to fall back with the mixed April employment data and concerns surrounding the European Greek debt situation. The US Department of Labor reported an addition of non-farm payroll employment of 244,000 jobs in April but, the increase in the unemployment rate offset other positive jobs news.  There is also concern surrounding the types of jobs being added with McDonald’s providing a large number of the jobs reported - possibly as many as 25% of the jobs. Large and small banks and thrifts were mixed Friday and the SNL US Bank Index closed the week at 282.38 with the SNL Thrift index closing at 561.99 Friday.