This is The Wall Street Digest Hotline Update for Friday, March 9, 2007, at 6:00 p.m. EST.
The February Jobs Creation report pushed stock prices higher this morning. At the close, the Dow added 16 points, closing at 12,276, while the Nasdaq remained flat at 2,387. Oil closed down $1.59 at $60.05 per barrel, and gold closed down $3.50 at $652.00 an ounce.
In February, 97,000 new jobs were created. January's report was revised higher to 146,000 jobs created from the 110,000 jobs originally reported last month. The unemployment rate fell to 4.5 percent from 4.6 percent. January's trade deficit fell to 59.1 billion and helped to strengthen the dollar.
A second consecutive day of gains in Japan's Nikkei stock index calmed concerns over further unwinding of the carry trade, which is the practice of borrowing money from Japan at its rate of one-half percent, then investing the money elsewhere at much higher rates of return, such as U.S. Treasury bills at 4.5 percent.
However, the most important issue today is record global liquidity, including record liquidity in the U.S. The bears were hoping for a ten percent correction, but only achieved five percent because money poured into the market from the sidelines and pushed stocks back up again. The battle between bulls and bears will continue for awhile, but the vast majority of the selling is over.
Don't forget, this correction began in Shanghai after the vice chairman of China's largest legislative body said 70 percent of the domestically traded companies were worthless and should be delisted. We have not heard the end of problems in China. I continue to recommend that you avoid investing in China. You would be far better off owning the ETFs from surrounding countries, such as Malaysia and Singapore, or the Emerging Markets ETFs, all of which are listed on our page 16 recommended list.
The U.S. stock market is still substantially undervalued at 34 percent. Stay close to our telephone/e-mail/website Hotline Updates. You should become fully invested immediately.
The next Hotline Update will be on Tuesday, March 13, 2007, at 6:00 p.m. EST.