February 28, 2011
Sheraz Mian
Director of Research
Last week was the worst for the stock market since August of last year, as the fast-unfolding unrest in the Middle East finally caught up with investors. The spike in oil prices, resulting from disruptions out of Libya, put a question mark over the U.S. economic recovery. Oil prices started easing on Friday as the Saudis stepped up to replace the estimated one-third to one-half of unavailable Libyan barrels.
It was this easing in oil prices on Friday that helped push the markets’ reverse course for the first time last week, offsetting the disappointing the GDP revision report. What all this means is that the direction of oil prices over the coming days will be as important for the day-to-day performance of the stock market as any other report about the U.S. economy.
We have a number of major economic reports coming out this week, with the February nonfarm payroll report coming out on Friday as the most important one. The market is looking for a trend reversal in that report, after disappointing readings in the preceding two months. Other reports have been showing improvements in the U.S. labor market, but we have yet to see confirmation of that trend in the all-important monthly nonfarm payroll report.
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