MarketView for February 11

Summary 

Share prices on the major exchanges ended higher on Friday, due in no small part to a rally that began on news that Egyptian President Hosni Mubarak had resigned, with the news temporarily easing tensions in the region, at least for now.

The S&P 500 index's five-month rise, which has taken it up almost 27 percent during that period, has confounded those calling for a correction. Nonetheless, weak volume has been undercutting what has been an unfailingly bullish market. However, you should note that only 7.7 billion shares traded on the major exchanges, a number that was well below last year's daily average of 8.47 billion shares traded.

The financial sector led the parade upward, on the back of the reduced uncertainty, rising throughout the trading day. Bank of America gained 1.9 percent to $14.77. Market Vectors Egypt Index ETF rallied on record volume the news, climbing 4.5 percent to $18.60.

Two weeks of anti-government protests in Egypt sparked concerns the unrest could spread across the Middle East, contributing to volatility in markets and commodity prices worldwide.

Commodities were a weak spot as crude oil prices declined in parallel with a falling-off of worries of possible oil supply problems in the Middle East. March crude futures dropped 1.5 percent.

Nokia, the world's largest cellphone manufacturer, and Microsoft, teamed up to build an iPhone challenger in an attempt to take on Google and Apple in the fast-growing smartphone market.

Nokia ended the day down 14 percent to close at $9.36. Microsoft ended the day down 0.9 percent, to close at $27.25.

For the week, the Dow is up 1.5 percent and both the S&P and Nasdaq are up 1.4 percent.

Kraft limited gains in the Dow on Friday, a day after the company cut its 2011 profit growth forecast, sending the stock down 1.4 percent to $30.66, the largest percentage decliner on the blue-chip index. Shares of mortgage insurers rose after the Obama administration presented options for overhauling the housing finance system. It pledged to continue backing existing obligations of government-controlled mortgage finance sources, such as Fannie Mae and Freddie Mac.

A drought in Northern China has hit 7.7 million hectares of winter wheat growing areas, which, coupled with strong demand, is lifting some agricultural processors. For example, Agribusiness Bunge Ltd rose 3.4 percent to $71.36 and Archer-Daniels Midland was up 2.2 percent to close at $36.22.

Consumer Sentiment Reaches Eight Month High

Consumer sentiment rose to an eight-month high in early February, due in part to the recent tax cuts and optimism regarding the labor market. Nonetheless, consumers were still less sanguine about the economy in the longer term. At the same time, a separate report showed stronger consumer activity as the trade deficit widened slightly more than forecast in December, reaching its highest level in four months.

Consumers expect to see improvement in the economy and job market this year, but the recovery was still anticipated to fall short as worries regarding inflation and its effect on wages weighed on the results, according to the latest consumer surveys from Thomson Reuters and the University of Michigan.

The preliminary February reading for the overall index on consumer sentiment came in at 75.1, up from 74.2 in January. It was the highest level since June 2010.

The survey's barometer of current economic conditions hit 86.8, the highest level for that index since January 2008, while the gauge of consumer expectations slipped to 67.6 from January's 69.3.

Concerns over inflation have been creeping up lately as commodity prices rise and on jitters that strength in the economy will force the Federal Reserve to hike interest rates sooner than expected. Nonetheless, the Fed is largely viewed as maintaining its accommodative policy for some time.

The survey indicated that the one-year inflation expectation was unchanged at 3.4 percent, the highest rate since the fall of 2008. The five-to-10-year inflation outlook also was unchanged at 2.9 percent.

Treasuries touched session highs following the data as some worried about the long-term outlook, though markets were more focused on news Egypt's president had bowed to relentless pressure from a popular uprising and stepped down.

The December trade deficit grew nearly 6 percent to $40.6 billion as the average price for imported oil leapt to its highest level since October 2008. Overall imports of goods and services were also their highest since October 2008, in a sign that consumers and businesses are spending more as the economy picks up steam.

A separate survey of forecasters indicated that the economy and jobs market are expected to grow more strongly in the first quarter than previously expected.

The Federal Reserve Bank of Philadelphia's survey of 43 professional forecasters sees the economy growing at an annual rate of 3.6 percent in the current quarter, up from the estimate of 2.4 percent three months ago. Although employment remains one of the biggest challenges for the economy, there have been signs the job market recovery is continuing, if not gaining speed.

In another positive sign, a measure of future economic growth rose to a 39-week high in the latest week, according to the Economic Cycle Research Institute, an independent forecasting group.