North American markets were up this week, despite a very weak U.S. September jobs report. For the week, the Dow was up 1.6% and recorded its 5th weekly rise in 6 weeks. On Friday, the Dow also closed above 11,000 for the first time in five months.
While a worse-than-expected jobs report showing a loss of 95,000 jobs would usually push markets down, this week's report strengthened investors' belief of further quantitative easing (QE2) from the US Federal Reserve on November 2nd.
Another boost for markets was the earnings season. Alcoa rose 5.7% on Friday, after reporting better-than-expected earnings of $0.09/share, versus expectations of $0.05/share. The company also raised its 2010 estimate for world aluminium demand.
Commodities continue to shine
Agriculture stocks surged on Friday, after the US Department of Agriculture stated that the corn crop is going to be smaller than expected.
Oil also rose for the third week in a row to US$82.66. Meanwhile, copper rose 2.3% on the week to US$3.7745/pound. On the back of a weak US dollar, gold also continued its move higher, finishing the week up 2.1% at US$1345.3/ounce.
Euro zone steady
While downgrades by credit agencies continued for Ireland, the situation in the euro zone calmed significantly versus the week before. In fact, Germany's August industrial output rose 1.7%, much better than the expected rise of 0.1%.
Lookahead for next week
Earnings season continues next week, as GE, Google, Intel and JP Morgan Chase announce earnings. However, investors will likely pay most attention to the Fed, as the market anticipates a QE2 that amounts to US$500 billion. However, Fed action on November 2nd is not guaranteed, and the Fed could disappoint investors with a QE2 that is less than expected.
With the S&P 500 having gone up 8.8% in September, and more still in the early part of October, a pull-back is more likely than further gains. Even if markets were able to hold on to its gains and head higher for the rest of October, investors will likely be disappointed by the Fed's decision on November 2nd. In addition, the situation in the euro zone (Ireland in particular) could implode at any moment.