US markets post strong gains despite Egypt

US markets rallied this week, despite the continued crisis in Egypt. On Friday, the S&P 500 rose 3.77 points or 0.29% to 1,310.87, while the Dow gained 29.89 points or 0.25% to 12,092.15. For the week, the S&P 500 gained 2.7%, while the Dow ended up 2.3%. The S&P 500 and Dow reached 2.5-year-highs, while the Dow recorded a gain of 2.72% for January.

The rally in US markets was mostly due to positive US economic data. On Tuesday, the ISM reported that US manufacturing expanded in January at the fastest rate in 7 years. In addition, a rise in non-manufacturing activity and better-than-expected retail data were reported this week.

Investor sentiment also received a boost from Ben Bernanke this week, who cited gains in household spending and improved confidence. Positive earnings also provided a lift to markets, with companies like JDS Uniphase posting stellar results.

Employment data mixed

The US gained only 36,000 jobs in January, far fewer than expected. However, the unemployment rate fell to 9% from December's 9.4%, and was lower than the 9.5% that economists expected. The private sector added only 50,000 jobs, fewer than the 145,000 expected. Meanwhile, the manufacturing sector added 49,000 jobs, more than the 10,000 expected. Investors were unsure about what to make of the mixed data.

Copper gains 4.7%

The price of copper futures rose 0.8% to US$4.5795/pound on Friday. For the week, the price of copper was up 4.7% on a recovering global economy.

Oil rises on Egypt

Brent crude rose to above US$101/barrel on Monday for the first time since 2008. On Friday, it settled below $90 on news of possible stability in Egypt.

Gold gains

The price of gold weakened on Friday, due to a stronger US dollar and news from Egypt. For the week, gold posted its first weekly gain in 2011.

Outlook for next week

US markets posted its best week in 9 weeks despite the turmoil in Egypt. Technical analysts also see little resistance for markets to head higher. However, with US markets in overbought territory, and the turmoil in Egypt continuing, the downside potential is greater than upside potential in the coming week. In addition, energy, mining and agriculture sectors are in overbought territory, posing a large potential for a short-term pullback.