The market ended the Friday modestly higher after spending most of the session below the unchanged level. At its worst, the Dow was down nearly 170 points but short-covering helped to lift the market well off its lows during the final hour of today’s trading. European sovereign debt issue continued to dominate investors’ minds. Investors are concerned that those countries with massive debt will find it more difficult to finance their future economic spending. For the week, the Dow lost 0.5% and it was the fourth straight weekly loss.

In today’s economic news, non-farm payrolls for January declined 20K instead of rising 5K as economists had hoped for. But a closer look revealed job market was indeed stabilized. All leading indicators in the job report including temp hires and hours worked pointed to improvement in the job condition. The nation’s unemployment rate, meanwhile, dipped to 9.7% from 10.0% a month earlier. It should be noted that in order to keep the unemployment at the current level by year-end, we need to generate a net of 100K jobs each month. And to drive the unemployment rate lower by 1%, another 100K job addition is required for each month.

Most major sectors finished the session modestly higher led by materials and financials. The CRB commodity index dropped 1.9%. The US dollar was higher against most major currencies. Treasury yields dropped. The three-month US LIBOR was unchanged at 25 bps. The VIX index was little changed. The market breath was neutral on both NYSE and Nasdaq. The volume was heavier compared to the previous session.

The market tumbled on Thursday with all three major indexes finishing the session lower by around 3%. The Dow, for the first time in three months, was briefly traded below the psychologically important 10,000 level before managing to close above it by 2 points. Mixed economic reports along with renewed fear over European sovereign debt problem was the main reason behind today’s broad selloff. The weekly jobless claims rose 8K to 480K while economists had been looking for a decline to 455K. The nation’s chain retailers, meanwhile, posted better-than-expected same-store sales results for the month of January.

All 10 major sectors finished the session lower led by energy and financials. The CRB commodity index dropped 2.6%. The US dollar was higher against most major currencies. Treasury yields dropped. The three-month US LIBOR was unchanged at 25 bps. The VIX index surged more than 4 points. The market breath was negative on both NYSE and Nasdaq. The volume was heavier compared to the previous session.

The market finished the Wednesday slightly lower after posting strong gains in each of the previous sessions. Weaker-than-expected economic reports provided investors with a perfect reason to move some chips off the table. The ISM service index rose to 50.5 in January from a revised 49.8 in December. Analysts were expecting a reading of 51. Separately, the latest ADP report showed that private companies cut 22K jobs in January while a rise of 5K had been expected. Nonetheless, the cut was the smallest since Feb 2008.

Most major sectors finished the session lower led by health care and financials. The CRB commodity index dropped 1.0%. The US dollar was higher against most major currencies. Treasury yields rose. The three-month US LIBOR was unchanged at 25 bps. The VIX index was little changed. The market breath was negative on both NYSE and Nasdaq. The volume was a little lighter compared to the previous session.

The market continued to rally on Tuesday with all three major indexes finishing the session higher by around 1%. The Dow’s 230 points back-to-back advance in two days was the biggest in three months. Investors were encouraged by a positive report from the housing front and the recent selling also provided some investors a good entry point. Pending home sales for December rose 1% and marked the ninth improvement over the past 10 months. In other stories, Treasury Secretary Tim Geithner told the Senate Finance Committee that the economy is in better shape compared to a year ago while the government still needs to take efforts to bring down unemployment. On Friday, we are going to get the non-farm payroll report for January.

In the past market comments, I argued that the market should eventually move higher due to very reasonable valuation. To further illustrate this point, I spent some time comparing the current Dow components prices with prices 10 years ago(note: a couple of Dow components have been replaced during the past decade but this should not change the overall picture. In addition, price for Kraft was based on June 14 2001, when it was spinned off). The table is listed below and some interesting statistics are shown at the bottom of the table.

From the table above, we can find a couple of interesting things:

1. Stock prices are much cheaper now compared to a decade ago. Average PE ratio has dropped from 37 times earnings to less than 14 times estimated earnings. This can also be seen from dividend yield, which increased from an average of 1.27% to a current reading of 2.72%;
2. The damage of the tech bubble can still be felt today. Several tech companies in the Dow, including Cisco and Microsoft, are currently traded at less than half of their market value for 2000 although their sales have more than doubled since then;
3. The Dow 30 usually accounts for roughly 30% of overall US market cap. Back in 2000, the total US market cap was around $15 trillion, or more than 1.5 times of then GDP of around $9.9 trillion. Today, the total US cap is a little more than $10 trillion, or less than 75% of the current GDP of around $14.3 trillion. Interestingly, big companies managed to increase their sales much faster compared to the overall GDP growth. The total sales of the Dow 30 companies have increased almost 80% from 1.518 trillion to 2.685 trillion during the past decade while GDP increased less than 50% in the same period. One reason can be expansion in the overseas market;
4. Although sales have increased by almost 80% in the past decade, margins have stayed pretty much flat for the period. The average net margin of 30 Dow companies have improved only slightly from 11.9% to today's 12.5%. Historically the net margin in the US companies is between 5% and 10%. And the Dow companies are obviously outstanding in this front.

All 10 major sectors finished the session higher led by health care and industrials. The CRB commodity index rose 1.9%. The US dollar was lower against most major currencies. Treasury yields were little changed. The three-month US LIBOR was unchanged at 25 bps. The VIX index dropped more than 1 points. The market breath was positive on both NYSE and Nasdaq. The volume was a little heavier compared to the previous session.

The market started the new week in a positive note. By close, all three major indexes were higher by at least 1% but volume was lighter compared to the previous session. Better-than-expected economic news was behind today’s movement. The ISM’s manufacturing index jumped to 58.4 in January from 54.9 in December. The reading is the highest since August 2004 and is well above the 55.5 forecasted. Separately, consumer spending increased by 0.2% in December and it was the third straight monthly gain. Personal income, meanwhile, climbed 0.4%, better than 0.3% increase that had been expected. In other top stories, President Obama sent Congress a $3.83 trillion budget that would put more money into fighting unemployment.

All 10 major sectors finished the session higher led by energy and materials. The CRB commodity index rose 0.9%. The US dollar was lower against most major currencies. Treasury yields rose. The three-month US LIBOR was unchanged at 25 bps. The VIX index dropped 2 points. The market breath was positive on both NYSE and Nasdaq. The volume was a little lighter compared to the previous session.