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US stock market daily report (February 01, 2013, Friday)

Contributed by Millennium Traders

An advisory committee on small and emerging companies who advises the Securities and Exchange Commission, recommended an exclusive exchange be created for micro and small capitalization public companies that would be available to only high net-worth investors or “accredited investors” who must have a net worth excluding their home of $1 million or more or, have income of $200,000 or more for at least two years. Companies listing on an exchange set up for high-net-worth investors may not be required to provide costly prospectuses and other disclosures that are necessary when retail investors are involved thus, driving costs down associated with public offerings. On the downside, retail investor advocates worry that small investors would be blocked from making desired investments. Charles Rotblut, vice president of the American Association of Individual Investors, said it’s a question of fairness and access. “An accountant that does not have the wealth to be an accredited investor, but understands financial statements, would not be allowed to invest,” Rotblut said and added that such an exchange would also raise new risks for high-net worth investors who do not necessarily have the knowledge, experience or skill to understand the potential investment. “Having wealth does not mean you have the knowledge to always make intelligent investment decisions,” Rotblut said. The committee is made up of 20 individuals in the small publicly traded business space including angel investors, state regulators and small bank executives, met at the SEC and voted unanimously to make the recommendation. While the SEC is not required to follow recommendations of the committee, their suggestions usually carry weight with. Some of their recommendations have been incorporated into the JOBS Act, legislation approved by Congress in April to help increase capital formation. Co-chairman of the committee Stephen Graham said it is difficult for small private companies to “cross the line” to become publicly traded because of the costs involved in being publicly traded. “You can drive the disclosure regime and the costs associated with that way down,” Graham said. Graham noted that the exclusive exchange would act as an intermediary stepping stone for small companies to enter the broader markets. The institutions would only trade on the special exchange and companies could later expand their disclosure regime and move to traditional exchanges. The committee recommended that the SEC and participants explore other alternatives, such as the creation of a private secondary market in the shares of private companies as means of helping to facilitate capital formation for companies that don’t want to float their shares on an exclusive exchange. According to Grant Thornton, 81% of all listed companies are small cap or smaller, representing cumulatively 6.6% of total listed company value.

Around 10:00am ET on Friday, the Dow Jones Industrial Average struck a mark, not seen since October 2007 - Dow 14,000. "Rarified territory is a good way to describe it," says Jamie Farmer, managing director at S&P Dow Jones Indices. The first ever close above the important psychological number occurred on July 19, 2007. On nine separate occasions during 2007, the Dow closed above 14,000. The move on the market sets the stage for a fresh new month with strong gains. The move for the Dow pushed the world's best-known stock gauge to its best level since the 2008 financial crisis and left it just shy of its October 9, 2007, all-time high of 14,164.53. The move extends the gain on the Dow to 6.8% and boosts its return from the bear market low in March 2009 to 114%. Optimism in a belief that the economy in the USA and around the world, are on the road to recovery. Farmer says the move on the Dow has been driven by a growing belief that headwinds, such as the sub-par economy, the November elections, fiscal issues and Europe's debt woes, are diminishing... all in all, things are getting better. "What's driving the market narrative right now is a burgeoning sense of recovery and confidence," says Farmer. "The Dow is emitting a signal that sentiment is on the rise." Investors who have been sitting on the sidelines, hoarding their cash, may start to begin funneling some of that so called safe money, back into the markets. "The Dow provides historical touchstones," says Farmer. "When Americans hear the number of points the Dow is up or down, their minds immediately translate that. The 14,000 number has a reference quality to it and has enormous value in itself."

According to data released Friday by CoreLogic U.S. foreclosures fell 21% in December from the same period in 2011. The national foreclosure report indicates that there were 56,000 completed foreclosures in the U.S. in December, compared with 71,000 in 2011. "The rate of foreclosures continues to trend down, albeit at a slower rate as we exit 2012. This trend should continue into 2013 and is another positive signal that the gradual healing process in the housing market is gaining traction," said Anand Nallathambi, CoreLogic's chief executive. Florida had the highest rate of foreclosure inventory in December, while Wyoming had the lowest rate.

The Labor Department reported the U.S. created 157,000 jobs in January and the unemployment rate ticked up to 7.9%. New jobs created during December was revised to 196,000 from 155,000 and for November, new jobs was revised to 247,000, the biggest increase in 10 months, from 161,000. Average hourly wages rose 4 cents to $23.78 while the average workweek remained flat at 34.4 hours.

Consumer-sentiment for January came in at a reading of 73.8 from 72.9 in December, as reported on Friday by the University of Michigan-Thomson Reuters.

The Commerce Department reported Friday that construction spending picked up at the end of 2012, rising 0.9% to an annualized rate of $885 billion. Spending grew 9.2% for all of 2012. Residential construction surged by 22.3% last year, nonresidential construction increased by 1.2% and November construction spending was upwardly revised to 0.1% growth from an initial read of a drop of 0.3%.

The Institute for Supply Management reported Friday, ISM index rose to 53.1% in January from 50.2% in December, striking the highest level since April. The new-orders index rose to 53.3% in January from 49.7% in the prior month; employment index rose to 54.0% from 51.9% in December and production rose to 53.6% from 52.6% in the prior month.