Bulls regain composure

What a difference one week makes, as the bulls came up winners for five consecutive days!

Underscoring last week’s triumph, the Dow Jones Industrials gained nearly 650 points, the biggest weekly point gain since the index of 30 industrials climbed 782 points at the end of November 2008 (MarketWatch).

Talk that some European countries might just roll over maturing Greek debt and the eventual passage of a tough and unpopular list of budget cuts in the Hellenic Republic, which paved the way for new aid, helped avert a near-term default and sparked a big rally in stocks last week.

And relatively sanguine economic data – though nothing to suggest a renewed economic vigor – also aided the advance. Simply put – mix in reasonably decent economic news with a healthy dose of bearish sentiment and you concoct a recipe for an explosive rally.

Victims during the week – Treasuries were hit, with the ten-year yield jumping nearly 30 basis points to 3.18%. The dollar didn’t fare very well either amid a move to riskier assets.

In the meantime, barely a hiccup was registered in credit markets before and during the recent debt crisis if measures of risk are taken into account, suggesting a temporary resolution had been anticipated by banks and bond players – something I’ve harped on over the past three weeks.

Looking forward, investors and analysts will be paying close attention to economic data in the holiday-shortened week and the less-than-robust recovery could provide headwinds for equities.

All eyes will be on the labor report out on Friday, which is expected to show an increase of 110,000 new jobs in June, up from a disappointing 54,000 in May (Bloomberg). The private sector is forecast to add 125,000.

I’ll go out on a limb and say that 110,000 may be a bit optimistic. And 100,000+ is far from impressive. But anything in that neighborhood would likely ease fears that the latest turbulence and continued uncertainty isn’t forcing firms to shelve recent plans to bolster staff.