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For the second consecutive week, the major market indices traded in the red. A late session recovery on Friday kept losses from being worse and kept the Dow from closing below support at 10,000. For the week, the major market indices fell as follows:

Dow Industrials (DJI) - 10,012.23 (-55.10) -0.55%

S&P 500 (SPX) - 1,066.19 (-7.68) -0.72%

Nasdaq Composite (COMP) - 2,141.12 (-6.23) -0.29%

The week was highlighted by the employment report, but this data was considered a disappointment. Heading into this release on Friday, stocks seemed to already have priced in a weak report. Nonfarm payrolls were expected to rise slightly during January, but actually fell by 20,000. Prior months were revised lower as well with the number of jobs lost from the expansion peak in December 2007 through December 2009 at 8.404 million, which is a more than a million higher than the initial reading. The bulls are pointing to the unemployment rate, which fell 3-tenths to 9.7 percent. However, this is deceiving since it occurred because of job seekers becoming discouraged, not because more jobs are available.

The productivity report for the fourth quarter was supportive to business owners, rising 6.2 percent. When productivity is high, it means businesses are getting more out of each worker per hour worked. This does help profits, but isn't a good thing for jobs growth. Of course, the hope is that a pick up in demand will force business to hire to keep up.

The global economy was in the spotlight this past week when concerns about debt in several European countries took center stage. Greece, Spain and Portugal all had their debt lowered, raising the cost to insure this debt. This news pushed the euro to a low against the dollar not seen since May 2009. Some economists feel this could spread across the globe, though most feel it will be resolved and stocks have overreacted to the news. If stocks have fallen more than necessary, it would be a great time to pick up some bargains. Since the Dow reached its high in January at 10,729, it has fallen 7 percent. However, support held at 10K and Friday's session created a bullish hammer.

Earnings remained heavy this past week, but even positive results couldn't help the bulls. This week's calendar isn't as heavy for earnings or economic data, though several of these events could impact trading.

Weekly Calendar of Events:

Monday:

Economic - None

Earnings - Atmel (ATML), CNA Financial (CNA), CVS Caremark (CVS), Electronics Arts (ERTS), Hasbro (HAS), Loews (L)

Tuesday:

Economic - ICSC-Goldman Store Sales, Redbook, Wholesale Trade

Earnings - Baidu Inc (BIDU), BJ Services (BJS), Disney (DIS), Coke Cola (KO), Pulte Homes (PHM)

Wednesday:

Economic - MBA Purchase Applications, International Trade ($-35.7B), EIA Petroleum Status, Treasury Budget ($-46.0B)

Earnings - Allstate (ALL), Activision (ATVI), Boston Scientific (BSX), Computer Science (CSC), Elan (ELN), Prudential (PRU), Sprint Nextel (S)

Thursday:

Economic - Retail Sales (+0.5%), Jobless Claims (467K), Business Inventories (+0.2%)

Earnings - Alcon (ACL), Alcatel (ALU), Cephalon (CEPH), Credit Suisse (CS), Marriott (MAR), Pepsico (PEP), Varian (VARI)

Friday:

Economic - Consumer Sentiment (75.0)

Earnings - Agilent (A), Duke Energy (DUK), Ingersoll Rand (IR)

Retail sales will be the major focus as far as the economy goes with estimates for growth of 0.5 percent in January. In December, retail sales fell 0.3 percent after one percent plus gains the prior two months. Sales including auto sales are expected to rise 0.6 percent. Ironically, spending has been stronger than one might expect given the weakness in the jobs market. The fact is that economists are mixed on their view of growth. Some feel it will continue immediately and is self-sustaining. Others feel the economy is still in jeopardy of retracing after billions in stimulus is removed.

The key for the bulls this week is for the Dow to bounce off 10K. After breaking this level intraday, a late session rally pushed the index back above this key level. It will be interesting to see how stock fare in the weeks to come given a lack of news as earnings season ends. The nice thing is that option traders can benefit from any sort of market, even one that moves sideways, which is what we would see in February.

Jody Osborne
Senior Writer & Options Strategist
Optionetics.com ~ Your Options Education Site

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