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The Navigator Weekly Commentary March 5, 2010
The commentary is updated weekly, or sooner if market conditions warrant. For a print version please click here.
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"Navigator Fund is an all weather no-load mutual fund whose objective is to seek capital appreciation. The fund surveys the global economic horizon and charts a course designed to achieve a smooth investing journey."
Mark A. Grimaldi
Navigator Chief Economist & Fund Manager

This is the "Navigator Weekly Commentary" for the week ending March 5, 2010. The full Navigator Newsletter is available through a password protected login on our web site.

In the February 2009 Navigator, Mark Grimaldi promised that there would be a NEW Navigator Fund (NAVFX). This no-load fund was launched on December 30, 2009 and is exclusively managed by Mr. Grimaldi, a 5-star rated fund manager.

The fund can be purchased, with absolutely no sales charges or transaction fees, in several ways:

1) Directly from the fund company.

2) Directly from Fidelity Investments and National Financial Services:
www.fidelity.com

3) Directly from Vanguard:
www.vanguard.com

4) Directly from Charles Schwab:
www.schwab.com

To request an application and prospectus please visit www.NAVFX.com or call 800-673-0550, toll free. Additional questions and support can also be sent to advisor@navigatormoney.com.

The Navigator Fund (NAVFX) is a pure no-load mutual fund which can be purchased directly via Fidelity, Schwab and Vanguard with no load, no sales charge, no commissions and no transaction fee.

After a lackluster week of conviction-less action, stocks posted the majority of their solid gains for the week on Friday as the Street breathed a sigh of relief that fewer jobs were lost than expected from nonfarm payrolls. The better-than-expected labor report, along with China reaffirming its growth forecast and waning fears about Greece's deficit problems helped boost optimism that the global economy continues to be on the mend. Treasuries finished lower after the jobs data and after the first increase in consumer credit in a year. Equity news was light today, as Marvell Technology beat Street earnings estimates, Apple announced that the iPad will be available in the US on April 3, and Southwest Airlines said that while traffic was light, a measure of revenue improved.

The Dow Jones Industrial Average rose 122 points (1.2%) to close at 10,566, the S&P 500 Index was 16 points (1.4%) higher at 1,139, and the Nasdaq Composite gained 34 points (1.5%) to 2,326. In modest volume, 1.1 billion shares were traded on the NYSE and 2.3 billion shares were traded on the Nasdaq. Crude oil was $1.29 higher at $81.50 per barrel, wholesale gasoline rose $0.04 to $2.27 per gallon, and the Bloomberg gold spot price dipped $0.14 to $1,132.06 per ounce. Elsewhere, the Dollar Index - a comparison of the US dollar to six major world currencies - was down 0.1% to 80.45. For the week, the DJIA rose 2.3%, the S&P 500 Index advanced by 3.1%, and the Nasdaq Composite gained 3.9%.

Nonfarm payrolls fell by 36,000 jobs in February, compared to the Bloomberg estimate, which called for a 68,000 decrease in jobs, while January was revised lower to a loss of 26,000 from the initial decline of 20,000 and December's figure was positively revised to a decrease of 109,000 from the initial report of a loss of 150,000. The unemployment rate remained at 9.7%, while expectations were that the rate would increase to 9.8%. Average hourly earnings rose 0.1%, slightly below the Street's forecast of a 0.2% increase, while average weekly hours fell to 33.8 from 33.9, compared to the forecast calling for it to decline to 33.7. Losses were largest in construction, at 64,000, while temporary services added 48,000, and manufacturing and retail were nearly flat. Government payrolls fell by 18,000, as Census hiring of 15,000 was offset by declines in the number of postal workers and losses at the local level.

Underlying components of this month's report were less positive than last month, as number of involuntary part-time workers (workers who want full-time work, but are working part-time) rose 475,000 on a seasonally adjusted basis, offsetting half of the improvement seen last month, and the number of discouraged workers, persons not seeking work because they believe no jobs are available, increased to 1.2 million.

The tepid move in markets and desynchronized nature of economic data this week ahead of the report indicate that traders are uncertain about the next move in the market and economy. Manufacturing has played a part in the overall recovery, which continues as illustrated by a tenth straight monthly improvement in the Index of Leading Economic Indicators (LEI), with January's 9% year-over-year increase posting the largest annual increase since April 2004. Following the recent market pullback, sentiment corrected quickly and is now positioned for a renewed market uptrend.

Late in the day, a report from the Federal Reserve showed that US borrowers increased consumer credit in January for the first time in year, rising by $5 billion, following a larger-than-previously reported $4.6 billion drop in December and compared to the $4.5 billion drop that economists expected. Within the report, revolving debt, such as credit cards, fell $1.7 billion, while debt such as auto and mobile-home loans rose by $6.6 billion. The Fed's report does not cover lending secured by residential real estate.

Treasuries remained lower after extending losses following the labor report. The yield on the 2-year note was up 4 basis points to 0.89%, while the yields on the 10-year note and the 30-year bond increased 8 basis points to 3.68% and 4.64%, respectively.

Concerns continued to ease toward Greece's deficit problems after yesterday's Greek bond deal saw demand outpacing the size of the offering by nearly three times, indicating that investors are willing to buy the debt, quelling fears of the ability of the nation to raise funds. Also, the Greek Parliament passed the additional 4.8 billion euros ($6.5 billion), or 2% of GDP, austerity package discussed this week. In euro-zone economic news, German factory orders surged in January, more than offsetting the prior month's decline, after orders increased 4.3% month-over-month and 19.6% year-over-year, better than expectations of 1.3% and 15.4%, respectively. In the UK, producer prices rose in February from a year earlier by the most since December 2008, at 4.1%, on higher gas and food prices.

In Asia, at China's annual legislative meeting, Chinese Premier Wen opened the 10-day National People's Congress meeting by affirming a target of 8% growth, which has been set and exceeded for each of the last five years, along with 3% inflation and a "basically stable" currency. Wen said - in a speech equivalent to the US State of the Union address - that moderately loose monetary policy and proactive fiscal stance will continue.

The US equity markets posted solid gains this week, as several pieces of data from multiple fronts gave the bulls reason to be optimistic that the US economy continues down the recovery path. However, concerns about euro-area debt problems - which were soothed somewhat by Greece's austerity actions to pare its deficit and a favorable bond auction - along with uncertainty regarding what Friday's US labor would reveal promoted cautious trading among investors throughout the week.

M&A activity continued, headlined by UK insurer Prudential Plc's $35.5 billion agreement to acquire American International Group's Asian life-insurance unit, as the bailed out US firm attempts to pay back the government, continuing the recent uptick of corporate deal making to suggest optimism is returning to the corporate sector, which could foreshadow better employment conditions down the road. Meanwhile, both the ISM Manufacturing and Non-Manufacturing Indexes remained at levels depicting expansion, with the non-manufacturing gauge - a more domestically driven measure of business activity - showing its employment component moved closer to piercing though to expansion as it reached the highest level since April 2008, adding to the week's optimism that labor conditions are relatively improving, along with a larger-than-expected drop in weekly initial jobless claims, which stopped a recent upswing in claims. The bulls also received support from US same-store sales reports from the nation's retailers that were largely better than expected.

However, there were some mixed signals on the economic front that exacerbated caution, with personal incomes rising by a smaller amount than expected but personal spending exceeded economists' forecasts, while even though nonfarm productivity was revised solidly higher, it suggested that despite being positive for corporate profits, it could mean companies are holding off on hiring. Finally, the reaction to the Fed's Beige Book was tepid even as the report that Fed policy makers use to asses monetary policy showed conditions improved modestly across a broader geographic region.

There were NO changes to the Navigator Fidelity, Schwab or Vanguard oriented model portfolios.

Advance retail sales for February will be released next Friday, forecasted to fall 0.2% month-over-month, after growing 0.5% in January, while sales ex-autos are estimated to increase 0.1%, on the heels of a rise of 0.6% in January. On a month-to-month basis the data can be volatile, but on a 3-month basis, retail sales comparisons have been positive since July.

Consumer confidence remains near a record low, as consumers face the headwinds of repairing net worth from stock and home price declines, while continuing to hold elevated levels of debt amidst a tough employment environment. Consumers responded to the crisis by stopping in their tracks, postponing spending while letting their savings rates increase. However, uncertainty has subsided, and while sentiment remains tenuous, consumers have been resilient, adjusting to the new environment by changing their behavior from "shop until you drop" to bargain hunting. Retailers have adjusted too, by reducing inventory levels and product offerings to meet changing consumer tastes. The consumer discretionary sector tends to be one of the first to recover after a downturn and one of the first to underperform once economic growth starts to flatten out - as we believe we are currently seeing now.

Other releases on the US economic agenda next week include the MBA Mortgage Application Index, wholesale inventories, the trade balance, initial jobless claims, business inventories and the University of Michigan consumer sentiment survey.

Thank you for being a Navigator reader, and enjoy your weekend.

Click here to view past Commentaries


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