And That's the Week That Was
Brounes & Associates
By Ron Brounes
December 31, 2012
Market Matters…
|
Market/Index |
Year Close (2011) |
Qtr Close (09/30/12) |
Previous Week (12/21/12) |
Current Week (12/28/12) |
YTD Change |
Dow Jones Industrial |
12,217.56 |
13,437.13 |
13,190.84 |
12,938.11 |
5.90% |
NASDAQ |
2,605.15 |
3,116.23 |
3,021.01 |
2960.31 |
13.63% |
S&P 500 |
1,257.60 |
1,440.67 |
1,430.15 |
1,402.43 |
11.52% |
Russell 2000 |
740.92 |
837.45 |
847.92 |
832.10 |
12.31% |
Global Dow |
1,801.60 |
1,921.70 |
1,998.76 |
1,984.57 |
10.16% |
Fed Funds |
0.25% |
0.25% |
0.25% |
0.25% |
0 bps |
10 yr Treasury (Yield) |
1.87% |
1.64% |
1.75% |
1.71% |
-16 bps |
10 – 9 – 8…The countdown to 2013 brings holiday revelers to Time Square and to countless restaurants and bars across the globe. It also brings…nervous politicos back to DC, worried about being blamed for taking the country over the Fiscal Cliff; and cautious consumers tightening their pocketbooks during the holiday season as the dreaded “R” (recession) word resurfaces; and profit-taking investors eager to wrap up the old year “in-the-black” with fewer positions should the budgetary challenges not be resolved. 7 – 6 – 5…Senate Majority Leader Harry Reid cast serious doubt about prospects for a last-minute deal and then made matters worse by calling Speaker Boehner’s House a “dictatorship.” Senate Minority Leader McConnell complained that the Prez should have reached out to him sooner and claimed that Republicans went further in their compromises and “way out of our comfort zone” than anyone could have ever imagined. Obama and the “fearsome foursome” (Boehner, McConnell, Reid, Pelosi) met late in the week, but so far, no dice. 4 – 3 – 2…The House is set to reconvene for votes late Sunday afternoon and the country is still holding out hope that an 11th hour deal can be reached, even one with severely limited scope that will allow Congress to claim victory, avoid the Cliff for the time being, and “kick the can” down the road for another day (or a few months). Oh, by the way, the government is about the reach its borrowing limit next week so the powers-that-be need to come up with a deal to raise the debt ceiling in short order as well. 1- 0…Happy New Year (Bah Humbug).
The holiday season proved disappointing to many retailers as MasterCard’s SpendingPulse unit reported that sales increased a mere 0.7% in the eight-week period from October 20 through Christmas Eve. In 2011, sales climbed by 2%, following two very solid post-recession years in 2009 and 2010. Retail and other consumer-related stocks often struggle during the last few weeks of the year (between Thanksgiving and Christmas) as investors worry about the true activity of the season. In many cases, these same securities reverse course in the new year as the stress of the season has passed and people are often eager to get back into buying mode. Only time will tell about the mindsets of investors this go-round.
Markets took a much-needed break for the holidays and investors found lumps of coal in their stockings as the politicos gave them few reasons for optimism (other than merely agreeing to meet) and stocks fell over five consecutive days. Still the key indexes stayed positive on a year-to-date basis with only utilities as a potential sector laggard. Much of the bullish sentiment of the year was derived from the Fed’s monetary stimuli moves and financials and consumer stocks benefited most from Bernanke’s actions. Volume was light as trading desks operated on skeleton staffs and moves can be exaggerated given the lack of overall activity. Crude rose above $90/barrel and closed during the week at a level not seen since mid-October as political unrest emerged in the Middle East (what else is new?) and housing brought new signs that the rebound is for real. 10 – 9 – 8 – 7 – 6 – 5 – 4 – 3 – 2 – 1 - 0. So let the countdown to the new year (and to a positive end of the fiscal cliff saga) begin!!! Here’s hoping the fireworks are beautiful and more than symbolic for a favorable Fiscal outcome. Happy New Year…
Economic Calendar
Date |
Release |
Comments |
December 25 |
Christmas Day |
Market Closed |
December 27 |
Jobless Claims (12/22/12) |
Drop not considered major as data is volatile at end of year |
|
New Home Sales (11/12) |
Highest level since April 2010 |
|
Consumer Confidence (12/12) |
Lower due to fiscal cliff concerns |
The Week Ahead |
|
|
January 2 |
ISM – Manu (12/12) |
|
|
Construction Spending (11/12) |
|
January 3 |
Jobless Claims (12/29/12) |
|
January 4 |
Unemployment Rate (12/12) |
|
|
Nonfarm Payroll (12/12) |
|
|
Factory Orders (11/12) |
|
|
ISM – Services (12/12) |
|
With folks still concerned about their jobs, retailers complaining about limited traffic, and companies worried about investing in technology and infrastructure given the uncertainties of the budget situation, housing of all sectors continued to be the last bastion of optimism in the domestic economy. To that end, housing prices, as measured by the Standard & Poor's/Case-Shiller 20-city index, looked primed to experience an annual gain for the first time since 2006 and new home sales rose last month to the highest level in over two years. Some believe that the rebound was inevitable given the longevity of the sector doldrums that initially emerged even before the financial crisis of 2007. Others point to the actions of the Fed as proof that policies are working and the low rate environment has encouraged buyers to reenter the market and prices are finally rising to keep up with the enhanced demand. Rates should stay at low levels for the foreseeable future and the housing rebound could very well continue to be the one savings grace in the otherwise “cautious” economy.
While the holiday sales numbers lagged what many retailers had desired, the nervous consumer showed itself in other ways as well. Consumer confidence dropped in its latest release to the lowest level since August (and November’s index number was revised lower as well) as folks grew more pessimistic about the lack of activity in DC and how the bickering would affect them in their pocketbooks. Though jobless claims fell again last week, analysts warned that the data is quite volatile this time of year and may not be truly reflective of an improving labor market. The Chicago purchasing managers index bested expectations, but few noticed given the obsession with Congress and the White House.
Europe limped into the new year with many of the same problems unresolved from last year this time. The 17-member euro-zone remains intact (for now) and Greece, Spain, and Italy each made limited progress on their budgetary fronts. During the year, the European Central Bank promised to do “whatever it takes” to preserve the common currency and even Germany took surprising steps to aid its weaker brethren. Still many EU economies remain quite weak and the jury is still out over the overall success of the austerity measures, particularly given the slow growth (contraction) environments. Meanwhile in Asia, Japan’s Nikkei climbed to a new 2012 high as the weakness in the yen offered promise for exporters as their products become cheaper and more desirable abroad.
On the Horizon…As January goes, so goes the entire year. Analysts will survey the landscape quite closely as the fiscal cliff issue gets resolved one way or the other. Some fear that political inactivity or a deal with too limited a scope will send the market spiraling downward and the economy back on the road to recession. Others hope that a last-minute deal will put an end to the last remaining economic uncertainty and investors will take the market to higher levels. Biz will begin to spend freely again and consumers will regain their lost confidence. Of course, the answer most likely remains somewhere in the middle (and don’t forget the debt ceiling concern remains in the picture as well). Forget the month of January (for now) and take it “one day at a time.” And so the countdown continues.
(c) Brounes & Associates
