Market Matters…
|
Market/Index |
Year Close (2012) |
Qtr Close (12/31/12) |
Previous Week (02/01/13) |
Current Week (02/08/13) |
YTD Change |
|
Dow Jones Industrial |
13,104.14 |
13,104.14 |
14,009.79 |
13,992.97 |
6.78% |
|
NASDAQ |
3,019.51 |
3,019.51 |
3,179.10 |
3,193.87 |
5.77% |
|
S&P 500 |
1,426.19 |
1,426.19 |
1,513.17 |
1,517.92 |
6.43% |
|
Russell 2000 |
849.35 |
849.35 |
911.19 |
913.67 |
7.57% |
|
Global Dow |
1,995.96 |
1,995.96 |
2,124.91 |
2,110.40 |
5.73% |
|
Fed Funds |
0.25% |
0.25% |
0.25% |
0.25% |
0 bps |
|
10 yr Treasury (Yield) |
1.76% |
1.76% |
2.01% |
1.95% |
19 bps |
With folks in the Northeast finally returning to normalcy following Superstorm Sandy’s impact in October, a “potentially historic” blizzard threatened the region with predicted disruptions to businesses, schools, travel, etc. Though New England is expected to catch the brunt of the damage, forecasters are calling for up to 20 inches of snow in New York City. For now, NYSE Euronext does not anticipate anything but “business as usual” at the NY Stock Exchange as contingency plans are well in place.
Developments in DC again topped the headlines as the Labor Department looks to be pursuing charges against Standard & Poor’s Ratings Service for its role in the 2007/08 mortgage debacle that contributed to the financial crisis. Faulty models may have been at least partially responsible for investor losses and the government is thought to be seeking over $5 billion. The gov is also hoping to save a buck or two by ending the US Postal Service ’s Saturday snail mail delivery as the agency reportedly lost almost $16 billion last year. Finally, the political bickering again has started in earnest as the countdown to the “new and improved” Fiscal Cliff is in full force. With upwards of $85 billion in spending cuts scheduled to begin in March, Prez O is urging Congress to pass a smaller package and consider tax increases or risk sending the economy back into recession. Defense Secretary Panetta warned about the disastrous impact the automatic spending cuts could have on the military. Republicans soundly reject additional revenues (taxes), but even Speaker Boehner acknowledged that the country’s national defense will be severely weakened should no deal be reached. Aw…sounds like biz as usual in the Nation’s Capital.
Earnings season plugged along to little fanfare as Toyota raised its full-year forecast, BP posted a large drop in profits as a results of its Deep Horizon fines, LinkedIn continued to grow its memberships (and its earnings), and AOL reported its first quarter of revenue growth in eight years. Dell moved a step closer to life away from public scrutiny as the company reached a $24 billion deal to go private (with investments from Microsoft and Silver Lakes Partners ) though its largest outside investor expressed strong opposition. Meanwhile rival HP is now considering a move to break itself up into several tech companies. AMR (American Airlines) and US Airways are close to merging into what would become the world’s largest airlines. With cash on hand and uncertainty limiting its investment/spending options, MasterCard decided to reward shareholders by boosting its stock repurchase plan by another $2 billion and doubling its quarterly dividend. Chase reduced its rating on discounter Wal-Mart from overweight to neutral on worries that the expiring payroll tax cuts could hinder future sales growth.
Stocks were mixed throughout the week as investors took cues from the debt-related political debate (cliff), decent corporate earnings and economic data, and uneven global developments. Profit taking was the name of the day early as the Dow kicked off the week with its first triple-digit loss of the year, but steadily bounced back as the week progressed. Oil dropped to a two week low on rising supplies and diminished demand, but still remains above the $95/barrel level. So bring back Fiscal Cliff II.
Economic Calendar
|
Date |
Release |
Comments |
|
February 4 |
Factory Orders (12/12) |
Increased due to defense spending |
|
February 5 |
ISM – Service (01/13) |
Overall index slipped, but still in expansion mode |
|
February 7 |
Jobless Claims (02/02/13) |
4-week average at lowest level since March 2008 |
|
Consumer Credit (12/12) |
Sizable jump in student loans |
|
|
February 8 |
Balance of Trade (12/12) |
Biggest contraction in almost four years |
|
The Week Ahead |
||
|
February 13 |
Retail Sales (01/13) |
|
|
February 14 |
Jobless Claims (02/09/13) |
|
|
February 15 |
Industrial Production (01/13) |
And the survey says …According to a Wall Street Journal survey, the economy as measured by GDP will grow at a 2.4% pace in 2013. While some bemoan the slow but steady forecast as too cautious, others point out that last year’s survey also projected a growth rate of 2.4%, only to have been proven as overly optimistic as the actual pace was reported as 1.5%, the second straight year that GDP underperformed expectations.
For this week, at least, the economic picture looked favorable. Factory orders climbed in December on strong defense spending. The trade deficit fell to its lowest level in about four years as demand for “Made in America” goods was on the rise as China’s economy rebounds and Europe appears to have withstood the worst of the downturn (maybe?). The labor market also looks promising as the four-week moving average of jobless claims fell to levels not seen since March 2008. Retailers enjoyed a solid January as discounts and promotions (and a temporary reprieve from Fiscal Cliff talk) brought shoppers back to the malls. Thomson Reuters reported that same-store sales jumped by 5.8% last month with both Macy’s and Kohl’s posting double-digit gains.
Shifting abroad, those predictions that Europe is close to economic resurgence may still be a tad premature (or simply wishful thinking). Retail sales in the euro-zone plunged in December and its manufacturing sector remains clearly in contraction mode as France’s activity was reported as its worst in almost four years. While industrial production in Italy climbed by 0.4% in December, its output for all of 2012 was the lowest since 1990. While many analysts claim that the rising euro has hampered growth in the region, European Central Bank Prez Draghi doesn’t believe that the currency moves are impacting the economic outlook and any prospects for expansion. (At least the EU finally approved a budget deal.) China, on the other hand, remains unambiguously in expansion mode. Its services sector solidly grew in January, its exports gained at a faster pace, and inflation slowed. In fact, regulators are reining in bank lending amid concerns that inflation may pick up as substantial moneys are flowing into the economy.
The debate over Federal Reserve stimuli has yet to end as economists are divided about whether (and when) the policymakers should cease (cut) the bond buying program. A survey of economists showed that the majority (65%) believe the Fed will keep the program in tact until 2014 (or beyond), though some think it will begin to taper the size of the bond buys down in late 2013.
On the Horizon… To tax or not to tax? To cut spending or not to cut spending? To compromise or not to compromise? To pander to constituents or to do their jobs? Those are the questions facing Congress as $85 billion in automatic spending cuts are staring the country in the face. That nice game of “kick the can” down the road is coming to a close next month and the nation’s “best and brightest” seem no closer to a real solution that they did at the end of the year. Investors seem to expect some form of compromise as markets have moved to higher levels since the beginning of the year (and the temp deal). But now time (and patience) is running out. In the meantime, earnings season moves forward and retail and manufacturing highlight the economic data of next week. (Is anyone even paying attention?)
© Brounes & Associates
