Market Matters…
|
Market/Index |
Year Close (2012) |
Qtr Close (12/31/12) |
Previous Week (02/08/13) |
Current Week (02/15/13) |
YTD Change |
|
Dow Jones Industrial |
13,104.14 |
13,104.14 |
13,992.97 |
13,981.76 |
6.70% |
|
NASDAQ |
3,019.51 |
3,019.51 |
3,193.87 |
3,192.03 |
5.71% |
|
S&P 500 |
1,426.19 |
1,426.19 |
1,517.92 |
1,519.79 |
6.56% |
|
Russell 2000 |
849.35 |
849.35 |
913.67 |
923.15 |
8.69% |
|
Global Dow |
1,995.96 |
1,995.96 |
2,110.40 |
2,098.72 |
5.15% |
|
Fed Funds |
0.25% |
0.25% |
0.25% |
0.25% |
0 bps |
|
10 yr Treasury (Yield) |
1.76% |
1.76% |
1.95% |
2.01% |
25 bps |
“ Mr. Speaker, Mr. Vice President, Members of Congress, fellow citizens…God bless the United States of America.” Thus ended another State of the Union in which the Prez outlined his hopes and dreams for the future (or, at least, the next three-and-a-half years). During this remarks, O poured out his heart about how the gov can “improve life in America.” He spoke of expanding education, repairing infrastructure, spurring alternative energy, and increasing pay for employees. While all are noble pursuits, the budgetary stalemate between Congress and the Administration promises little in the way of additional funding for any program. With massive spending cuts threatening to drive the country back into recession and increased taxes all but ruled out by Republicans, the President’s wish list will face difficulties coming to fruition. For his part, (a parched) Senator Marco Rubio painted a more basic vision for the country, one that will spark economic growth simply by fixing the middle class. Why didn’t you think of that, Mr. O?
Transactions ruled the day as deal-making appears to be back in vogue within corporate boardrooms. Since the beginning of the financial debacle, M&A has been out of favor as the uncertain global economic and political climates forced managers to sit on their hands and await better times ahead. In one day alone, $40 billion in deals was announced and activity in 2013 is off to its fastest pace since 2005. Warren Buffett’s Berkshire Hathaway and a private equity partner will be entering the ketchup biz by acquiring Heinz for $23 billion. Cardinal Health is buying AssuraMed for $2 billion. Comcast is taking full control of NBCUniversal by purchasing the remaining 49% from General Electric for $16.7 billion. AMR (American Airlines) is joining forces with US Airways in an $11 billion merger to surpass United (formerly ContinentalUnited) as the largest airline company in the world.
Earnings season plugged along, but analysts seem more interested in the current quarter’s results and the forecasts given in the management addresses. Early in the week, 339 of the S&P 500 had reported and they posted an average earnings growth rate of 7.3% and revenues that rose by 5.9%, far exceeding earlier expectations. However, 63 companies have cut their forecasts for first quarter earnings and analysts now project an increase of 1.7%, much worse than the outlook at the beginning of the year. With Fiscal Cliff II still staring the country in the face and continued sluggishness throughout much of the EU, uncertainty serves as a giant headwind that is forcing corporations to proceed with caution.
Stocks traded virtually flat throughout the week as the calendar inched closer to the harsh budgetary realities and politicos showed little signs of compromise (as noted by the rousing rounds of applause and the numerous smirks at the State of the Union…at least, no one called the Prez a liar this time). Still, the indexes remain close to multi-year highs and the enhanced deal-making activity brought a semblance of optimism to the investor mindset. Crude prices dropped late in the week following a weaker-than-expected report on projected global demand and concerns that Europe is far from moving past its long-term struggles. If only we could simply improve life in America by fixing the middle class…
Economic Calendar
|
Date |
Release |
Comments |
|
February 13 |
Retail Sales (01/13) |
3rd straight monthly gain |
|
February 14 |
Jobless Claims (02/09/13) |
Significant decline |
|
February 15 |
Industrial Production (01/13) |
Slight decline after 2 big monthly gains |
|
The Week Ahead |
||
|
February 20 |
Housing Starts (01/13) |
|
|
PPI (01/13) |
||
|
Fed Policy Meeting Minutes |
||
|
February 21 |
Jobless Claims (02/16/13) |
|
|
CPI (01/13) |
||
|
Existing Home Sales (01/13) |
||
|
Leading Eco. Indicators (01/13) |
With a relatively quiet week on the data front, the global jobs picture remained at the forefront of economic concerns. Fed Vice Chairperson Yellen, the top prospect to be Dr. B’s successor, pointed to the large gap between the current labor market and the maximum level of employment in this country and said that the policymakers will focus on jobs as their key factor in making monetary policy decisions. With the inflation rate well under control for now, Yellen sees the current programs as “entirely appropriate,” despite certain other officials calling for a revisit of the prolonged bond buying stimulus plans. During the week, several global corporations (within financial services) announced jobs cuts as they attempt to cut costs and maximize profitability. Thomson Reuters will slash 2,500 jobs by year-end; ING Group is cutting 2,400 from its retail division as customers move more into online banking; Barclays continues to try to elevate its reputation from prior scandals and is eliminating thousands of investment banking positions. Still, the weekly jobless claims number plunged last week to 341k and the less volatile four-week moving average remains close to a five-year low.
In other economic news, industrial production dropped in January after two months of strong gains, and output still remains up over two percent from last year’s level. The Empire State (NY) Fed survey depicted regional factory expansion for the first time since the summer. Though retail sales rose (ever-so-slightly) in January, which marked the third straight monthly increase, some analysts fear that consumer activity may be slowing as a result of the payroll tax hike and certain discounters like Wal-Mart are already feeling the pinch. Still the recent Reuters/U of Michigan sentiment index bested expectations. (Lots of contradictions all the way around.)
Looking abroad, economic activity in the euro-zone fell at the fastest rate in almost four years and even stalwarts like Germany have been hindered by problems elsewhere in the region that have impacted trade. Though industrial production climbed in December, the decline in the fourth quarter was the worst experienced in the euro-zone in three years. Many remain concerned about the rising euro as the stronger currency makes exports more expensive and less competitive (particularly against certain goods and services produced in emerging economies). The topic continues to be debated among Group of Seven (and G20) leaders, though, for now, most seem to be in agreement that market forces should win out over any artificial means of currency devaluation.
On the Horizon… The economic calendar is more hectic in the upcoming week as investor dissect news along the inflation front and also hope to see a continued rebound in housing. The Fed policy meeting minutes reveal the mindset of the policymakers and analysts seek hints about the longevity of the bond buying stimuli. Retailers take center stage as Wal-Mart, Nordstrom, and Abercrombie & Fitch are among those posting results, though the new year brings new concerns about higher taxes impacting sales so last quarter’s numbers seem largely irrelevant at this point. As the clock ticks and the calendar flips oh so closely to March, politicos are digging in their heals over budgetary matters and the fiscal cliff again takes center stage. Any great maverick compromiser in the midst? (Wishful thinking.)
The information set forth was obtained from sources which we believe reliable but we do not guarantee its accuracy or completeness. Neither the information nor any opinion expressed constitutes a solicitation by us of the purchase or sale of any securities. Past performance is not a guarantee of future performance.
© Brounes & Associates
