Market Matters…
|
Market/Index |
Year Close (2013) |
Qtr Close (12/31/13) |
Previous Week (01/24/14) |
Current Week (01/31/14) |
YTD Change |
Week Change |
|
Dow Jones Industrial |
16,576.66 |
16,576.66 |
15,879.11 |
15,698.85 |
-5.30% |
-1.14% |
|
NASDAQ |
4,176.59 |
4,176.59 |
4,128.17 |
4,103.88 |
-1.74% |
-0.59% |
|
S&P 500 |
1,848.36 |
1,848.36 |
1,790.29 |
1,782.59 |
-3.56% |
-0.43% |
|
Russell 2000 |
1,163.64 |
1,163.64 |
1,144.13 |
1,130.88 |
-2.82% |
-1.16% |
|
Global Dow |
2,483.62 |
2,483.62 |
2,422.39 |
2,389.92 |
-3.77% |
-1.34% |
|
Fed Funds |
0.25% |
0.25% |
0.25% |
0.25% |
0 bps |
0 bps |
|
10 yr Treasury (Yield) |
3.04% |
3.04% |
2.72% |
2.65% |
-39 bps |
-7 bps |
As January goes, so goes the market? Let’s hope not. According to the January Indicator (from the Stock Market Almanac), since 1973, when the S&P 500 rises in January, over the next 11 months it jumps by an average of 11.2%. When January ends “in the red,” the remainder of the year climbs a mere 0.2%. Unfortunately, in 2014, the index fell over 5%, the worst January since 2009. Perhaps more interesting for the markets will be the impact of this weekend’s Super Bowl. Historically, when a team from the NFC wins the Big Game (Seattle), the S&P 500 rises 10% in the following 11 months, compared to a gain of only 4% when the AFC (Denver) is victorious. HOWEVER, the Denver Broncos have won two Super Bowls in the past and the index returned 28% and 15% respectively in those years (1998 and 1999). Bottom line…who knows?
Prez Obama delivered his State of the Union and set out to strengthen his Democratic base and attract Independents for the mid-terms. He spoke a great deal on income inequality and pushed issues such as a minimum wage hike, ending corporate tax breaks, and creating starter savings accounts to help middle income folks in retirement. Republicans countered with their familiar themes of free market capitalism and less government. (Expect lots of bickering in the months ahead as the mid-terms approach.)
Earnings were mixed though a few biggees renewed certain investor concerns. Caterpillar posted better-than-expected earnings and even announced a sizable stock repurchase program. Visa reaped solid revenues and strong growth from enhanced payment volumes, while Facebook got a boost from mobile advertising. Ford reported strong quarterly results, but warned about new product launches impacting profitability in the current year. Amazon.com experienced a big jump in revenue, but still missed its already significant expectations. Apple sold fewer iPhones than anticipated, but still expects its China Mobile deal to reap major benefits in that ever-expanding marketplace. Chevron considerably missed its earnings forecast and suffered from weaker refinery margins. In transaction news, Liberty Global is buying Dutch cable company Ziggo for $9.4%; Google is selling its Motorola handset biz to China’s Lenova for almost $3 billion. Despite speculation to the contrary, AT&T will not be in the hunt for Vodaphone, at least not in the immediate future.
After suffering through the worst week for equities in two years, things didn’t improve in the least. The fears that have been prevalent throughout the emerging markets continued to spread and, despite a few central banker moves, investors remained nervous, cautious, and more apt to take profits. The Fed expanded its tapering plans which brought more worries to the global marketplace about the long-term effects of less artificial stimulus. In a flight-to-quality move, buyers moved out of risk assets and sought out the safe-haven of 10-year Treasuries as the yield dropped down below 2.7%. January is done and investors need to look past that Barometer. Super Bowl, anyone?
Economic Calendar
|
Date |
Release |
Comments |
|
January 27 |
New Home Sales (12/13) |
Decline due to bad weather |
|
January 28 |
Durable Goods Orders (12/13) |
Biggest drop since July |
|
Consumer Confidence (01/14) |
Surprising five-month high |
|
|
January 29 |
Fed Meeting Statement |
Additional tapering |
|
January 30 |
Jobless Claims (01/25/13) |
Highest level since mid-December |
|
GDP (4th qtr) |
Best second-half growth since 2003 |
|
|
January 31 |
Personal Income/Spending (12/13) |
Strongest consecutive increases in spending since early 2012 |
|
The Week Ahead |
||
|
February 3 |
ISM – Manu (01/14) |
|
|
February 4 |
Factory Orders (12/13) |
|
|
February 5 |
ISM – Services (01/14) |
|
|
February 6 |
Jobless Claims (02/01/14) |
|
|
Balance of Trade (12/13) |
||
|
February 7 |
Unemployment Rate (01/14) |
|
|
Nonfarm Payroll (01/14) |
||
|
Consumer Credit (12/13) |
With emerging markets in a panic, the central banks of Turkey, South Africa, and India took steps to “right the ship” (too strong?) by raising rates and (hopefully) strengthen their respective currencies. Investors reacted with a collective yawn and after a temporary equity rebound, the same old global concerns resurfaced. As expected, China’s purchasing managers’ index contracted in January, a development that started the whole emerging market scare and may prompt moves from its central bank as well. In Europe, the EU’s inflation rate fell well below its target and the European Central Bank is undoubtedly watching. (Just when the Fed looks to take a less active role, the rest of the world gets more involved…see below).
The domestic data of the week did little to calm investors’ nerves. New home sales unexpectedly fell in December, though analysts were quick to point out the poor weather conditions and their expectations for continued progress in the months to come. Durable goods orders fell on a sharp decline in aircraft demand. Initial claims for unemployment benefits rose in the latest week to the highest level since mid-December, a negative sign for labor, but one that must be taken with a grain of salt as end of year volatility often impacts these releases. Shifting gears to some positive news, consumer confidence unexpectedly climbed to a five-month high and the GDP in the fourth quarter grew at a 3.2% clip on solid spending by both consumers and businesses. The second half of 2013 expanded at a 5.8% pace which is the strongest such period since 2003.
The Fed got together to say goodbye to Dr. B. and make some tweaks to its bond buying program once again. Despite the emerging market turmoil and newfound uncertainties in the labor market, the policymakers unanimously voted to reduce bond purchases to $65 billion a month, its second straight tapering move in the past two months. With Bernanke riding off into the sunset, Chair Yellen takes over the helm (and all the praise and criticism that comes with it…ready for those periodic trek to the friendly confines of Congress?)
On the Horizon …Now that January has come to an unsuccessful close, investors can stop worrying about the Indicator or Barometer and focus on the next 11 months. Emerging markets remain in disarray, but a comment (or action) or two from China’s central bank could go a long way to helping calm some nerves. A busy week on the domestic economic calendar is highlighted by labor releases which were less than stellar last month. Some positive news on that front could help as well. As for earnings, Merck and Disney come calling. Will Microsoft have a new Chief? Denver or Seattle? Who’s better for stocks?
© Brounes & Associates
