Market Matters…
|
Market/Index |
Year Close (2013) |
Qtr Close (12/31/13) |
Previous Week (02/07/14) |
Current Week (02/14/14) |
YTD Change |
Week Change |
|
Dow Jones Industrial |
16,576.66 |
16,576.66 |
15,794.08 |
16,154.39 |
-2.55% |
2.28% |
|
NASDAQ |
4,176.59 |
4,176.59 |
4,125.86 |
4,244.03 |
1.61% |
2.86% |
|
S&P 500 |
1,848.36 |
1,848.36 |
1,797.02 |
1,838.63 |
-0.53% |
2.32% |
|
Russell 2000 |
1,163.64 |
1,163.64 |
1,116.52 |
1,149.21 |
-1.24% |
2.93% |
|
Global Dow |
2,483.62 |
2,483.62 |
2,406.50 |
2,458.65 |
-1.01% |
2.17% |
|
Fed Funds |
0.25% |
0.25% |
0.25% |
0.25% |
0 bps |
0 bps |
|
10 yr Treasury (Yield) |
3.04% |
3.04% |
2.68% |
2.75% |
-29 bps |
7 bps |
On the job just a few days and already investors like what she’s saying (even though she is not saying anything new). While Congress historically heckled and blasted Dr. B. during his visits to Congress, they seemed to give Janet Yellen a bit of a pass in her inaugural testimony. She spoke of continuing with the same central bank policies (wow!) and staying the course on reductions to bond buying (seriously?) and mentioned that labor is improving, but still has a ways to go before the Fed is totally comfortable (ground-breaking). Investors responded positively to the (same ol’ same ol’) rhetoric and, for the interim at least, the pessimism that has enveloped the markets was lifted and buyers reappeared seeking bargains from the prior carnage. Perhaps Congress paid little attention to the Fed Chair because the legislators were so busy pretending to compromise as they extended the debt ceiling until March 2015 (but not without traditional drama). Tea Party loyalist and would-be Prez candidate Ted Cruz tried to throw a wrench into the bill by making a procedural move that forced a key Republican Senators to temporarily join the Dems in a vote to move the legislation forward (for the good of the economy?) before they emphatically announced their disdain for the action. (Can you really have it both ways, Senators? They will find out at the mid-terms.) And Senator Cruz remains among the most loved/hated politicos in DC.
Earnings season plugged along and Thomson Reuters now claims that about 70% of those that have reported fourth quarter profits have actually bested forecasts. Some analysts remain leery and have focused more on the outlooks than the recent numbers themselves. In transaction news, Jos. A Banks agreed to buy Eddie Bauer for $825 million in a move that will hopefully scare off predator Men’s Wearhouse. Cable giant Comcast will be joining forces with rival Time Warner through a $45 billion acquisition though few customers think service will improve if the deal even passes regulatory hurdles. Speaking of, antitrust officials balked over the proposed Sprint – T-Mobile transaction so the “playas” are reconsidering their options. Finally activist investor Carl Icahn is giving up his battle to force Apple’s hand in increasing its share buybacks (after he successfully forced Apple’s hand in increasing its share buybacks). McDonald’s global same-store sales improved in January as China and Europe led the charge, while US consumers still try to wrap their arms around the heart-healthy menu.
Stocks got back on track this week as investors reacted favorably to Fed Chair Yellen’s comments and the Dow even experienced its best one-day gain of the year. While the markets had gotten off to a poor start in 2014, the eternal optimists pointed to the stellar performance in 2013 and looked at the early sell-off as mere profit taking and reevaluation. Earnings have surprised (to the good side) and board rooms have remained active, generally a sign of biz confidence. While some of the data has depicted an economy in retreat, the snow and frigid weather conditions that have gripped much of the country have proven an appropriate excuse for investors (for now). Oil pushed above $100/barrels on the seasonally bad weather, though inventories continue to rise each week. Any thoughts about global warming, Senator Cruz?
Economic Calendar
|
Date |
Release |
Comments |
|
February 13 |
Jobless Claims (02/08/14) |
Longer-run trend still points to a steadying labor market |
|
Retail Sales (01/14) |
Dropped on cold weather |
|
|
February 14 |
Industrial Production (01/14) |
1st decline since July |
|
The Week Ahead |
||
|
February 19 |
Housing Starts (01/14) |
|
|
PPI (01/14) |
||
|
Fed Policy Meeting Minutes |
||
|
February 20 |
Jobless Claims (02/15/14) |
|
|
CPI (01/14) |
||
|
Leading Indicators (01/14) |
||
|
February 21 |
Existing Home Sales (01/14) |
When Janet Yellen talks, investors listen. With few pieces of economic data on the calendar this week, folks shifted their attention to the Nation’s Capital where the Fed Chair sounded a lot like Ben Bernanke in drag. She promised “a great deal of continuity” and halted speculation that bond buying reductions were imminent by stating that the domestic outlook would have to take a “distinctive turn for the worse” before the policymakers would consider shifting strategy again.
While the weekly releases were generally negative, the drop in retail activity and the decline in manufacturing output could easily be disregarded as byproducts of the unusually harsh winter weather. Jobless claims jumped a tad in the latest week, yet the overall workforce trend still appears to be favorable. In fact, the “quit rate” in November rose to a post-recession high as employees are seemingly more comfortable leaving their current positions and looking for new (better) ones in the improving labor market. Additionally, the preliminary Thomson-Reuters/University of Michigan sentiment index beat expectations in February, another sign that individuals feel better about their job situations.
The news in Europe was also deemed positive. Though a 1.1% increase in 4th quarter GDP wouldn’t normally seem like much to write home about, the data showed improvements, not just in Germany, but in previously soft regions like France, Spain, and Italy. Still, for all of 2013, overall GDP in the Eurozone dropped by 0.4% and continues to lag the developed economies of the US and Japan. The UK experienced its strongest gains in retail sales since early 2010 and the Bank of England revised (upwardly) its forecast for the country’s economic growth in 2014, though its policymakers do not expect interest rates to rise (much) over the course of the next few years. China offered some good news of its own as exports surprisingly jumped last month, a sign that its trade picture may not be as pessimistic as many had previously feared.
On the Horizon…A new market trend or just a short break from the previous negativity? Investors will enjoy a shortened trading week (Happy Birthday Mr. Presidents…Washington and Lincoln, that is), but will have more data to digest once they return to work. Inflation and housing highlight the calendar, though few expect any price pressures at this time (but what about deflation?) and housing activity also may succumb to the “poor winter weather conditions” excuse. The Fed releases minutes from the last policy meeting, though Yellen has already played her hand with this week’s Congressional testimony, so watchers should expect little in terms of new developments. Earnings season plugs along as Wal-Mart offers insight into the mind of the (discount) shopper (will they mention the weather?) and HP reports how badly PCs are getting hurt by smart-phones and tablets. Will Senator Cruz be sharing a Valentine’s wish with his Texas counterpart, John Senator Cornyn? (Or vice versa?)
© Brounes and Associates
