Monday, January 13, 2014

Market Week: January 13, 2014

The Markets

Believers in the so-called January indicator--the concept that the first five trading days suggest the stock market's overall direction for the rest of the year--were likely discouraged last week. The S&P gave up roughly half a percentage point during 2014's first five trading days. The other three domestic indices also slipped during those five days, with losses ranging from the Nasdaq's quarter of a percentage point to the Dow's nearly seven-tenths of a percent. A rebound at week's end gave three of the four domestic indices a gain for the week. However, the small-cap Russell 2000 was the only one to see a slight gain for both the week and the year so far. Meanwhile, the yield on the benchmark 10-year Treasury fell as the new year saw a new interest in bonds.

Last Week's Headlines

Only 74,000 new jobs were added to U.S. payrolls in December; that's the lowest number since January 2011, according to the Bureau of Labor Statistics. However, the unemployment rate fell from 7% to 6.7%, largely because of people dropping out of the workforce.
Minutes of the meeting at which the Federal Reserve's monetary policy committee decided to begin scaling back its bond purchases emphasized once again that tapering will be done gradually and will depend on economic data. Members also forecast stronger economic growth in coming years and a gradually declining unemployment rate.
The Senate made it official that Janet Yellen will oversee the Fed's tapering efforts. Members confirmed her appointment as the first woman to chair the Federal Reserve Board. She will take over when Ben Bernanke steps down January 31.
Record exports helped cut the U.S. trade deficit to $34.3 billion in November. According to the Bureau of Economic Analysis, that was the lowest level since September 2009.
Orders placed with U.S. factories in November surged 1.8% for the month, putting them at their highest level since the Commerce Department began tracking the figures in 1992. Inventories, which have risen 11 of the last 12 months, were partly responsible, but new orders for durable goods, particularly transportation equipment, also have risen 3 of the last 4 months and were up 3.4% in November.
Growth in U.S. service industries slowed slightly in December as the Institute for Supply Management's gauge fell almost 1% to 53% during the month. The ISM survey also showed new orders falling to 49.4% in December, which represents actual contraction.

Eye on the Week Ahead

The Q4 2013 earnings season will get into high gear as several major financial and tech companies release reports. Data on retail sales for the holiday season will shed light on the state of consumers' wallets.

Data sources: Economic: Based on data from U.S. Bureau of Labor Statistics (unemployment, inflation); U.S. Department of Commerce (GDP, corporate profits, retail sales, housing); S&P/Case-Shiller 20-City Composite Index (home prices); Institute for Supply Management (manufacturing/services). Performance: Based on data reported in WSJ Market Data Center (indexes); U.S. Treasury (Treasury yields); U.S. Energy Information Administration/Bloomberg.com Market Data (oil spot price, WTI Cushing, OK); www.goldprices.org (spot gold/silver); Oanda/FX Street (currency exchange rates). All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results.
The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2,000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indices listed are unmanaged and are not available for direct investment.

Monday, January 6, 2014

Market Week: January 6, 2014

The Markets

Equities rang in the new year by taking a bit of a breather. As investors decided to take some of the profits that the Santa Claus rally had left in their stockings, the Dow lost 135 points on 2014's first trading day, though it regained much of that the following day. The other three domestic indices fared slightly worse, though not as badly as the Global Dow. Meanwhile, gold showed signs of new life after its disastrous 2013, jumping nearly 3% in the first two days of the year.

Last Week's Headlines

Home prices rose 0.2% in October, putting them 13.6% higher than 12 months earlier. The year-over-year gain in the S&P/Case-Shiller 20-City Composite Index was the strongest since February 2006, and October's monthly increase represents the 17th straight month of gains. However, S&P warned that the monthly increases were showing signs of slowing.
Construction spending was up 1% in November, according to the Commerce Department, and was almost 6% higher than the previous November. Strength in both residential and nonresidential private construction fueled the growth as spending on public works projects fell 1.8% during the month.

Eye on the Week Ahead

Last week's light trading volumes should be back to normal this week, and those who believe that the first five trading days of January indicate something about equities' subsequent direction during the coming year will have a better basis for making that assessment. Friday's jobs numbers will be of interest, as always, as will the minutes of the meeting at which the Fed's monetary policy committee decided to start tapering.

Monday, December 2, 2013

Market Week: December 2, 2013

The Markets

The Dow industrials and the S&P 500 continued to set all-time records with an eighth consecutive week of gains for both. And though the Nasdaq remained far from its all-time high, it finally managed to surpass the 4,000 threshold last seen more than 13 years ago. Meanwhile, the benchmark 10-year Treasury yield remained stable.

Last Week's Headlines

Building permits rose 6.2% in October, according to the Commerce Department, and were almost 14% higher than in October 2012. Data on September and October housing starts, which was delayed by the federal government shutdown, will be available along with November figures on December 18.
Home prices were up 3.2% in Q3 in the 20 cities measured by the S&P/Case-Shiller 20-City Composite Index. September's 0.7% gain represented a 13.3% increase from a year earlier, the highest annual growth since February 2006.
Durable goods orders fell 2% in October. The decline was fueled in part by a nearly 16% drop in new orders for aircraft and parts, the same factor responsible for the previous two months' worth of increases. However, orders for computers and capital goods also fell, leaving nontransportation orders down 0.1% for the month.

Eye on the Week Ahead

Friday's unemployment rate--the last before the Fed's monetary policy committee's last meeting of the year--and preliminary sales results from the expanded Black Friday retail holiday weekend will likely dominate the week. However, reports from a range of economic sectors, including housing, manufacturing, services, and consumer spending, also will suggest the state of the economy.

Key dates and data releases: U.S. manufacturing, construction spending (12/2); auto sales (12/3); new home sales, balance of trade, Fed "beige book" report, U.S. services sector (12/4); revised Q3 GDP estimate, factory orders (12/5); unemployment/payrolls, personal income/outlays (12/6).

Data sources: All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. News items are based on reports from multiple commonly available international news sources (i.e., wire services) and are independently verified when necessary with secondary sources such as government agencies, corporate press releases, or trade organizations. Market data: U.S. Treasury (Treasury yields); WSJ Market Data Center (equities); Federal Reserve Board (Fed Funds target rate); U.S. Energy Information Administration/Bloomberg.com Market Data (oil spot price, WTI Cushing, OK); www.goldprice.org (spot gold, NY close); Oanda/FX Street (currency exchange rates). Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results.

The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indexes listed are unmanaged and are not available for direct investment.