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Post by cyclops on Dec 24, 2011 9:58:09 GMT 10
Although the traditional "Santa Claus rally" period didn't officially start until today, Santa came early this year with a greater than 3.5% gain in equities on the week, which recoups last week's loss and then some. The S&P is now roughly flat on the year as we approach the final week of 2011.
While the action was constructive, this week was relatively quiet in terms of news flow. The week did start with a big piece of international news - the death of North Korea's dictator Kim Jong Il. That event caused initial uncertainty across Asia as his son Kim Jong Un stepped into control. However, after initial weakness on Monday, most Asian markets spent the rest of the week advancing along with their western counterparts.
After a lackluster Monday performance, markets got a substantial lift on Tuesday following encouraging German sentiment data and a better-than-expected Spanish bond auction. After Tuesday's 3% gain, stocks edged higher on Wednesday and Thursday, amid relatively light corporate news flow and generally encouraging economic data. On Thursday, initial jobless claims data, the Michigan sentiment revision and leading indicators data all beat expectations, although the revision to Q3 GDP came in below expectations. Last night, Congress agreed to a two-month extension of the payroll tax cut and unemployment benefits, temporarily lifting some domestic political uncertainty. This morning, while the Nov. durable goods data beat expectations, spending came in below expectations and excluding aircraft, the durables orders weren't as strong as the headline number. However, markets managed to see follow-through strength to end the day higher by 0.7%.
Corporate news flow was light throughout the week. Oracle's (ORCL 26.06, +0.37) disappointing earnings report sent its stock down 12% on Wednesday, while American Greetings (AM 12.97, -0.42) fell 24% in the two days following its earnings report. There were a few pieces of M&A news announced, with WCA Waste Corp (WCAA 6.62, +0.23) being acquired by Macquarie Infrastructure Partners II for $6.50 per share in cash, representing a 33% premium. Delphi Financial (DFG 44.13, +0.12) gained more than 70% after announcing it would be acquired by Tokio Marine. Finally, Akamai (AKAM 31.93, +0.30) gained 15% after announcing it would acquire privately held content delivery company Cotendo for approximately $268 million.
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Post by cyclops on Jan 1, 2012 21:25:59 GMT 10
The year that was ....
Another volatile year has passed and the U.S. stock market, as measured by the S&P 500, was the picture of relative strength. Close to unchanged for the year, the S&P 500 outperformed every major developed market and nearly every developing market. While the showing by the S&P 500 was not as strong on an absolute basis as many had wished, it was a stalwart showing in the face of double-digit percentage declines for most other major markets. The year certainly started on an optimistic note. The S&P 500 jumped 2.3% in January and was up 8.4% by the end of April. By early August, however, the S&P 500 was down 11.0% for the year. The marked reversal of fortune was precipitated by a string of caustic events that included a spike in energy costs related to the Arab Spring, the aftereffects of the Tohoku earthquake and tsunami that hit Japan, the eurozone’s sovereign debt crisis, and the debilitating debt ceiling negotiations that ultimately prompted Standard & Poor’s to downgrade the U.S. debt rating from AAA to AA+.
In last year’s Year-In-Perspective comment, we said the market outlook was “relatively bullish, but 2011 could be another bumpy year.” While this wasn’t an extremely bold prediction, it did turn out to be quite accurate. Nobody though could have predicted the twists and turns that this year took. In brief, 2011 was a year that saw highly correlated and extremely volatile trading action. Fundamental factors provided a base layer of support throughout the year, but they ultimately took a back seat to macro developments that drove large, headline-driven swings in the capital markets. Below we review several of the key developments that contributed to the volatility.
Middle East Tensions Evolving into Arab Spring: The first obstacle to a smooth 2011 was the escalation of tensions in the Middle East. This began in late 2010 with Tunisia and gained steam in January/February with Egypt. The civil uprisings were heavily covered by the media and quickly spread through the region. Libya ended up being the most dramatic and drawn-out revolution, deteriorating into an all-out war between rebels and a defiant Gadhafi, who met his death this fall at the hand of rebel forces. While the transition to freer societies is a positive, the uncertainty in the biggest oil-producing region in the world temporarily sent oil prices drastically higher, leading to equity market volatility and economic concerns. Although the price spike in oil eventually subsided, the shock from the Middle East was one of the major volatility events of the year.
Japanese Earthquake/Tsunami: As the Middle East situation was unraveling and debt concerns were rising across Europe, the massive Tohoku earthquake and tsunami hit Japan on March 11. This was reported to be the most powerful earthquake ever to hit Japan, and the nuclear crisis that followed led to a global scare. Volatility levels surged. This event derailed Japan’s economy and had a negative impact on the global economic recovery as well.
European Debt Problems: We listed Europe as one of our top concerns for 2011, and it was by far the biggest volatility factor of the year. The problems for the European Union were a nettlesome factor all year long, as market concerns moved from Greece and Ireland to Italy, Spain and even France. Fears intensified in the fall as EU leaders hemmed and hawed over crafting a solution that could prevent a systemic banking crisis. The rancor in the eurozone had a severe impact on the U.S. market along with the U.S. debt debacle. The S&P 500 suffered a sharp 17% selloff in late-July/early-August. This had a damaging effect on confidence and the resulting economic outlook, which ultimately resulted in higher risk premiums and lower prices for risky assets such as stocks (and the debt of risky European countries). While European debt yields have come off of their highs, yields on Italian (6.89%) and Spanish (5.24%) debt remain at historically high levels and present problematic funding costs. The immediate fears about the impact of Europe have receded from the levels seen this fall, but the consensus view is that Europe is already in or will experience a recession in the near-term. While a recession in Europe would drag on global growth, the U.S. economy should still be able to manage modest growth. Europe’s ability to deal with its solvency problems and the depth of the economic weakness there remain big unknowns for 2012, and will continue to be volatility factors for the foreseeable future.
U.S. Debt Debacle and Subsequent Downgrade: Although Europe’s fiscal problems are much more of an immediate concern than the issues the U.S. is facing, this year’s messy debt ceiling debate and eventual increase turned out to be a highly disappointing process. The U.S. debt deadline in early August had been known for quite some time, and it didn't cause initial concern since the debt ceiling had been raised in lockstep with U.S. debt levels in the past. Most market participants had given lawmakers the benefit of the doubt that they would again find a solution in time. However, the drawn-out process chipped away at the confidence in U.S. lawmakers and the uncertainty around the event led to a decrease in stock prices. Although a temporary deal was eventually reached, Standard & Poor's downgraded the U.S. credit rating to AA+ from AAA on August 7. S&P said the downgrade reflected its opinion that "the fiscal consolidation plan that Congress and the Administration recently agreed to falls short of what would be necessary to stabilize the government's medium-term debt dynamics." Despite the unsurprising nature of the information contained in the historic downgrade, it came at a time of severe weakness for markets and global equities were met with further selling pressure. The poor handling of the debt ceiling negotiations created a volatility shock for the markets and represented another setback for the year.
Other Factors/Themes of 2011: Earnings Growth Remained Strong, Market Valuation Attractive: S&P 500 earnings estimates on an adjusted basis for 2011 are up 3.2% over the last 12 months as companies continue to exceed the Street’s expectations. Earnings growth is now expected to come in at 11.7% for the year after recording 38% growth in 2010. Earnings are expected to grow 8.8% in 2012… Looking at valuation, the S&P 500 currently trades at 12.2x adjusted FY12 earnings estimates. One year ago, with the S&P 500 trading at nearly the same price level, the market traded at 13.6x FY11 earnings estimates.
Monetary Policy Changes Form but Remains Accommodative: 2011 saw the official end of QE2 in June. That policy was replaced with more unconventional policy in September, with the announcement of Operation Twist. The “twist” involves selling shorter maturity issues and purchasing longer-dated bonds in order to keep long rates low and extend the maturity of the Fed’s portfolio. The Fed has stated it wants to keep rates low until at-least mid-2013, so policy should continue to support that goal as long as economic conditions allow it to do so.
IPO Market Stymied by Fall Volatility; 2012 Pipeline Strong: The IPO market took a step down from 2010 in terms of the number of IPOs and the amount of capital raised. In all, there were 334 global offerings, down 30% from last year, with about $134.5 billion raised. The IPO market fizzled out in the second half as concerns about Europe came to the forefront, causing investors to shift away from riskier assets. The slowdown actually can be described as more of a shutdown, with only two IPOs between August 17 and November 3. The average return for a U.S. IPO was about -13%, and about two thirds of the deals priced this year are now trading below their offer prices. If 2010 was the year of the Chinese IPO, 2011 was the year of the internet IPO. There were 24 internet companies that went public in the U.S. alone – including highly touted companies like Groupon (GRPN), LinkedIn (LNKD), Pandora Media (P), and Zynga (ZNGA). This was the highest total of internet IPOs since the later stages of the “internet bubble” about a decade ago. Looking ahead to 2012, the pipeline of U.S. deals looks very strong, with around 200 companies filing papers to go public – the highest amount since 2000. There are a number of prominent companies included in this pipeline, including Yelp, The Carlyle Group, Toys R Us, and Ally Financial, among others. Of course, the IPO everyone will be watching for is social networking giant Facebook. Although Facebook has yet to formally announce plans, an IPO in 2012 seems like a given. At this point, 2012 looks to be an active year for IPOs, but much will depend on the headlines coming out of Europe and their impact on risk appetites.
Occupy Wall Street Gains Steam: “Occupy Wall Street” protests spread around the world and demonstrated that many people are not satisfied with the status quo of widening income disparity. The movement was initially disregarded given its lack of direction and focus, but many became sympathetic to the various messages of resentment that the movement symbolizes. The power of the individual’s voice has been unlocked through social media networks and the instant dissemination of the mass media over these channels has made all of this discontent highly visible. So while the media has moved onto other things and the winter will thin out the Occupy encampments, this movement may gain steam again in the spring and have some broader political/societal implications as the presidential election draws closer.
Outlook for 2012: Attractive Valuations Reflect Uncertain Times The European debt crisis and resulting economic impact are the biggest unknowns/risks for 2012. Despite the anticipated weakness in Europe, the U.S. economy is expected to grow at a sluggish pace around 2% over the next several quarters. While this isn’t an exciting outlook, and is not likely to lead to a big improvement in the employment picture, the relative value argument for equities remains quite strong. As mentioned above, with the S&P 500 trading at 12x forward earnings, the market valuation has gotten more attractive from where we stood at the end of 2010 (14x). The earnings yield of 8.2% is very attractive when compared to a 1.9% yield on 10-year treasuries. Additionally, U.S. corporate balance sheets are strong with record levels of cash. While these factors argue for an investment in equities, the attractive valuations are a reflection of the increased risk premiums being demanded in the face of so much uncertainty. While the European situation is the biggest potential risk for 2012, it is a known variable the market has been dealing with for quite some time now. The current situation is factored in to market values. Other variables that are likely to play a part in market valuations and volatility include the trajectory of China’s economy, the political dynamics ahead of the 2012 U.S. presidential election, and geopolitical issues that crop up around the world (North Korea, Iran seem like potential areas of concern).
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Post by cyclops on Jan 8, 2012 21:25:59 GMT 10
Although the stock market was able to come back from an early slide, its inability to push into positive territory left it to chop its way into the close for a lackluster finish.
The December payrolls report initially provided a lift to premarket sentiment. It featured a headline unemployment rate of 8.5%, which is down from the 8.6% in the prior month and less than the 8.7% that had been widely anticipated. Moreover, nonfarm payrolls climbed by 200,000, which exceeds the increase of 150,000 that had been expected. Private payrolls increased by 212,000 to exceed the consensus call for an increase of 170,000.
However, stocks were hit with selling pressure once the session opened. As was the case in the two previous sessions, stocks were able to stabilize and gradually work their way higher, but a lack of leadership prevented the broad market from overcoming resistance at the flat line.
Although the stock market was unable to close the week on a positive note, it displayed resilience in the face of a weaker euro, which fell about 0.6% to what is basically a new 16-month low of $1.27.
Recent market action may not have been all that exciting, but a strong gain on Tuesday helped the stock market book a weekly gain of 1.6%. For some prognosticators, that makes for a promising start to 2012, which many believe will still be driven by global financial and economic conditions, especially those in Europe. The Presidential election is also in the mix, as are corporate earnings. Earnings season gets its unofficial start early next week.
Trade this week began on Tuesday since domestic markets were closed on Monday in observance of New Year's Day. Stocks put together their best performance of the week by advancing about 1.6%, but the S&P 500 was unable to overcome resistance at its multi-month closing high of 1285.
Manufacturing data from China, India, a couple of corners of Europe provided encouragement to buyers. Even domestic manufacturing proved pleasing -- the December ISM Manufacturing Index improved to 53.9 from 52.7 in November so that it exceeded the reading of 53.4 that had been widely expected.
Construction spending for November increased by 1.2%, which bested the 0.5% increase that had been generally expected after a downwardly revised 0.2% decline during October.
Minutes from the most recent FOMC meeting proved unsurprising by stating only that domestic economic activity recently expanded moderately. Although the pace economic activity is expected to pick up, some committee members communicated that current and prospective conditions could warrant additional policy accommodation.
Trade on Wednesday had a flat finish as concerns about financial conditions in Spain and uncertainty over the financial flexibility of Hungary brought the negative themes of 2011 back into focus. Also in the mix were cautious comments from officials in China regarding the country's economic outlook.
On Thursday the Nasdaq made a nice gain, but the broad market mustered only a modest gain after working its way up from a marked loss in morning trade. A weaker euro and rising debt yields in Europe -- signs of the same old concerns about financial and economic conditions there -- dampened the mood of many traders, but the negativity was partly tempered by an ADP Employment Change that reported private payrolls increased by 325,000 during December. An increase of 180,000 had been generally expected.
Weekly initial jobless claims count declined by 15,000 week-over-week to 372,000, which is on par with the 375,000 initial claims that had been widely anticipated. The ISM Services Index for December did little to surprise by coming in at 52.6, which is only slightly less than the 53.0 that had been broadly forecasted. December same-store sales were also of little influence, due to their underwhelming results
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Post by cyclops on Jan 15, 2012 16:20:49 GMT 10
Concerns about sovereign debt downgrades stirred sellers on Friday, but stocks were able to cut losses. That ensured the broad market a modest weekly gain of about 1%. Stocks slid to a loss in excess of 1% this morning. The descent came in response to headlines that downgrades could be in store for several eurozone countries. France actually confirmed that analysts at S&P made a single-notch downgrade to the country's credit rating. That decision contradicted word earlier this week that analysts at Fitch expect France to keep its top-notch credit rating in 2012.
Banking bellwether and Dow component JPMorgan Chase (JPM 35.84, -0.98) reported disappointing quarterly results this morning. It made for a lackluster follow-up to the unceremonious start that earnings season made earlier this week when fellow blue chip Alcoa (AA 9.80, -0.13) posted a mixed report. The financial sector suffered all session as most other diversified banks and financial services stocks traded lower in sympathy.
Not a single sector scored a gain on Friday, but shares of many retailers were helped higher by the latest Consumer Sentiment Survey from the University of Michigan. It improved from 69.9 in December to 74.0 in the preliminary reading for January. Not only did that best the Briefing.com consensus call for a reading of 71.2, but it marked the highest reading since May 2011.
The euro had a volatile week before it suffered a sharp slide on Friday. The currency ended the day at $1.2681, which makes for a -1.1% loss.
Prior to Friday participants were dealt a sizable dose of data after being deprived from such catalysts for a few days. Retail sales during December increased 0.1%, while sales less autos fell 0.2%. Both came short of what had been expected, but prior month sales were revised upward. Economists noted that sales weakened while aggregate earnings increased, likely since consumer debt remains a hindrance for current consumption.
Initial weekly jobless claims made an unexpected jump to 399,000 from 375,000, which is where many had expected them to remain. Initial claims have steadily increased over the past few weeks, but the latest increase is likely due to disappointing December retail sales resulting in staffing cuts.
After the European Central Bank (ECB) and Bank of England opted to keep interest rate targets at 1.00% and 0.5%, respectively, ECB President Draghi offered a reminder of the substantial downside risks to regional economic activity. Although the nature of the comments was unsurprising, Draghi's words cast a pall over news that recent debt offerings from both Spain and Italy were successful.
Midweek trade was mostly listless and lackluster, a consequence of little news flow. The only economic item was the Fed's Beige Book. Once again it made mention of a modest increase in economic activity, but did nothing to assuage concerns about the pace of the economic recovery.
Tuesday saw stocks jump in response to robust gains staged by many of the major averages abroad. Investors gained confidence from word that analysts at Fitch believe both France and Germany will maintain their top-notch credit ratings in 2012. Meanwhile, some believe that China might ease monetary policy so as to hedge against disruptions to the country's economy.
Trade on Monday was generally uneventful as market participants prepared for the unofficial start of earnings season. It got going when Alcoa (AA) announced quarterly results after the close. The Dow component posted a strong top line, but its earnings came short of what Wall Street had expected.
The pace of earnings announcements will pick up next week, but traders will have to wait an extra day since U.S. markets will be closed on Monday in observance of Martin Luther King, Jr. Day.
Treasury Auction recap: Results from an auction of 3-year Notes featured a bid-to-cover of 3.73, dollar demand of $119.4 billion, and an indirect bidder rate of 38.5%. For comparison, the prior auction featured a bid-to-cover of 3.62, dollar demand of $115.8 billion, and an indirect bidder rate of 39.1%. An average of the past six auctions results in a bid-to-cover of 3.33, dollar demand of $106.6 billion, and an indirect bidder rate of 38.9%. An auction of 10-year Notes drew a bid-to-cover ratio of 3.29, dollar demand of $69.1 billion, and an indirect bidder rate of 38.3%. For comparison, an average of the past six auctions results in a bid-to-cover of 3.08, dollar demand of $66.2 billion, and an indirect bidder rate of 44.0%. An auction of 30-year Bonds drew a bid-to-cover of 2.60, dollar demand of $33.8 billion, and an indirect bidder participation rate of 31.9%. For comparison, an average of the previous six auctions results in a bid-to-cover of 2.69, dollar demand of $37.2 billion, and an indirect bidder rate of 29.8%. ..NYSE Adv/Dec 1062/1972. ..NASDAQ Adv/Dec 796/1676
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Post by cyclops on Jan 21, 2012 23:03:55 GMT 10
The S&P 500 poked into positive territory in the final minutes of the session to book its best closing level since summer. Although it made for only an incremental gain, the broad market measure has now finished in higher ground for four straight sessions. That helped the broad market book a 2.0% weekly gain, which marked its third consecutive weekly climb. | Action was mostly muddled today, but financials made a late emergence to score a 0.7% gain and give the stock market a helpful lift. The sector had spent most of the session mired near the neutral line as participants processed quarterly reports from regional lenders Comerica (CMA 29.58, +0.90) and Fifth Third Bancorp (FITB 13.18, -0.38) and financial services outfit American Express (AXP 50.04, -0.91). Fifth Third was the only one that came short of the consensus earnings estimate.
A raft of heavy hitters from the tech sector was out with results, too. Between Google (GOOG 586.00, -53.57), IBM (IBM 188.52, +8.00), Microsoft (MSFT 29.71, +1.59), and Intel (INTC 26.38, +0.75), Google was the only one that failed to generate the earnings that Wall Street had expected. The sector settled with a narrow gain of 0.2%.
Not to be overlooked, blue chip conglomerate General Electric (GE 19.15, +0.00) posted an upside earnings surprise of its own. It was subjected to early pressure, but overcame the selling to settle at the flat line.
Plenty of market action in recent weeks has been driven by the dollar-euro dynamic, given the tacit signals about economic health and financial sentiment conveyed by the currencies. Relative to a collection of competing currencies, the greenback mustered an incremental gain after three straight slides that resulted in a weekly loss of about 1.7%. The euro slipped just 0.2% against the greenback, but still settled the week with a 2.0% gain at $1.29.
Economic data was limited to December existing home sales, which hit an annualized rate of 4.61 million units. That bested the rate of 4.55 million units that had been generally expected.
The combination of earnings reports from several widely-held names and monthly options expirations helped lift share volume above recent levels, but the final tally on the NYSE remained less than 1 billion.
Leading up to the week's end, trade on Thursday saw stocks score varied gains as participants digested a deluge of data and a raft of earnings reports. Overall consumer prices were unchanged during December, but core prices increased by 0.1% when both had been expected to increase by 0.1%. As for weekly initial jobless claims, they made a surprisingly sharp drop to a multi-year low of 352,000. Housing starts for December were somewhat disappointing since they fell to an annualized rate of 657,000, which is less than the rate of 673,000 units that had been expected. The Philadelphia Fed Survey for January hit 7.3, but that was still shy of the 10.0 that had been expected among many economists.
Earnings in focus on Thursday featured upside surprises from eBay (EBAY 31.92, +0.41), United Health (UNH 52.27, -0.05), Union Pacific (UNP 112.84, +0.66), Freeport McMoRan (FCX 43.10, -1.27), and Morgan Stanley (MS 18.39, +0.11). Bank of America (BAC 7.07, +0.11) actually came short of the bottom line consensus. Eastman Kodak (EK 0.31, +0.01) came into focus for its declaration of bankruptcy.
Trade on Wednesday took Goldman Sachs (GS 108.74, +1.06) sharply higher after the investment bank and brokerage outfit posted an upside earnings surprise. Yahoo! (YHOO 15.96, -0.16) also got a bid when it was learned that co-founder Jerry Yang will leave the company.
Data was limited to news that producer prices for December slipped by 0.1%, but core producer prices increased by 0.3%. Many economists had expected that each price measure to increase by 0.1%. Separately, industrial production during December increased by 0.4%, which is only slightly less than the 0.5% increase that had been broadly anticipated.
There was some mid-week buzz about the International Monetary Fund wanting to expand its lending capacity, reportedly in the range of $600 billion to $1 trillion, in order to be able to meet a perceived financing shortfall. That same day the World Bank lowered its global growth forecast to reflect 2012 growth of 2.5% and 2013 growth of 3.1%.
Since domestic markets were closed on Monday in observance of Martin Luther King Day, the week started on Tuesday with traders encouraged by news that China's fourth quarter GDP climbed 8.9% from the prior year. Even though that marked a deceleration from the 9.1% annual rate posted in the prior month, it proved better than what had been anticipated by many. The country also reported that retail sales and industrial production for December climbed at a double-digit clip from one year ago.
Although they would offer leadership later in the week, financials faltered Tuesday as participants responded to an earnings miss from Citigroup (C 29.64, +0.31) and in-line results from Wells Fargo (WFC 30.54, +0.39)
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Post by cyclops on Jan 28, 2012 22:44:22 GMT 10
Listless and lackluster action left stocks to slog along in negative territory for almost the entire session, but a late lift helped the S&P 500 limit its loss in the face of disappointing fourth quarter GDP data. The effort ensured the broad market measure eked out an incremental gain of less than 0.1% for the week. Still, that marked its fourth straight weekly gain.
The major equity averages were mostly mixed this session -- the Dow was down for the entire day, while the S&P 500 managed to limit its move lower and the Nasdaq maintained its position narrowly above the neutral line. Dow components Procter & Gamble (PG 64.30, -0.50) and Chevron (CVX 103.96, -2.63) both displayed weakness, even though consumer staples giant P&G posted an upside earnings surprise and integrated oil outfit Chevron was the one that came short of the consensus earnings estimate. The Nasdaq was helped by Netflix (NFLX 123.79, +7.78), which extended its prior session rally to offset weakness in Starbucks (SBUX 47.85, -0.49) as the coffee company suffered selling pressure despite its upside earnings surprise.
Other earnings reports featured on Friday included Ford (F 12.28, -0.46), which fell short of expectations, but Altria (MO 28.14, -0.52) had better-than-expected results. Honeywell (HON 58.27, +0.44) had an in-line report.
Financials offered some leadership late in the session. The sector had been mired in the red with a modest loss for most of the session, but broke out in the final hour. Although it eased off of its high in the final 30 minutes, it still settled with a 0.4% gain, which is better than what any other sector achieved on the session.
Utilities fell out of favor after they had posted the only gain of any major group in the prior session. The defensive-oriented sector slid 1.3% on Friday.
Although stocks spent most of the session trading in mixed fashion, market participants didn't appear too spooked or disappointed by an advance estimate on fourth quarter GDP, which showed that the economy grew at an annualized rate of 2.8% in the fourth quarter, up from a 1.8% clip in the prior quarter. However, the increase in activity still came short of the consensus call of 3.2% growth. A deeper look shows that most growth in the fourth quarter was owed to an increase in private inventories, although increases in personal consumption expenditures and residential fixed investment also provided positive contributions.
The University of Michigan released a finalized Consumer Sentiment Survey for January that showed a reading of 75.0, up from 74.0 in the preliminary reading. That exceeded the 74.2 that had been generally expected among economists.
A substantial serving of economic reports on Thursday helped make up for the dearth of data earlier in the week, but their overall quality was mixed relative to expectations. Leading Indicators increased by 0.4% during December after a downwardly revised 0.2% increase in the prior month, but that was less than the consensus call for a 0.7% increase. For the first time since 1996 the Index experienced a change in its calculation.
Durable goods orders for December increased by 3.0% to best the consensus for a 2.0% increase. That came on top of an upwardly revised 4.3% increase for the prior month. Excluding autos, durable orders climbed 2.1%, which is considerably better than the 0.7% increase that had been commonly expected. Orders less autos for the prior month were revised upward to reflect a 0.5% increase.
The latest weekly initial jobless claims tally increased by 21,000 to 377,000, which is on par with the 375,000 initial claims that many had expected. Notably, the uptick did not alter the downward trend in the 4-week moving average, which decreased by 2,500 to 377,500.
New home sales for December fell 2.2% to a seasonally adjusted annual rate of 307,000 units, but analysts had generally expected sales to climb to clip of 321,000 units. The drop in new home sales came in the face of a 12.8% decline in median home prices to $210,300.
On Wednesday market participants were dealt disappointing pending home sales numbers for December. They showed a 3.5% drop when a 3.0% decline had been expected.
The highlight of the session, however, was news that the Federal Open Market Committee decided to keep its federal funds target rate at 0.00% to 0.25%, and that economic conditions are expected to warrant exceptionally low levels for the federal funds rate through at least late 2014. That forecast for the fed funds rate preceded news that the Fed now believes economic growth in 2012 will range from 2.2% to 2.7%, which is down from the previously forecasted range of 2.5% to 2.9%.
Without any data during the first two days of the week market participants took their cues from Europe amid speculation about Greece's dealings with its creditors. Disappointment and frustration related to ongoing wrangling induced selling some days, but ultimately the euro was able to rally back. On Friday alone it rallied about 1% against the greenback. That helped fuel a gain of more than 2% for the week. Although nothing official has been stated, rumors continue to point to a possible solution between Greece and its creditors.
Although generally strong, earnings didn't generate much excitement in the broad market this week. That's not to say there weren't any stock-specific swings, though.
Colgate-Palmolive (CL 90.40, -0.95) announced in-line earnings earlier in the week, but blue chips 3M (MMM 87.46, -0.12) and Caterpillar (CAT 111.28, -0.03) bested expectations for the bottom line. AT&T (T 29.16, -0.29) came short of the consensus estimate, as did Bristol-Myers Squibb (BMY 32.29, -0.19). Apple (AAPL 447.28, +2.65) absolutely blew out Wall Street's forecast, prompting the stock to bound to a new record high, but better-than-expected earnings from Boeing (BA 74.55, -0.76), United Technologies (UTX 77.62, +0.21), and ConocoPhillips (COP 69.40, -0.13) were given less regard when they were released.
Although both tech plays posted upside earnings surprises, shares of Texas Instruments (TXN 32.61, +0.42) were sold after their quarterly report was released whereas Western Digital (WDC 37.05, +0.04) was a top performer in the wake of its announcement. Market participants also had varied responses to better-than-expected results from blue chips Johnson & Johnson (JNJ 65.56, -0.14), DuPont (DD 50.72, -0.22), and McDonald's (MCD 98.69, -0.49). Fellow Dow components Travelers (TRV 58.05, -0.65) and Verizon (VZ 37.21, -0.13) both traded lower after they posted earnings that came short of what had been widely expected.
Halliburton (HAL 37.10, +0.94) was the most widely held name in a handful of companies that announced earnings at the very start of the week. Though it posted better-than-expected bottom-line results while in the spotlight, the stock still encountered selling pressure.
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Post by cyclops on Feb 4, 2012 23:15:04 GMT 10
A couple of pleasing economic reports brought about a barrage of broad-based buying today. That drove both the Dow and S&P 500 to multi-month highs, while the Nasdaq notched its best level in more than a decade.
Market participants turned bullish with the release of the official payrolls report for January. The unemployment rate surprised many by falling to 8.3% from 8.5%, which is where most economists had expected it to remain. Behind the headline number, nonfarm payrolls jumped by 243,000 when an increase of 155,000 had been widely expected. Private payrolls climbed by 257,000 when an increase of 168,000 was what many economists had forecasted.
The ISM Service Index jumped in January to 56.8 from 52.6 in the prior month, exceeding the 53.1 that had been expected, on average, among economists.
December factory orders climbed 1.1%, which is less than the 1.5% increase that had been widely expected, but the report was given less regard since fourth quarter GDP data was already released last week. Buying was aggressive in the early going, but action in the afternoon became quiet. Still, a steady bid allowed stocks to enter a consolidative, sideways drift.
Financials scored the strongest gains. Their near 3% rally fed a weekly gain of more than 4%. The sector's strong finish to this week's trade contrasted its start, which featured a 1.0% loss on Monday.
The S&P 500 advanced more than 2% for the week. That stands as its fifth consecutive weekly gain, including an incrementally higher finish last week. Stocks haven't had such a strong streak of gains since the S&P 500 scored seven straight weekly gains to round out 2010 and start 2011.
Climbs of the past several weeks may have lacked share volume, but investors concerned only with portfolio growth will likely be pleased that the S&P 500 settled at its highest level since summer, the Dow booked its best close since 2008, and the Nasdaq is now at its highest level since late 2000. Amid the stock market's strength, the Volatility Index has tumbled to its lowest level in seven months. At about 17, it is down more than 25% year to date.
Participants were generally less risk averse today, but the dollar didn't suffer from any kind of a concerted selling effort. Although it was unable to sustain a gain, it was flat against a collection of competing currencies by session's end.
Treasuries were trounced, however. The benchmark 10-year Note was dropped a full point. That took its yield back to where it started the week.
Action among stocks was more varied before trade commenced Friday. Earnings in focus included better-than-expected results from Dow Chemical (DOW 34.18, +0.64), Qualcomm (QCOM 61.06, +0.33), MasterCard (MA 390.32, +8.75), Cardinal Health (CAH 42.05, -0.17), Seagate Tech (STX 26.42, +0.67), Broadcom (BRCM 37.67, +0.67), Whirlpool (WHR 68.66, +4.30), Pfizer (PFE 21.20, +0.09), and Eli Lilly (LLY 39.51, -0.09). Exxon Mobil (XOM 84.92, +1.39) had in-line earnings results, while Amazon.com (AMZN 187.68, +5.96), Boston Scientific (BSX 6.03, +0.19), and CIGNA (CI 43.55, -0.58) came short of what Wall Street had expected of their earnings.
Retailers were out with monthly same-store sales results, but overall numbers were uninspiring. Gap (GPS 21.71, +0.19) and Target (TGT 52.14, +0.14) were among those that exceeded expectations, but Macy's (M 36.12, +0.89) and Nordstrom (JWN 50.27, +1.16) were among those that disappointed.
Social network outfit Facebook made headlines by filing for an initial public offering that some estimate will value the company up to $100 billion. That would more than quadruple the $23 billion valuation that Google (GOOG 596.33, +11.22) garnered in its IPO.
Market participants also had plenty of data to digest this week. Given the significance of the payrolls report on Friday, only modest attention was given to the latest weekly initial jobless claims tally. It showed that 367,000 claims were filed. That's less than the 375,000 initial claims that had been broadly expected.
The ADP Employment Change gave market participants a mid-week preview of the official payrolls report. It suggested that private payrolls increased in January by 170,000, which is less than the increase of 200,000 that many economists had expected.
The ISM Manufacturing Index improved in January to 54.1 from 53.1 in the prior month, but many had expected it to make a slightly stronger climb to 54.5. China reported mixed manufacturing data, but a handful of major eurozone members reported incremental improvements in their PMI Manufacturing readings.
The latest Chicago PMI fell to 60.2 in January from 62.5 in the prior month, contrasting the consensus forecast for a modest improvement to 62.8. The Consumer Confidence Index for January also proved disappointing. It fell to 61.1 from 64.8 in the prior month, clashing with expectations for an improvement to 67.0.
In the wake of last week's Advance fourth quarter GDP report personal spending data for December caused little stir. It was unchanged for the month. That's not too different than the expected increase of 0.1%. Core personal consumption expenditures increased by 0.2%, just as many had expected. Of interest to some, though, was news that the lack of spending came in the face of an increase in personal income of 0.5%, which actually exceeds the 0.4% increase that had been expected.
Fed Chairman Bernanke offered up testimony on the economy to the House of Representatives Budget Committee, but his statement caused little stir. Few were surprised by his analysis that the sluggish expansion of the economy has left it vulnerable to shocks. Bernanke did indicate, though, that concerns about the domestic outlook and developments in Europe are abating, even as Greece continues to grapple with creditors over its lending terms.
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