The Market Posted Its Second Weekly Decline

S&P 500Summary Week: January 2 – 9, 2015

BY Howard Silverblatt | FROM CRI | 2015-01-12 15:47


  It was not a good week for the market, which posted its second weekly decline. However, everything is relative. For the week, the S&P 500 posted what some said was an appreciated 0.65% declined. The appreciation came from the fact that the market had extended last week’s three days of declines into this week’s Monday and Tuesday, declining 2.70% for the two days and being off 4.21% for the five days; the market hadn’t seen five consecutive days of declines since early December 2013. And that there was some concern (although few admit to it now), that the long awaited correction might be on its way (let’s face it, eventually it will arrive). The selling and fear (as the VIX reached 22.90) was being generated by oil’s continued decline. While energy issue holders focused on their stocks, the market at large was concerned about the pullback by energy issues in capital expenditures and orders. Small layoffs were being reported at services and specialty companies due to the pullback (U.S. Steel, nowhere near the giant it once was, said it would close a plant in Ohio that makes drilling equipment), and companies were announcing that they were reviewing their plans. On the positive side of lower oil, there was some evidence that consumers were spending their oil “tax cut”, as retail sales increased; the evidence was more on the lower end of retail, where the additional money from lower gasoline prices was felt more (J C Penney reported a 19% increase in holiday sales). The market started to recover as oil began to turn up, even though oil trading just flat would have been considered a gain. Adding to the support was the belief that employment numbers would be good. The result was a strong two-day rebound of 3%, which some called a rally. Friday was the deciding day, as futures pointed down. The Friday premarket December employment report proved more complex than expected. The initial top-line number were very good: net new jobs increased by 252,000, the best month since June 2012, when a lower 240,000 gain was expected, as November was revised up to 353,000 (from 321,000), as was October, to 261,000 (from 243,000). For 2014, 2.952 million net new jobs were created, the highest since 1999. The unemployment rate also moved in the right direction, decreasing to 5.6% from 5.7%, the lowest since June 2008. The market liked what it saw, as futures turned from negative to positive. The difficulty, however, was with the average Hourly Wage component of the report, which unexpectedly decreased 0.2% (to USD 24.57 per hour), when a 0.2% increase was expected. And, adding insult to injury, last month’s strong 0.4% gain was revised downward to a gain of 0.2%, leaving the full-year 2014 hourly wage gain at 1.7%. The concern was that with less money in their pockets, consumers, which account for 70% of the U.S. GDP, would spend less. The market result was a positive opening that turned negative quickly (and stayed that way), as prices struggled throughout the day; the market closed the day off 0.84%. The report put wages, which are reported monthly (and one report does not a trend make), on the front page for investors. The public conversation was just starting to get loud, and it was expected to grow, as any gasoline savings would be mixed with the potential for lower wages.For the week, the market posted a 0.65% decline, to close 2,044.81, as the first full week of the year posted a loss. The year-to-date gains were in the red, off 0.68%, and the fall from the December 29 closing high being 2.19%. The sector returns from the high, however, ran from a 3.18% energy loss to a 2.68% health care gain. Breadth turned up, but remained negative for the week, as 200 issues gained, a far cry from last week’s 86 issues (387 gained the week before that), and 300 issues declined, down from 416 decliners last week (105 declined the week before). Eight of the ten sectors posted gains, compared to last week’s 10-for-10 decliners, as energy fell 3.60%, and was off 22.0% from the end of June. Heath care did the best, adding 2.28%, as it continued to prosper from Obamacare, where higher sales (via more coverage) appeared to make up for lower margins; the sector’s return from the close of 2012 was a very positive 75.7%. The VIX fear factor increased, trading as high as 22.90 on Tuesday, but it closed the week at 17.55, slightly down from its 17.69 close last week (14.77 the week before). The U.S. 10-year Treasury bond traded as low as 1.89% (also on Tuesday), as a flight to safety developed; it closed at 1.95%, down from last week’s 2.12% (2.25% the week before). Oil continued to trade down, but recovered slightly from its lows, as it ended the week at USD 48.20, down from last week’s USD 52.60 (and the prior week’s USD 55.90). Volume increased significantly, over 50% from last week’s minimal levels, as the Street got back to business, and volume was 19% higher than the 1-year average. Next week was expected to continue to pick up as earnings, hopefully, became the main issue. Bank earnings would be first up (J P Morgan and Wells Fargo on Wednesday, and Bank of America, Citigroup and Morgan Stanley on Thursday), with the bar set lower than in previous periods. Investors will be looking for trading and M&A, as well as at how traditional loans and portfolios are doing. Oil is expected to continue to be a main issue, as the debate continues on its lower price impact on consumer groups, as well as any savings on shipping and plastic packaging (petroleum-based manufacturing). If oil can stabilize, or at least stay in range with a minimum price of USD 45, it would smooth the market’s fear of the unknown—in general, uncertainty is the worst thing for the market. Volatility was expected to increase in general, as specific earnings are issued (mostly financials) and their results are used to reposition investments.


  The old Wall Street saying says ‘as January goes, so goes the year’. It didn’t work last year, when January fell 3.56% and the year was up 11.39%, but historically it has worked 72% of the time, including 25 of the 28 years from 1938 through 1965. As for the first day trade, which was down this year, it works half the time, meaning it also does not work half the time – so it’s a coin toss.


  In pre-market news Monday, oil prices fell under USD 52 (negatively affecting related markets, including Russia, Qatar, and Saudi Arabia), while the euro declined to a nine-year low, andthe Shanghai continued its 2014 winning ways, moving up 3.6%.European concern over Greek elections, possible lower consumer prices, and the continuing decline in oil prices pushed the euro below 1.20 and markets lower. Meanwhile, speculation that the ECB would extend stimulus at its January 22 meeting grew.German inflation declined to 0.1% in December, from November’s 0.5%, the lowest rate since October 2009, when a 0.2% rate was expected.Oil traded at USD 51.00, gold was at USD 1188.60, and the U.S. 10-year yielded 2.11%; the euro traded at 1.192, the pound at 1.5234,and the yen at 119.88. European markets were broadly down, as the FTSE was off 0.7%, the EBEX was down 1.2%, and the DAX was 0.56% lower. Asia was also lower, as many markets opened after the extended holiday, with the exception of Shanghai, which was up 3.6%. The Nikkei was down 0.2%, as Singapore was off 1.3%. U.S. futures were off 0.25%.In the U.S., a research report said Wall Street Strategists (top-down) expected an 8.2% gain in the S&P 500 for 2015. A recent bottom-up paper by S&P DJI found equity analyst expected a lower 5.1% gain.Domestic auto sales for December rose, reaching 17 million for all of 2014—a level not seen since 2002. Auto maker Ford (F) posted a 1.2% increase (opening off 1.6%% and closing off 3.9%), as General Motors (GM) reported a 19% gain (opening flat and closing off 1.5%). Fiat Chrysler sales were up 20% in December (up 16% for the year); Nissan sold 6.9% more (11% more for the year); Honda reported a 1.5%, when an increase in the 6% area was expected (up 1% for the year). Biological product issue Amgen (AMGN) and non-index issue Kite Pharma (KITE) agreed on joint research licensing; Amgen opened off 1.5% (closing off 1.2%), as Kite opened up 5.8% higher (and closed up 15.1%). Energy issues were under pressure from lower oil prices, as Exxon Mobil (XOM) opened off 0.8% (and closed off 2.7%), Chevron (CVX) opened 1.5% lower (and closed off 4.0%), and Halliburton (HAL) opened off 1.4% (and closed off 2.0%).The market opened lower, as opening volume was heavier than it had been over the past few weeks, with the Street getting back to trading. The initial trades put the index down 0.6% to the 2,045 level. Prices declined from their opening, as they sought their level and their support level. Prices fell to be off 1.1%, at the 2,035 level, for the 10 a.m. reading, as they went into a trading range until 10:30 p.m. with wide steps up and down. Prices stabilized somewhat within a range, although they were not stable as the 11:30 a.m. reading was off 1.6% at 2,025. Declines were broad, with oil at USD 50.30 and the U.S. 10-year at 2.05%, as there was some flighttosafety.Energy was leading the way down (from the start), as the sector was off 4.1%, with materials off 2.2%; healthcare and consumer staples were holding their ground and doing the best, off 0.5% and 0.4%, respectively. Prices improved slightly and then fell back to the off 1.7% mark, the 2,023 level, at 12:30 p.m., as they started to trade in a tight range. The 2 p.m. posting was still at 2,023, as energy remained off 4.0% and healthcare managed to limit its decline to 0.6%.Prices continued in their tight range, with little change in the 3 p.m. and 3:30 p.m. postings. Additional trading then came in, as prices tilted slightly up until 3:55 p.m., when trading became very heavy, with prices dropping back down. For the session, the day closed off 1.83%, at 2,020.58—slightly above its intraday low of 2,017 posted a few minutes after 3 p.m. It was the worst day since the 2.07% decline on October 9, 2014, and it left the market 3.35% off its Dec. 29, 2014 closing high. Energy closed off 3.99%, as the sector’s issue Noble Energy (NBL) fell 9.6%, Diamond Offshore Drilling (DO) declined 8.7%, and Anadarko Petroleum(APC) lost 7.9%. Equipment rental issue United Rentals (URI) was downgraded by Evercore to ‘sell’ from ‘buy’, as it declined 10.9%—the worst issue in the index for the day. Oil closed at USD 50.00, as the U.S. 10-year closed to yield 2.03%. The market needed time to settle, as oil continued to dominate the news. In pre-market news Tuesday, oil was the main story, as it continued down and broke below USD 49 for the first time in over fiveyears.China was accelerating 300 infrastructure projects, with total expenditures of USD 1.1 trillion, to stimulate (and shore up) its economy.Expectations continued to grow that the ECB would move towards more stimulus at its January 22 meeting, which helped support stocks; some speculated, however, that the bank might wait until after the Jan. 25 Greek elections. Oil continued to trade under USD 50, at USD 49.11, a five-year low. Gold was at USD 1208.40 and the U.S. 10-year yielded under 2%, at 1.99%; the euro traded at 1.1894, the pound at 1.5190, and the yen at 119.13. European markets were mostly in the black, as the DAX was up 0.5% and STOXX was up less than 0.1%, but the FTSE was off 0.4%. Asian markets were deeply in the red, as the SENSEX was off 3.1%, Singapore was down 1.1%, the Nikkei was 3.0% lower, but Shanghai was flat. U.S. futures were up 0.1%.In the U.S., oil was the main story, but the question of market support was the main issue. After four days of declines, technicians were looking for some support, even if it came in the form of multiple swings. Healthcare, in general, managed a minor decline yesterday and opened higher. Nucleotide pharmaceutical issue Gilead Sciences (GILD), which bucked the trend yesterday by gaining 2.0%, opened up 1.8% and closed up 0.9%, as its prospects improved, while healthcare product maker Pfizer (PFE), which fell 0.5% yesterday, opened 0.4% higher and closed 0.8% higher. Retail apparel issue Michael Kors Holdings (KORS) opened off 5.3% and closed off 8.4%, the worst issue in the index for the day, as Credit Suisse cut its rating to ‘neutral’ from ‘outperform’, citing discounts used to sell merchandise. Utilities also rebounded from the start. The market opened a tick higher (less than 0.1%), at 2,022 and moved up quickly to 2,026, then down to 2,020, then back up to 2.026 again, and back down to 2,021, where it stood at 10 a.m. Prices were looking for their level, with little consistency (but at least they were in the black). At 10 a.m.,the November Factory Orders report came in with a 0.7% decline, slightly more than the 0.6% decline that was expected. The December ISM nonmanufacturing index declined to 56.2 from last month’s 59.3, when a 58.0 level was expected.Prices continued their swings, as they moved up to 2,030 to be up 0.5% at 10:30 a.m., but then declined again, however this time they forgot to turn back up. Prices moved lower, as oil was in the USD 48 range, while the market broke into the red (at 2,020) at 10:50 a.m. Prices continued down, as buyers saw no reason to go in, even if they wanted to bargain hunt. The 11:20 a.m. price broke under 2,010, off 0.5%, as the noon posting was at 2,003, off 0.9%. A few minutes later, the market broke under 2,000—a level it first reached in August. Prices moved down to the 1,996 level, off 1.2%, at 12:25 p.m., when some buying turned them upward. Prices moved up to off 0.75% to the 2,005 level for the 1 p.m. reading, but they fell back down to 1,993 by 1:30 p.m., and then they started up. The market moved higher, off 0.4%, reaching 2,013 just before the 3 p.m. reading, but it was unable to hold the level and started to go into a series of up and down rides. The 3:30 p.m. level was up 0.2%, at 2,016, when trading started to come in. Prices moved down to off 0.5%, at 2,011, at 3:50 p.m., when trading became heavy and the decline increased toa slope. The session ended the day off 0.89%, at 2,002.61. It was the fifth day of declines after the market reached a closing high, with anoverall decline of 4.21%. Energy had declined 6.15%, the worst of the sectors, as telecommunications had limited its loss to 1.75%, the best of the sectors. Oil was “excused” and the uncertainty of the situation was causing some selling and a lack of buying. In pre-market news Wednesday, oil was still the main story. However, moving up quickly was the January 22 ECB meeting and the January 25 Greek elections. The ECB was expected to increase stimulus after the meeting, but more were now expecting them to do so after the election. Eurozone consumer prices declined for the first time in fiveyears, as December posted a 0.2% year-over-year decline; the fall was seen as increasing pressure on the ECB.Oil traded at USD 48.40, gold was at USD 1211.10, and the U.S. 10-year yielded 1.98%; the euro traded at 1.1825, the pound at 1.5095, and the yen at 119.41. European markets bounded widely, as most markets were up over 1%, with the DAX and SROXX by up about 1.1%, with the CAC up 1.3%. Asian markets were mostly up, but more moderately, as the Hang Seng led with a 0.8%gain, Singapore was up 0.5%, and the Nikkei was up a tick (0.01%). U.S. futures were up a broad 0.8% after five days of declines (4.34% cumulatively).In the U.S., the weekly mortgage application report showed a 9.1% decline, as new purchase applications fell 9.1% and refinancing applications were 12.0% lower.The ADP December employment report showed 241,000 net new private jobs were created during the month, as 250,000 had been estimates; November was revised upward to 227,000 from the originally reported 208,000.The trade report for November showed a USD 39.0 billion deficit, down from October’s revised USD 42.2 billion deficit (originally reported as a USD 43.4 billion deficit); a USD 42 billion deficit was expected. Exports declined 1.0% to USD 196.36 billion after rising 1.6% in October, while imports fell 2.2% to USD 235.36 billion after rising 0.7% in October.Imported oil fell to its lowest level since 1994. The notes to the Fed’s December 16-17, 2014 meeting were scheduled to be released at 2 p.m., which could give the market more insight into its schedule for interest rate increases (and therefore move prices).Agricultural products maker Monsanto (MON) reported a 34% decline in earnings, beating estimates, as it cited lower seed sales. The issue opened up 0.5% higher and closed up 0.8%, as investors saw the longer-term seed business as growing.Coffee and coffee product maker Keurig Green Mountain (GMCR) said it reached a deal with Dr Pepper Snapple Group (DPS) to sell capsules that make sodas in Keurig’s planned cold-drink machine.Keurig opened up 2.6% higher and closed up 4.6%, as Dr Pepper opened up 0.5% higher and closed 1.5% higher.S&P Midcap 400 retailer J C Penney (JCP) opened up 19.7% higher and closed up 20.3%, as it reported a large increase in holiday sales.The market opened broadly higher, rebounding from the last five days of declines since the closing high on December 29, 2014. The opening ticks put the index up 0.55%, at 2,014, and the tilt was upward. Prices moved up steadily, as the 10 a.m. posting was at 2,024, up almost 1.1%, when the advance stopped. Prices started to tilt lower, as stocks started to test their level in normal trading (after the opening order buys).Prices declined back to 2,014 at 10:40 a.m., then climbed back up to 2,021, and back down to 2,012, up 0.5%, at 11:30 a.m. The market was active, and trades appeared to be steady, although erratic at times. Prices started to tilt back up and continued up, as the noon reading was at 2,025, up 1.1%. Prices then started to trade in a range, with only slight moves up and down. The 1 p.m. reading was a tick lower at 2,024, as the 2 p.m. reading, just before the Fed notes release, was back to 2,025, up 1.1%.The Fed notes confirmed much of what was said and what of what was believed. The Fed saw the U.S. as stronger, but had concern about foreign economies and their impact on the U.S. The Fed expected that foreign economies would be addressed by their central banks, and that it (the Fed) would be able to continue with its plans to increase interest rates later in the year. As the notes were released, the market reaction was—none. There was little movement and there was little change in trading. The notes were mostly as expected and caused no change in market trading. Prices continued on their range, dipping at times, as the 3 p.m. posting was at 2,021, up 0.9%, as the 3:30 p.m. reading was back to 2,024. Trading continued and picked up in the last few minutes, as prices titled up slightly. The session ended the day up 1.16%, at 2,025.90, the first gain after five days of declines and the first day of gains for 2015. The gains helped the attitude on the Street, but after five down days an upswing is normal. The economic data was good, and the ability of the market to trade in a tight range led some to think (or hope) that any selling (and/or reallocation) was over. The test of the level would continue tomorrow. The market would now start to focus on the employment report due on Friday and next week’s start of major bank earnings—and that gave reason for optimism (traders were tired of oil). In premarket news on Thursday, the impact of lower oil prices on inflation became a bigger issue, as the target inflation rates for central banks (many having 2%) were made more difficult. European markets were higher on stimulus hopes and U.S. performance, as the euro declined to under 1.18 to the U.S. dollar. U.K. company Standard Chartered (STAN), which focuses its business in Asia, said it would close its stock trading and underwriting business, as it reduced its work force by 4,000 workers. Oil traded at USD 48.90, gold was at USD 1,210.50, and the U.S. 10-year yielded 1.99%; the euro traded at 1.1787, the pound at 1.5074, and the yen at 119.45. European markets were strongly up for a second day, as the CAC led with a 2.3% gain, the STOXX was up 1.9%, and the DAX up 1.9%, the lowest of the major European markets. Asian markets were mostly up, as the Nikkei led with a 1.7% gain, the Hang Seng was up 0.6%; Shanghai was off 2.4%, as both HSBC (HSBC) and Bank of America said it would end 2015 slightly lower than it was trading at now. U.S. futures were strongly up, 0.8% higher, potentially extending the previous day’s rebound rally. In the U.S., the weekly new unemployment claims report showed claims declined to 294,000, from last week’s 298,000; a 290,000 level was expected. Retailers reported strong December sales, as several attributed the extra spending to lower gasoline prices, which put extra (and unexpected) money in consumer’s pockets. Wine and beer producer Constellation Brands (STZ) beat estimates, as it gave a better-than-expected forecast; the issue opened 5.2% higher and closed 4.5% higher. Self-service retail stores Family Dollar Stores (FDO) reported lower earnings as costs increased, missing estimates; the shares opened off 0.6% and close off 0.4%. Electronics entertainment and iPhone maker Apple (AAPL) opened 1.6% higher and closed 3.8% higher, as it reported a January record at its App Store. Software maker Microsoft (MSFT) opened 1.3% higher and closed 2.9% higher, as rumors continued that the company was developing a new web browser. Drink maker Coco-Cola (KO) said it would let 1,600 workers go as part of its cost-cutting program (the company employs 130,000 workers); the issue opened 0.4% higher and closed 2.2% higher. The market opened at the 2,041 level, up 0.75%, as momentum from the previous day and European gains fed opening trades. Prices moved up from there, as opening buy orders were filled, with the 10 a.m. reading being up 1.2%, at 2,051. Prices then went into a tight trading range (as they did yesterday), until 10:40 a.m., when they tilted up, reaching the 2,059 level (up 1.6%) a few minutes after 11 a.m., which put the index price back to where it was when it started the year. Prices then went back to their range, as the noon reading remained at 2,059, up 1.6% for the day and even for the year. Talk grew that the recent declines (which totaled only 4.21%) were overdone, and that the market was poised to move up; optimism had returned. Prices stayed in a range, with stable prices an unusual sight (recently). The 1 p.m. reading was at 2,058, as the 2 p.m. level was 2,057, with the 3 p.m. posting ticking up to 2,062, up 1.8%. Prices continued in a tight range, not moving significantly up or down. The session ended with a broad 1.79% gain, to close at 2,062.14, up 2.97% over the past two days and now able to post a positive return for the year-to-date, at up 0.16%. Energy rebounded 2.20% but was still off 2.83% for the year, as healthcare gained 1.72% and was up 3.12% for the week (the best of any sector). The VIX fear factor, which was 22.90 on Tuesday, closed down at 17.01, but it was higher than the 14.21 close a month ago. Oil closed up at USD 49.40. After the close, domestics and home product superstore issue Bed Bath & Beyond (BBBY; up 1.6% for the day) reported a decline in profits, as the issue traded down 3.7% in afterhours trading. Friday would be about the preopening employment report, but some momentum from the past 2 days was expected to help (or counter the report). Premarket global news on Friday was limited, as the expected U.S. jobs report became the issue. German November Industrial Output declined 0.1%, when a 0.4% gain was expected. Banco Santander (SAN) traded down (5%), as it said it would recapitalize via the sale of USD 8.8 billion in securities. Oil traded at USD 48.60, gold was at USD 1,212.80, and the U.S. 10-year yielded 1.99%; the euro traded at 1.1819, the pound at 1.5163, and the yen at 119.12. European markets were broadly down, as declines varied; the IBEX was off 2.8%, with the DAX off 0.4%. Asian markets were mixed, but mostly up, as the S&P BSE SENSEX was up 0.7% and the Hang Seng was up 0.3%; Shanghai and Singapore were both down 0.2%. U.S. futures were off 0.4%.In the U.S., futures were down after the two days of gains, ahead of the employment report. At 8:30 a.m., the December employment report showed that net new jobs increased by 252,000, marking December the best month since June 2012, when a lower 240,000 gain was expected. November was revised upward to 353,000 new jobs, from the originally reported 321,000, as October was revised up to 261,000 from the initial 243,000 reported. Nonfarm jobs accounted for 240,000 of the 252,000 new jobs in December. For 2014, 2.952 million net new jobs were created, the highest since 1999 (when 3 million net new jobs were created, which was aided by “Y2K” hiring). The unemployment rate decreased to 5.6% (8.7 million) from 5.7%, the lowest since June 2008, which was attributed to a lower labor force, as participation declined to 62.7% from November’s 62.8%. Hourly wages unexpectedly decreased 0.2% (to USD 24.57), when a 0.2% increase was expected, as last month was revised downward to a gain of 0.2% from the originally reported 0.4% increase; the full 2014 gain was 1.7%. The average work week remained unchanged at 34.6 hours (up 3.0% for 2014). U.S. futures moved up quickly, as the knee-jerk reaction was that the report would show the Fed’s plans to increase interest rates. Bed Bath & Beyond (BBBY) opened off 5.5% and closed off 6.7%, as it reacted to the previous day’s after-the-close release. Retailer Macy’s (M) opened off 2.2% and closed off 2.8%, after it said it planned to close 14 stores and take a USD 110 million charge. Office product superstores Staples (SPLS) opened off 1.9% and closed off 3.0%, as Credit Suisse cut its rating on the company to ‘neutral’ from ‘outperform’. High-end coffee store owner Starbucks (SBUX) said its COO would be leaving the company, as the issue opened up off 1.8% and closed off 3.3%.The market opened a tick higher, at 2,064 (it closed yesterday at 2,062), but it declined into the red within the opening minutes. Prices struggled at first, as they moved lower and higher as opening trades were executed, staying in the red. Prices took a decidedly downward slant at 9:45 a.m., as the market declined to 2,052, off 0.35%, at 10 a.m., when it ticked up for 15 minutes and then started to decline again. At 10 a.m., the December Wholesale Inventories report showed a 0.8% increase for the month, when a lower 0.3% gain was expected. The market was interpreting the employment report, with the net gain in new jobs viewed as positive, but the unexpected decline in average hourly wages overshadowing it. Lower oil prices were seen as adding money into consumer’s pockets, but lower wages could take that away. Prices moved in steps, as they moved below the off-1.0% mark (2,041), with the 11:15 a.m. reading being 2,039, off 1.2%. Prices started to turn up, as some buying helped, with the noon reading being 2,047, off 0.7%. Prices were active, as the market moved in longer steps, as the overall market stayed in a wider range. The 1 p.m. reading was lower at off 0.9%, at the 2,044 level, as the 2 p.m. reading was off a better, at a tick more than 0.7%, at the 2,047 level, and the 3 p.m. still better, at a tick higher, at off a bit less than 0.7%, at 2,048. Trading then started to increase, asprice levels moved up with them. The 3:15 p.m. reading was at 2,053, off 0.4%, but the market was unable to hold the level, as prices started to decline. The 3:30 p.m. posting was at 2,048, off 0.8%, as trading started to increase. Prices stayed level until 3:50 p.m., when trading became very heavy (end of day and end of week) and they turned down. The session ended the day at 2,044.81, off 0.84%. For the week, the market posted a 0.65% gain, which was appreciated, as the opening of the week looked like could be headed for the long expected correction (of 10%; last seen in 2011). The mixed employment report was seen as delaying the Fed, which was positive, but concern over wages was on the table, making next month’s numbers that much more important. Next week would start serious earnings, as major banks declare (JPMorgan Chase and Wells Fargo on Wednesday, and Bank of America, Citigroup and Morgan Stanley on Thursday), with the Street hoping to get back to basics. The price of oil will continue to play a role, but if it stays in range with a minimum of USD 45, it may play a background role. Volatility is expected to increase, as is trading volume—both for the specific earnings issues (mostly financials) and the continued implied impact of lower oil prices (consumer spending).


  Economic reports will start next Tuesday with the November JOLTS Job Openings report, one of Fed Chair Yellen’s favorite. At 2 p.m., the U.S. Treasury budget for December is expected to show a USD 23 billion surplus, up from November’s 56.8 billion deficit. Wednesday will start with the weekly mortgage application report. The December Retail Sales report is expected to show a mild 0.1% gain, as the ex-auto component is expected to increase 0.2%. The December Export Price Index is expected to show a 0.6% decline (it was down 1.0% in November). The Import Price Index is expected to be down 1.5% (it was down 1.5% in November), as the ex-petroleum component is expected to show a 0.03% decline. At 10 a.m., November Business Inventories are expected to be up 0.2% for the month. Thursday will start with the weekly new unemployment claims report. The PPI for December is expected to post a 0.4% decline, as the year-over-year rate is expected to be up 1.0%. The PPI ex-food and energy is expected to be up 0.1%. Friday will bring the December CPI report, which is expected to show a 0.2% decline for the month and be up 0.9% year-over-year. Ex-food and energy, the CPI is expected to up 0.1% for the month and up 1.7% year-over-year. Industrial Production for December is expected to have declined 0.3% after increasing 1.3% in November, as Capacity Utilization is expected to have decreased to 79.6% from November’s 80.1%. The traditional earnings season will start next week with Alcoa declaring Monday afterthe close. Wednesday will start the banks, as JPMorgan Chase and Wells Fargo opening up, as Bank of America and Citigroup will declare Thursday. All 23 issues will release their earnings next week, accounting for 9.1% of the S&P 500 market weight.


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