Markets remained volatile this week

S&P 500 Summary Week: January 23 – 30, 2015

BY Howard Silverblatt | FROM CRI | 2015-02-02 10:53


  Markets remained volatile this week, while earnings were mixed and forecasts disappointed. Affecting the energy earnings and forecasts was oil’s continuing decline. Globally, energy issues reduced their expected profit numbers and, more relevant to the non-energy sectors, their capital expenditures on drilling, exploration, equipment, and the need for services. Those reductions are putting pressure on non-energy issues, just as lower oil prices are putting pressure on the income of states and municipalities in the U.S. (and the world). Adding to the difficulty is the stronger U.S. dollar, which creates a headwind for U.S. companies’ foreign profits and increases the cost of exported products, therefore reducing sales. The stronger U.S. dollar has become the reason (and excuse) for many fourth quarter missed expectations and the reason (excuse) for many lower 2015 forecasts. At this point, 2015 projections appear to be based on a significant number of assumptions: the price of oil, the strength of the dollar, and, to a smaller extent, when the Fed will raise rates (the Fed’s Wednesday notes only reinforced the expected June or September date for the first interest rate increase since 2006). At this point, oil still needs some more time to find its level; for the dollar to settle in, given that most of the central bank’s moves appear to be behind us (unless another round is needed and that would take a little time develop); and February’s retail reports (most end their earnings period in January) may do a lot to see what consumers are doing. At that point, say late February, a clear and more usable 2015 forecast may emerge. For the week, the market posted a broad 2.77% decline (compared to last week’s broad 1.60% gain), to close at 1994.99. The decline was attributed to a trifecta: lower oil prices, a stronger U.S. dollar, along with earnings and, more importantly, earnings forecasts, which were less than expected. The market posted strong declines (of at 1.3%) on three days on three of the five days. Friday’s advance Q4 GDP report (the next update in Friday, February 27) came lower than expected, at 2.6%, which started the market off down, and ended it off 1.3%. For the month, the S&P 500 was off 3.10%, as the year got off to a shaky start—similar to last year, when January posted a 3.56% decline. Breadth returned to being negative, as it has been for most of the month, with only 84 issues up, compared to 380 last week, and more in line with the prior week to that, which was 179. Decliners numbered 419, up from last week’s 120 (and 321 decliners the week before that). Nine of the ten sectors declined for the week, compared to last week where nine of the ten gained. All ten sectors declined, as information technology, which last week did the best with a 3.11% gain, declined 4.11%, as Microsoft’s 14.4% decline over powered Apple’s 3.11% gain. Energy did better than most, as it declined 1.82%. Financials fell 3.28%, as their year-to-date decline of 6.99% is the worst of the sectors. The VIX fear gauge closed up at 20.97 from last week’s 16.66 (the prior week was 20.95), but it traded over 23 and at 16 during the month, as volatility and prices moved. The U.S. 10-year Treasury closed down again, at 1.68%, from last week’s 1.79% (and the prior week’s 1.95%), as the lower-than-expected fourth quarter GDP pushed rates down. Oil remained volatile and moved lower, breaking under USD 44 for the first time since 2009, and closed up at USD 47.60, compared to last week’s USD 45.30 (the prior week was USD 48.50). The good news, if I can stretch the definition of good, is that oil stayed within a wide trading range of USD 44-USD 48. Volume declined 3% from the prior week but remained 11% higher than the one-year average. With 60% of earnings reported, the fourth quarter has not been a good one, especially for energy, big banks, or telecommunications issues (which had large pension charges). At this point the quarter is expected to 2.2% year-over-year decline and a 6.6% decline over the third quarter. Of more concern is the 2015 outlook, which has been declining. Many energy companies are cutting their forecasts, along with the 2015 expenditures (drilling, exploration, need of equipment, and services), with non-energy issues reducing their forecast, as many cite the headwinds of a stronger U.S. dollar. At this point, 2015 estimates are still unstable and need to settle down—for better or worse; I would expect a more “stable” picture by the end of February, as retail reports, and hopefully oil, find a level. Next week will continue the earnings run, but with fewer reports, as 100 issues, representing 16.6% of the market value, reports (starting with Monday’s Exxon Mobil).

  S&P added hospital and surgical center issue HCA Holdings (HCA) to the S&P 500, replacing Safeway (SWY); Safeway is being acquired by led by Cerberus Capital Management L.P. S&P also added S&P MidCap 400 branded and generic pharmaceutical issue Endo International (ENDP), which replaced Covidien (COV); Covidien is being acquired by S&P 500 member Medtronic (MDT).


  In premarket news on Monday, the Greek opposition party Syriza won a major vote (approximately half of the 300 seat assembly), as it quickly formed a coalition government. The anti-austerity group wished to renegotiate aid loan programs, permitting greater stimulus in Greece, as well as debt forgiveness plans; the group’s plan directly conflicts with Germany’s approach, which issued what appeared to be a conformation of its (Germany’s) view. The election is seen as spurring other anti-austerity groups. The euro rebounded on the news, and many believed that a negotiated agreement would be achieved, as the Greek market traded down 1.9%. Japanese exports increased 12.9% in December (year-over-year), when an 11.2% gain was expected, as exports to the U.S. rose 24% and were up 6.8% to Europe and 4.3% to China. German Business Confidence rose to 107.0 in January, higher than the 106.5 expectation, and up from December’s 105.5. Oil traded at USD 45.80 and gold was at USD 1,282.10; the euro traded at 1.1255, the pound at 1.5008, and the yen at 118.38. European markets were mostly up, with the DAX and IBEX up the most, both at 0.8%; the FTSE was the only major exchange down, off 0.2%. Asian markets were mixed, as both the SENSEX and Shanghai were up 0.9%, but the Nikkei was off 0.25%, with Singapore down 0.4%. U.S. futures were off 0.1%. In the U.S., the Greek elections took a back seat to the 140 issues (35% of the S&P 500 market representation) releasing its earnings this week. A pending snow storm in New York (and the eastern seaboard) appeared to lessen the foot traffic on the Street, as downtown hotel reservations (walk-to-work) booked up. Single-family home builder D.R. Horton (DHI) beat estimates, opening up 5.6% and closing up 5.5%. Fluid and control product maker Roper Industries (ROP) beat estimates, opening up 8.2% and closing up 4.0%. Computer hard drive maker Seagate Technology (STX) missed estimates, as it opened off 7.9% and closed off 7.7%, the worst issue in the index for the day. Telecommunications issue AT&T (T; closing off 0.6%) said it would buy Nextel’s Mexican wireless business for USD 1.9 billion. Paper and lumber issue MeadWestvaco (MWV) said it would merge with rival Rock-Tenn (RKT) in a total deal valued at USD 16 billion; MeadWestvaco opened up 10.1% higher and closed up 14.0%, the best issue in the index for the day. S&P MidCap400 packaged foods issue Post Holdings (POST) said it would buy privately held MOM Brands for USD 1.15 billion; Post opened up 3.3% and closed up 17.8%. Google (GOOGL; off 1.0% for the day) and Cablevision Systems (CVC; up 0.2% for the day) were reported to be preparing a test market for a new cellphone business approach based on the use of hot spots. S&P MidCap400 energy issue Cliffs Natural Resources (CLF; off 3.6% for the day) ended its cash dividend payments, saying it would use the money the pay down debt. The market opened in the red, with slightly higher trading, which some attributed to the Greek-EU conflict. The initial tick put the index off 0.25%, moving down to a low of 2,041, off 0.5% at 9:50 a.m., as opening orders exhausted themselves and fresh orders turned the market up to seek its level. Prices moved up to the 2,048 level, off 0.2%, over the next 20 minutes and then went into a trading range with quick small moves as it sought its level. The market wanted to get the European news behind it, as earnings would get busy quickly. At 10:30 a.m., the market stepped up to break into the black at 10:45 a.m., and then it went back into its trading range, moving above and below the break-even line, as the noon posting was in the black, at 2,953, up less than 0.1%. A rumor shot across Wall Street that International Business Machines (IBM) would do a massive layoff of 100,000 employees, the company reiterated that a much smaller number was being considered; the company was trading up 0.6%. Prices stayed near the break-even mark (on both sides of it) until 1:15 p.m., when they tilted up and made their way to the mid 2,057 level, up 0.3%, at 1:50 p.m. Prices then resumed their trading range, but this time solidly (perhaps I shouldn’t use that word in a volatile market) in the black, as the 3 p.m. posting was at 2,054, up 0.1%. The market continued in that range, with the 3:50 p.m. level at 2,054, as trading became heavy and prices moved decidedly higher. The session ended with a 0.26% gain, to close at 2,057.09. Energy rebounded 1.39%, as it was the best sector of the day, while information technology and telecommunications shared the prize for the worst sector of the day—both off 0.44%. The day did not have the high volatility of the past two weeks, but it did see a battle over the impact of Greece on the European economy. Both Greece and EU members and officials made comments during the day, with few sounding like a compromising position. Standard & Poor’s Ratings Services reduced Russia’s debt rating to BB- from BBB-, placing it in what is considered to be a “junk” rating. The country is still considered investment grade via combined investing rules, but it could lose that designation if downgraded by either Fitch or Moody’s Ratings. After the close, software for microcomputers Microsoft (MSFT; off 0.4% for the day) beat earnings expectations, as cloud sales increased, but certain unit sales were slow, and currency exchange losses hurt the company; the shares traded down 4.3% in aftermarket trading, which may affect tomorrow’s market opening. Semiconductor and electronics equipment maker Texas Instruments (TXN; flat for the day) reported higher profits, as it traded down a tick. Commercial banker Zions Bancorp (ZION; up 1.2% for the day) missed earnings, and the shares traded down 0.6%. In premarket news on Tuesday, Chinese Industrial Production declined 8.0% in December, year-over-year, the worst reading since October 2011. The Japanese yen strengthened as its government said it did not have schedule for achieving its 2% inflation goal. U.K. fourth quarter growth came in at 0.5%, when a 0.6% gain was expected. The Greek anti-austerity vote was seen as affecting the current Italian Presidential parliament voting. Greek debt prices declined, as the three-year yield climbed to 12.25%. Russia said it would proceed with its second bond offering, USD 74 million, of five-year floating rate instruments; the aftermarket was trading five-year Russian notes at 15.4%, as the ruble was at 67-to-1 with the U.S. dollar. Oil traded at USD 45.10 and gold was at USD 1,287.70; the euro traded at 1.1357, the pound at 1.5189, and the yen at 117.44. European markets were in the red, as the anti-austerity movement moved to Italy from Greece. Asian markets were mixed, as the Shanghai was down 0.8% and the Hang Seng was off 0.4%, with the Nikkei up 1.7%, and the SENSEX up 1.0%. In the U.S., the New York snow blizzard (is it wrong to say NYC = USA?) came in less than expected, producing eight inches of snow when 24-to-30 inches were expected; the Street remained less traveled, as many companies had reduced their attending staff; trading was expected to be slow. The unexpected “blizzard” appeared to be in the Durable Orders for December 2014. The report showed a 3.4% decline for the month, when a 0.7% gain was expected, as orders ex-transportation were down 0.8% when a 0.8% gain was expected. Adding to the disappointment, last month was revised downward to show a 2.1% decline from the originally reported 0.7% decrease (ex-transportation was revised to show a 1.3% decline from the originally released 0.4% decline). U.S. futures reacted quickly, declining from a moderate loss to be off 1.2% area. The S&P/Case-Shiller Home Price Index for November 2014 came in slightly higher than expected, posting a 0.7% gain for the month when a 0.6% gain was expected, as the year-over-year gain was 4.3% as expected, but again, was less than the prior month’s 4.5%—continued growth at a declining rate. The Fed started its first two-day meeting (in Washington), as rotation gave more votes to Doves than Hawks. The Fed was expected to leave rates unchanged, with their view on the economy drawing the most attention; there is no conference after the meeting (the Fed’s next meeting is March 17-18, with a 2 p.m. conference March 18). In premarket earnings, earthmoving machinery maker Caterpillar (CAT) missed estimates, as it forecast 9% lower sales for 2015; the shares opened off 7.3% and closed off 7.2%. Household and personal care product maker Procter & Gamble (PG) also missed estimates, opening off 2.8% and closing off 3.4%. Pharmaceutical and medical product Bristol-Myers Squibb (BMY) beat estimates, but warned that a strong dollar could affect 2015 earnings; the shares opened off 1.0% and closed off 0.8%. Healthcare and consumer related product maker Pfizer (PFE) opened off 1.4% and closed off 0.6%, as it reported lower earnings and sales, citing the stronger dollar and patent losses. Issues affected by yesterday’s after-the-close releases included Microsoft (MSFT), which opened off 8.7% and closed off 9.3%, the worst issue in the index for the day, and Zions Bancorp (ZION), which opened off 3.4% and closed off 1.6%. iPhone and entertainment equipment maker Apple (AAPL) would report after the close, with the issue opening the session off 0.6% and closing off 3.5%. The market opened lower, as lower-than-expected earnings, starting with Microsoft the previous day and continuing this morning with Caterpillar and Proctor & Gamble, put those few who were active in the market in a more selling mood. The opening ticks, on less-than-enthusiastic volume, were at 2,037, off 1.0%, and moved down to the 2,032 level, off 1.2%. At 9:45 a.m., the January Services PMI came in at 54.0, up from December’s 43.8 and the higher than the expected 53.8, as the 10 a.m. December 2014 release of New Home Sales came in at an annual rate of 481,000, when a 452,000 level was expected (November was revised down to 431,000 from the originally reported 438,000). The Index of Consumer Confidence came in at 102.9 for January, up from December’s revised 93.2 (originally reported at 92.6), and way above the 95.1 expectations; it was the highest level since 2007. Lower oil prices were seen as contributing to the higher posting. Prices stayed around the 2,032 level until 10:30 a.m., when they took a step down to 2,020, off 1.8% at 10:45 a.m., and then turned back up. Prices continued to slowly move up, as the noon posting was at 2,027, off 1.5%, with the 1 p.m. read at 2,034, off 1.1%. Prices then evened out, as they traded flat until 2:15 p.m., when they stepped up to the 2,042 level, off 0.7%, as they then went back to trading in a range. At 2:40 p.m., prices broke out of their range and tilted down, as concern over contagion from Greece and the stronger dollar’s effect on earnings started to dominate the talk. The 3 p.m. level fell back to 2,037, off 1.0%, as the 3:30 posting was at 2,031, off 1.25%. Trading started to increase, and prices continued an unsteady decline. The session ended the day off 1.34%, at 2,029.55, the worst decline since the January 5, 2015 decline of 1.83%. Poor economic data and earnings were blamed for the decline, as the stronger dollar easily became the fall guy and excuse for missing estimates (for those of you who thought it would be oil, better luck next quarter). After the close, Apple ( down 3.5% for the day) easily beat estimates, setting a record (for any public company) with a USD 18 billion earnings quarter and reporting a 38% increase; the issue traded up 5.2% in the aftermarket. Global telecommunications issues AT&T (T off 1.1% for the day) reported a loss but beat estimates, as it traded up 1.7%. Internet navigational issue Yahoo (YHOO; off 2.9% for the day) reported flat earnings and said it would spin-off its remaining interest in Alibaba (BABA) in a tax-free distribution late in the year. The 15% interest in Alibaba is estimated to be worth USD 40 billion; Yahoo traded up 7.6%. Biological product maker Amgen (AMGN; off 0.5% for the day) beat expectations, as a tax credit helped its bottom line; the issue traded a tick down. In premarket news on Wednesday, global concerns were centered on potential Greek–EU negotiations, as currencies seemed to settle down. The U.S. Fed note (after its meeting) would come after the global close but could play a role in Asia’s opening. Reports said China was planning on setting its 2015 growth rate at 7%; 2014 is coming in at 7.4%. Oil traded at USD 45.50 and gold was at USD 1,291.20; the euro traded at 1.1355, the pound at 1.5201, and the yen at 117.89. European markets were mostly moderately down, as the IBEX was off 1.2% and the CAC was off 0.5%, but the DAX was up 0.15%. Asian markets were mixed, with the Shanghai off 1.4%, but the Nikkei was up 0.15% and the Hang Seng was up 0.2%. U.S. futures were up 0.5%. In the U.S., the Fed meeting would end with a press release, but no conference, as the Street would focus on working. Apple’s record-setting USD 18 billion quarter and higher-than-expected iPhone sales were the topic of choice, with the discussion on whether the company was at its peak, while a close-second topic was the effect of the stronger dollar on U.S. companies. The weekly mortgage application report showed a 3.2% decline for the week, after two weeks of strong gains, as purchase applications declined 0.1% and refinancing applications fell 5.0%. Jet airplane maker Boeing (BA) beat expectations as it reported higher profits on higher sales; the issue opened 2.9% higher and closed 5.4% higher. Issues affected by yesterday’s after-the-close releases included Apple AAPL), which opened up 7.7% (it had dropped 3.5% yesterday), which closed up 5.7%; AT&T opened up 2.0%, closing off 0.4%, and Yahoo (YHOO) opened up 3.6% and closed down 3.2%, as investors questioned the value of the company ex-Alibaba. S&P MidCap 400 metal maker United States Steel (X) opened 9.8% higher and closed 10.7% higher, as it reported a strong quarter. The market opened higher, at 2,042, up 0.6%, as it rebounded from yesterday’s decline, but it struggled. Prices gyrated a few points up and down through 10:15 a.m., when they were at 2,041, and then started to decline as earnings concerns increased—mostly rooted in the concern of the effect that a stronger dollar would have over earnings. Prices fell steadily and with little resistance, as they broke into the red at 10:45 a.m., falling to 2,023, off 0.3%, at 11:20 a.m., before buying kicked in. Prices turned back up and made it back to the black within 20 minutes. Energy issues were having a difficult time, as the sector was off 2.2%, with information technology doing the best, up 1.3% (helped by Apple and Yahoo!). Prices moved up to the 2,033 level, up 0.15% at 12:15 p.m., as they started to trade in a range and were waiting for the 2 p.m. Fed note. Prices declined to near the break-even mark, as the 2 p.m. Fed release approached. Little was expected from the notes, and that is mostly what we got. The words “patient” and “gradual” were maintained, and the growth of the economy was raised to a “solid pace.” If there would have been a conference, the key question from Wall Street would have been the stronger U.S. dollar. The Street remained mostly unchanged, with the Fed seen as doing their first increase since 2006 in June or September, with June being the favorite. The first increase was expected to be small to show it has started—then we’ll all be guessing on the date for the next one will be. At this point, the Fed was still seen as moving against the world, as most central banks are cutting rates and adding stimulus, with the U.S. having already cut stimulus and about to increase rates. The market had a quick spike up, then down, which were due to more traders and positions. Prices, however, did decline down to the 2,018 level, off 0.6%, at 2:30 p.m. (more on currency concerns than on the Fed) and tried to turn around, moving back up to the 2,026 level a few minutes past 3 p.m. Buying, however, was weak, and prices started to decline again, and they just kept going. Momentum built up, as trading started to come in. The 3:30 p.m. reading was down to 2,014, off 0.75%, as the 3:45 p.m. posting was at 2,001, off 1.4%. Trading started to get heavy, but the declines stopped, as prices moved a tick up off their lows. The session ended the day off 1.35%, after posting a 1.34% decline yesterday; the last back-to-back 1.3% declines were on June 19-20, 2013 (the last three-day run was February 26-March 2, 2009). All 10 sectors declined, as information technology did the best, managing a 0.07% decline for the day; without Apple’s 5.7% gain the sector would have been down 1.36% (and the index would have been down 1.61%). Oil and gas issues declined, as the sector posted a broad 3.87% loss for the day. Nabors Industries (NBR) lost 11.7%, the worst issue in the index for the day; Denbury Resources (DNR) fell 9.4%; Hess (HES) declined 7.8%; National-Oilwell Varco (NOV) closed 7.2% lower; and Murphy Oil (MUR) reduced 7.2%. Entertainment software maker Electronic Arts (EA) closed up 12.8%, the best issue in the index for the day, as it beat estimates and improved over the day, while other issues declined. Fast food restaurant issue McDonalds (MCD) said its CEO would resign, as sales continued to lag; the issue closed off 0.9% for the day. After the close, global social web services issue Facebook (FB; up 0.6% for the day), beat estimates as sales from ads increased; the issue, however, traded down 1.8% in aftermarket trading (investors appeared to want more, and it was a bad day to release). Digital wireless communications product maker QUALCOMM (QCOM; off 1.1% for the day) beat but gave a poor forecast, as the issue declined 8.3%. In premarket news on Thursday, German unemployment for January declined to 6.5% from December’s 6.5%, the lowest rate in over 20 years. Newly elected (Sunday) anti-austerity Greek leaders moved to reverse prior programs and rehire public service employees, as hopes dimmed for a compromise with other EU members on its aid program. Denmark’s central bank reduced its bank deposit rate for the third time in two weeks. Royal Dutch Shell said it would freeze dividends and cut back on spending (USD 15 billion) over the next three years, citing lower oil prices as the reason. Oil traded at USD 44.40 and gold was at USD 1,267.10; the euro traded at 1.1320, the pound at 1.5131, and the yen at 117.93. European markets were a sea of light red, as the FTSE was off 0.7%, with the IBEX down 0.4%, and the STOXX 0.4% lower. Asia was red and off more, as the Shanghai led down, off 1.3%, with the Nikkei and the Hang Seng both 1.1% lower; the SENSEX, however, was up 0.4%. U.S. futures were up less than 0.1% (but they were up). In the U.S., the main discussion was on the impact of the stronger U.S. dollar on company’s income statements and oil’s continued instability and decline. The weekly unemployment claims reports came in at 265,000, falling 43,000 from last week’s 308,000, when a slight decline to 300,000 was expected. Diversified healthcare product maker Abbott Laboratories (ABT) beat earnings estimates but fell short on sales; the issue opened 0.9% higher and closed 4.3% higher. High-end leather goods retailer Coach (COH) beat estimates, as its U.S. sales declined 22% when a 24% decline was expected; the shares opened up 6.2% and closed up 6.8%. Household and personal care issue Colgate-Palmolive (CL) beat on earnings, as it sales came in as expected; the issue opened up 5.2% and closed up 6.0%. Domestic oil issue ConocoPhillips (COP) reported a loss and said it would cut capital spending by another 15%; the company had cut its capital spending by 20% in December. The issue opened 1.0% higher and closed 0.4% higher. Auto maker Ford Motor (F) beat estimates and reported lower earnings, taking a Venezuela charge and forecasting a stronger 2015; the shares opened 1.1% higher and closed 2.7% higher. Manufactures motorcycles Harley-Davidson (HOG) beat expectations, opening up 1.2% and closing up 3.7%. Audio video system component maker Harman International (HAR) opened 13.1% higher and closed 23.8% higher, the best issue in the index for the day, as it reported a strong quarter. Chocolate and candy maker Hershey Foods (HSY) missed estimates and cut its forecast, as the shares opened off 5.0% and closed off 4.1%. Diversified energy issue Occidental Petroleum (OXY) reported a loss, as it cut its future spending (adding its name to a growing list of energy issues); the shares opened 2.3% higher and closed 2.4% higher. Refiner Phillips 66 (PSX) beat expectations, as cheaper oil led to higher margins in its refining operations; the shares opened 2.3% higher and closed 3.1% higher. Homebuilder PulteGroup (PHM) beat estimates, opening 1.8% higher and closing 6.0% higher. Non-index Chinese internet issue, whose stock is being distributed to holders by Yahoo!, reported a 40% gain in sales, which disappointed investors. Alibaba shares opened off 8.0% and closed off 8.8%, as Yahoo (YHOO) shares traded down 6.2% and closed down 5.9%. QUALCOMM (QCOM) opened off 7.6% and closed off 10.3%, the worst issue in the index for the day, as it declined from its lower forecast released yesterday after the close. Fast food restaurant McDonald’s (MCD) opened up 3.1% and closed up 5.1%, after its CEO said he would resign. The market opened higher, at 2,006, up 0.2% on heavier-than-normal volume, but started to decline quickly as opening orders were filled. Prices fell quickly to the 1,992 level, at off 0.5%, but made their way back to the break-even line for the 10 a.m. posting, when the December Pending Sales Index declined 3.7% for the month, when an increase of 0.6% was expected. The market declined quickly on the news, falling to the 1,989 level, off 0.65% at 10:45 a.m. (4.9% off the closing high [a correction is 10%]). Prices then leveled off, as they slanted upwards. Prices moved back to the black a few minutes before noon, reaching 2,005 (it opened at 2,006), and then started to decline. Oil dropped below USD 44 for the first time since 2009 and was at 43.80, as oil replaced the higher U.S. dollar as the concern of the moment. Energy issues were pulling back, with economists attempting to quantify the impact globally and in the U.S., since many of the cuts were abroad for the U.S. companies. Prices traded above and below the break-even line, with most being below, as they stayed in the black starting at 1:15 p.m. and moved up, with few pullbacks, as the 2 p.m. posting was at 2,011, up 0.4%. Prices traded in a range, in steps, but with a slight upward tilt. At 3:15 p.m., with the market at 2,014, up 0.6%, prices moved out of their range and started up. Trading started to come in at 3:30 p.m., with the market at 2,020, up 0.9%. Prices reached 2,024, and then declined back to the 2,021 level and traded flat, as volume became heavy. The session ended the day up 0.95%, at 2,021.25, after two days of 1.3%+ declines. The gains were seen as independent of the prior day’s declines, as earnings helped, with oil moving up off its lows in late trading. The market was still unstable, and intraday volatility remained high. After the close, online retailer (AMZN; up 2.6% for the day) beat estimates, as the issue traded up 8.3% in the aftermarket. Internet search and advertiser Google (GOOG; up 0.1% for the day) missed estimates, as sales pointed to slower growth; the issue traded down only a tick. Charge card issue Visa (V; up 0.7% for the day) beat estimates, as the company announced a four-for-one stock split; the issue traded up 3.3%. In premarket news on Friday, Russia, in a reversal of recent rate increases, unexpectedly cut its interest rate to 15% from the previous 17%; the ruble continued to weaken against the U.S. dollar and was now at 72 (losing half its value over the past six months). Eurozone consumer prices declined 0.6% in January year-over-year, the largest decline since July 2009. Oil traded at USD 44.80, the U.S. 10-year yielded 1.72%, and gold was at USD 1,264.40; the euro traded at 1.1333, the pound at 1.5073, and the yen at 117.56. European markets were lower, with most centering at off 0.4%; the DAX, CAC, and FTSE were off 0.5%, as the IBEX and STOXX were off 0.3%. Asian markets were down more, as the SENSEX was off 1.7%, the Shanghai was down 1.6%, and Singapore was 0.8% lower; the Nikkei, however, was up 0.4%. U.S. futures were down 0.8%. In the U.S., the Advance Q4 GDP report came light of the expected 3.2% rate, at an 2.6% annual rate, down from the 5.0% third quarter and 4.6% second quarter rate; the first quarter posted a 2.9% annualized decline. Consumer spending, however came in higher than the 4.0% expectations, at 4.3% (Q3 was 3.2%). The employment cost index came in (another Fed favorite, which shows wage growth), came in with a 0.6% gain, as expected, but was down from last quarter’s 0.7%. The implied takeaway was that consumers were spending, but companies were not. The market’s reaction was for U.S. futures to decline and the 10-year yield to fall. Earnings continued on, as pharmaceutical issue AbbVie (ABBV) opened off 1.6% and closed off 4.4%, as it beat estimates, but questions on the strength of its sales remained. International oil issue Chevron (CVX) beat estimates, as it lowered its forecast and planned capital expenditures; the issue opened off 1.4% and closed off 0.5%. Ethical drug maker Eli Lilly (LLY) beat estimates as it reported lower earnings, and it reduced its sales estimate due the stronger U.S. dollar; the issue opened up 1.3% and closed down 0.2%. Charge card issue Mastercard (MA) beat expectations, as it reported a 29% increase in profits; the shares opened 2.9% higher and closed up 0.8% higher. Membership discount retailer Costco Wholesale (COST) said it would pay a special USD 5 dividend (aggregate USD 2.2 billion); shares opened up 2.0% and closed up 1.7%. Issues affected by yesterday’s after-the-close releases included, which opened 11.0% higher and closed 13.7% higher, the best issue in the index for the day; Google (GOOG), which opened 1.0% higher and closed 4.7% higher; and Visa (V), which opened 4.8% higher and closed 2.8% higher. The market opened lower on higher-than-usual volume (as it did yesterday), and the lower-than-expected GDP number opened the market at 2,011 (it had closed at 2,021), off 0.5%. Prices started to rise, moving up to 2,018, off 0.15% at 9:45 a.m., but the buying was not there and prices turned back down. The 10 a.m. reading was at 2,014, as the January Consumer Sentiment index came in at 98.1, a tick down from last month’s 98.2, when the reading was expected to be flat. Prices continued down, reaching a low of 2,003, off 0.9%, at 10:35 a.m., when they started to turn up. Prices gyrated in large swings but remained in the red, as the 11:15 a.m. posting was a tick above 2,000, off 1.0%, and the noon reading was at 2,007, off 0.7%. Prices then started to turn up, as buying (potentially bargain hunting) came in, pushing stocks up to 2,014, off 0.3%, for the 12:30 p.m. reading. Prices then again changed directions, trading back to the 2,006 level, off 0.75% at 1:15 p.m., before turning back up. The upturn was supported by oil, which was moving higher. Oil reached USD 48, as it appeared that traders were covering month-end positions, and trading into longer ones. Stock prices followed, as they broke into the black for the first time in the session, at 2:30 p.m. Oil prices then started to fall back (the buying support seemed to end), as prices did the same. Trading started to come in, and prices moved down quickly, as the 3 p.m. posting was back to 2,009, off 0.6%, with the 3:20 level a tick above 2,000, off 1.0%. Prices then tried to recover, but at 3:40 p.m., as trading became heavy, they began to decline again. Prices continued to fall, as there were few, if any, buyers willing to come in. For the session, the market closed under 2,000, at 1,994.99, off 1.30%, as the market ended a volatile week with a 2.77% decline after a 1.60% gain last week. For the month, the market posted a 3.10% decline, so let’s hope that the Wall Street saying of “as January goes, so goes the year” does not end up being correct. Next week will see a significant reduction in earnings, as 100 issues, representing 16.6% of the S&P 500, are to report (starting with Exxon Mobil on Monday before the opening). Volume and volatility are expected to continue. Economic reports will center on next Friday’s (8:30 a.m.) employment report, with oil, currency, and central bank actions getting noticeable attention.


  Economic reports will play a major role next week, as earnings will start to decline from their peak, with the monthly employment on Friday being the main attraction and market affecter. Reports will start Monday with the December Person Income report, which is expected to post a 0.3% increase. The PCE is expected to show a 0.2% decline, after last month’s 0.6% gain, with the PCE Chain Price expected to post a 0.03% decline. At 10 a.m., the January ISM manufacturing report is expected to come in flat at 55.5. Construction spending for December is expected to post a 0.6% gain, after a 0.3% decline in November. At 10 a.m. on Tuesday, Factory Output for December is expected to be unchanged for the month, as Factory Inventories are expected be down 0.1%, compared to the prior month’s 0.1% gain. U.S auto sales for January will be reported during the day and are expected to come in flat at an annual rate of 5.8%, as Light Trucks are expected to tick up to 7.7 million, from last month’s 7.6 million. Wednesday will start with the weekly mortgage application report. The January ADP Employment report is expected to show a decline to 215,000 net new jobs for the month, down from last month’s 241, 000. At 10 a.m., the January Non-manufacturing ISM report is expected to increase to 56.6 from December’s 56.2. Thursday will start with the weekly unemployment claims report. Fourth quarter preliminary Productivity is expected to increase 1.1%, down from the 2.3% Q3 increase, as Unit Labor Cost is expected to gain 0.8% after last month’s 1.0% decline. The December Goods and Service report is expected to post a USD 38.1 billion deficit compared to last month’s USD 39.0 billion deficit, as Exports are expected to come in at USD 196.0 billion (from last month’s USD 196.4 billion) and Imports at USD 234.9 billion (from last month’s 245.4 billion). Friday will bring the January unemployment report, which is expected to show that 228,000 net new jobs were added for the month, down from December’s 252,000, with private jobs accounting for 218,000 of the 228,000. Hourly wages are expected to increase 0.2%, as the average work week is expected to remain flat, at 34.6 hours. The unemployment rate is expected to be unchanged at 5.6%. With two-thirds of the earnings reported to date, next week will start the decline from this week’s height, as 100 issues are scheduled to release, consisting of 16.6% of the market value. The following week has 100 issues representing 16.6% of the market value, scheduled to report (starting with Monday’s before the opening Exxon Mobil release).


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