MONDAY-WEDNESDAY’S ACTION: Sellers Dump Stocks
Stocks fell on Monday as sellers relentlessly cut their long positions. The major averages and a slew of leading stocks suffered extensive damage after the worst weekly decline for the major averages since November 2011. The Commerce Department said new home sales totaled 414k in December, missing estimates for a 458k. Meanwhile, Caterpillar (CAT) gapped up 5% after topping estimates. After Monday’s close, tech giant Apple Inc (AAPL) gapped down reporting earnings.
Stocks bounced on Tuesday as investors digested a slew of earnings and economic data. Shares of AAPL weighed on the major averages but Billionaire investor, Carl Icahn, tweeted that he bought $500M more of AAPL shortly after the opening bell. His tweet said: “Purchased an additional $500M in shares (brings his stake to approx $4.1B)- “My buying seems to be going neck-and-neck with Apple’s buyback program, but hope they win that race.” As of Tuesday’s open, 153 stocks in the S&P 500 (SPX) reported Q4 results- 69.3% beat earnings estimates & 68.6% beat revenue estimates. Meanwhile, the SPX is down over -3% since earnings season began. Earnings data was mixed. Consumer confidence rose to 80.7 in January, beating estimates for 78.1. Durable goods fell -4.3% in December and missed estimates for a gain of 1.6%. The Case-Shiller home price index jumped by +13.7% in November which bodes well for the housing market. Tuesday evening, President Obama delivered his annual State of The Union Address and said basically said everything is great and recycled the same old themes.
Stocks fell hard on Wednesday after the Fed tapered by another $10B/month. The Fed will now print $65B/month to stimulate the economy and inflate asset prices (a.k.a. stocks). Turkey’s Central Bank took action to curb fears and boost confidence but that was short lived. Turkey’s Central Bank raised interest rates by a whopping 445-basis points to 12.00%. The primary goal was to strengthen its currency, the lira. The move worked for only 15 hours. The lira briefly rallied after the announcement but spent the rest of the day falling and gave up all of its gains by the close.
THURSDAY & FRIDAY’S ACTION: STOCKS Fall After Fed Tapers
Stocks rallied sharply on Thursday as investors digested a slew of economic and earnings data. Initial Q4 GDP showed the U.S. economy grew by +3.2%, matching estimates. Meanwhile, consumer spending rose by 3.3%, missing estimates. A separate report showed jobless claims rose by 19k to 348k which is not ideal for the jobs market. Shares of Facebook (FB) and Under Armour (UA) gapped up after reporting very strong quarters. Stocks slid on Friday as sellers continued to dump stocks.
MARKET OUTLOOK: MARKET PULLING BACK
It is important to monitor this pullback to see if this turns into another shallow pullback or something more substantial. As always, keep your losses small and never argue with the tape.