MONDAY-WEDNESDAY’S ACTION: Soft Open For 2014
Stocks ended lower on Monday causing the S&P 500 to experience its third consecutive down day. So far, the S&P 500 has yet to have a winning day in 2014. Each year, people love focusing on January for some correlation to how the overall market will perform for the rest of the year. Statistically the correlation is very low at best. Economic data was thin, the ISM non-manufacturing index for December slid to 53.0 from 53.9, missing estimates for 54.6 while durable goods rose by +3.4%.
Stocks rose for the first time in 2014 on Tuesday and snapped a three day losing streak as investors digested the latest round of economic data and waited for earnings season to begin. The November trade deficit narrowed to $34.3 billion from a downwardly revised $39.30 billion (from $40.60 billion). Many analysts were expecting the deficit to come in at $40.40 billion. Economists believe that the lower trade deficit in November and October will help Q4 GDP. Elsewhere, the Senate approved Janet Yellen’s nomination to lead the Federal Reserve with a 56 to 26 vote. Stocks were quiet on Wednesday after the ADP said private sector employment rose to 238k last month, beating estimates for 203k. Later that day, the December FOMC minutes showed that some officials saw “waning benefits” from monthly bond purchases. The minutes also showed that some members wanted to see QE end sooner rather than later.
THURSDAY & FRIDAY’S ACTION: Dec Jobs Report Disappoints
Stocks were quiet on Thursday as everyone waited for Friday’s jobs report. Before Thursday’s open, the Labor Department said weekly jobless claims slid to 330k from an upwardly revised 345k (from 339k). The Street was expecting a reading of 338k. Before Friday’s open, the Labor Department said US employers only added 74k new jobs in December which missed estimates for around 200k. The unemployment rate slid to 6.7% due to a large chunk of workers giving up (participation rate). A separate report showed that the real unemployment rate, without any special adjustments, would be 13.1%.
MARKET OUTLOOK: BULLS ARE IN CONTROL
As we have been saying all year, the market is very strong in all three time-frames: short, intermediate, and long. The last pullback was shallow in size (%decline) and scope (days/weeks, not months). As always, keep your losses small and never argue with the tape.