Weekly Market Recap DATE: 4/15/2013

Transcription

1 Weekly Market Recap DATE: 4/15/2013 Last Week: Stocks continued to set new highs, even as Friday s economic data and a plunge in commodity prices gave investors incremental issues to consider The Dow Jones Industrial Average climbed 300 points for the week, 2.1% o Best for the week were Pfizer (+5.4%), Home Depot (+5.1%), Disney (+4.9%), and Merck (+4.4%) o Only two Dow constituents lost ground for the week, those being Hewlett Packard ( 4.9%) and Alcoa ( 0.2%) Hewlett Packard was hurt by a data release that showed the weakest PC demand for a quarter since research firm IDC began tracking the data in 1994 Dow Transports added 1.8% Dow Utilities tacked on 1.7% S&P s 500 gained 2.3% o All 10 sectors participated in the advance, with Healthcare leading the way. Curious leadership in a straight up market, isn t it, especially as the Affordable Care Act takes effect? o Top groups were Automobiles, Travel and Tourism, Biotechnology, and Gambling o Laggards were all in the metals complex: Aluminum, Nonferrous Metals, Gold Mining, and Platinum & Precious Metals The S&P Midcap 400 climbed 2.3%, while the S&P Smallcap 600 rose 1.8% NASDAQ s Composite was the week s best broad market equity index, posting a 2.8% increase Advancers topped decliners by a better than 2.5 to 1 margin Curiously, perhaps even as stocks were busy setting new all time highs, individual investor sentiment fell to its lowest level since March 2009 (chart courtesy Strategas)

2 As individual investors sour on the markets just as they ve reached new highs, sell side strategists seem to be capitulating one by one. The latest example was JPMorgan s Thomas Lee, who said in a note last week that his 1,580 target for the S&P 500 seems low. He went on to say that now that he is more bullish, the risk is ʺthat the market begins to correct just as we capitulate on it happening. That is potential irony.ʺ Overseas markets were higher nearly across the board, led by Japan s whopping 7.4% climb and Greece (yes, Greece!?!) which made Japan s gain look anemic with a massive 13.5% advance for the week. Japan s major stock index has risen 63% since June Crude oil sold off, shedding $1.41/barrel to end the week at $91.29 Gold melted, losing $74.40/ounce for the week (with virtually all of that occurring Friday the largest one day percentage drop since February 2012); the yellow metal ended the week at $1,501 o That s gold s lowest closing price since July 2011, which might be surprising, given the massive amount of money printing being conducted by the Federal Reserve, the Bank of England, and the Bank of Japan, among others (charts courtesy Strategas)

3 o Some observers pointed to news that Cyprus may be required to sell its sovereign gold holdings to partially fund its bailout o Others pointed to Federal Reserve officials who have been speaking more hawkishly about slowing the pace of bond purchases (i.e. money printing) later this year o In the first half of the week, both Deutsche Bank and Goldman Sachs cut their price forecasts for gold o Barron s reports that the large gold ETF (ticker GLD) held peak assets of more than $77 billion in August 2011, which had fallen to $72.2 billion by the end of 2012, and to $59.4 billion by last Thursday o There s probably a technical aspect to gold s decline, too. Since its August 2011 peak, the precious metal now has fallen more than 20%, entering official bear market territory o Barron s observes that liquidity is so pervasive that Dubai is equipping its police fleet with Lamborghini Aventadors. For those unfamiliar with the vehicle, it carries a pricetag of about $400,000 o Silver wasn t spared either it lost 5.4% on Friday, and 3.5% for the week Treasuries were little changed for the week, with the yield on the 10 year note rising 3 basis points to 1.72% The trade weighted dollar fell 0.2% last week, but still managed to gain against the Japanese Yen. The Yen plumbed new lows and came ever so close to breaching the 100 level versus the dollar it reached intraday on Thursday The Federal Reserve erred in e mailing the minutes from its March meeting to about 100 recipients (including various investment banks) a day early. That was at least partly credited for Tuesday s sharp equity rally. According to a CNNMoney report, At this point, it s not clear whether any trading took place based on the early release, but the Federal Reserve Board s Inspector General will conduct an initial investigation of the error. o Not clear? Any? Based on the market s vertical response to the accidental e mail, it seems clear and certain that some trading took place based on the Fed minutes o Not to worry, the Fed says it will be working with market regulators, the SEC, and CFTC to insure they have the information they need to evaluate the incident. o For our part, we re curious how a market regulator would determine whether an investor bought or sold a specific stock or ETF based on early receipt of Fed minutes? Economic data mostly disappointed: o The National Federation of Independent Business Small Business Optimism index fell to 89.5 o The University of Michigan s Consumer Confidence index fell to a 9 month low, marking 72.3, a far cry from either the consensus estimate (79.3) or last month s level (78.6) chart courtesy dshort.com

4 o March Retail Sales declined 0.4%, materially below the consensus forecast which looked for an unchanged level o The Producer Price Index dropped 0.6% in March, well below the consensus which was looking for 0.2%. Core PPI (which excludes volatile food and energy components) fell 0.2%. Those are the sequential changes; on a year over year basis, PPI actually increased 1.7%, while core PPI rose 1.1% y/y (chart courtesy dshort.com)

5 o One positive piece of news was weekly jobless claims, which dipped to 346,000 As Japan s central bank ramps up its $80 billion monthly bond buying program, Japanese investors are looking to invest outside the country. According to Japan s Ministry of Finance, Japanese investors bought a record 645 billion yen of foreign equity securities during the week ending March 23, the most since records began in 2005 This Week China released a slew of reports that were generally weaker, leading stocks lower and continuing the onslaught in commodity land o China s first quarter GDP came in below expectations at a 7.7% annualized pace. Economists had been expected 8.0% Sheng Laiyun, spokesman at the National Bureau of Statistics which released GDP, said ʺChinaʹs economic fundamentals havenʹt changed. We are confident about future growth and optimistic about achieving this yearʹs growth targetʺ o Industrial production rose 8.9% in March, lower than consensus expectations of 10.0% o Fixed asset investments jumped 20.9% for the quarter, slightly below a 21.3% estimate o Power generation rose just 3.2% in March, the slowest pace in six months o Retail sales rose an impressive 12.6% in March, an acceleration from 12.3% in February o China added more than 3 million jobs during the first quarter. That s as many jobs as the U.S. has added in the past eight years! The Nikkei fell 1.6% and the Hang Seng lost 1.4% European markets are lower, with the German DAX down 0.6% and the London FTSE down 0.8% U.S. markets are indicated lower, led by commodity sensitive sectors o The 10 year yield is unchanged at 1.72% o The dollar is down 0.1% o West Texas crude is off $1.61 per barrel to $89.39 and Brent is lower by $1.92 per barrel to $ Natural gas is bucking the trend, up 0.4% to $4.24 per Mcf o Gold hit its lowest level since April 2011 in early trading. The shiny metal is down nearly 6%, or $88.90 per ounce, to $1, Citigroup is jumping on the bearish commodity bandwagon, downgrading its view on the complex this morning. ʺCiti expects 2013 to be the year in which the death knells ring for the commodity super cycle, ushering in a new decade of opportunities based on how individual commodities will perform against one another and against broader market indicators such as equities or currencies,ʺ Citigroup research analysts said in a report today Thermo Fisher Scientific agreed to buy fellow life science equipment maker Life Technologies for $11.4 billion Satellite TV provider Dish Network is offering to buy Sprint Nextel for 18% more than Japan s Softbank previously offered. The deal is valued at $25.5 billion in cash and stock Earnings expectations have fallen nearly 3 percentage points since January, according to Thomson Reuters data. S&P 500 companies are now expected to grow earnings 1.1% in the first quarter. Ahead of earnings, companies have been notably pessimistic, with a 4.7 to 1 ratio of negative to positive warnings 74 S&P 500 companies report this week, including:

6 o Charles Schwab, M&T Bank, and Citigroup today o Coca Cola, BlackRock, Intel, Comerica, Northern Trust, Goldman Sachs, US Bancorp, CSX, Yahoo!, Linear Technology and Johnson & Johnson tomorrow o Wednesday we hear from Abbott Laboratories, Kinder Morgan, ebay, Quest Diagnostics, Huntington Bancshares, Mattel, Bank of New York Mellon, Bank of America, Dover, St Jude Medical, American Express, Noble Corp, SanDisk and PNC Financial o Thursday follows with UnitedHealth Group, Philip Morris Int l, PepsiCo, Microsoft, Google, America Movil, First Cash Financial, Omnicom, Baxter Int l, PPG Industries, Sherwin Williams, Snap On, Union Pacific, KeyCorp, Danaher, Fifth Third Bancorp, Morgan Stanley, BB&T, Verizon, Freeport McMoRan, Chipotle, IBM, Capital One, E*Trade, Advanced Micro Devices, Nucor, AutoNation, Intuitive Surgical and Peabody o Friday ends the week with reports from McDonald s, State Street, Schlumberger, Laboratory Corp, Honeywell, Baker Hughes, Suntrust, General Electric, Rockwell Collins, American Electric Power, Genuine Parts, ManPower, Under Armour, Kimberly Clark and Interpublic Group Economic reports include plenty of housing and manufacturing data points, as well as a look at inflation o April NAHB Housing Market Index (consensus 45, actual 42), New York Empire Manufacturing (cons 7.0, actual 3.1) and February Net Long term TIC Flows (cons $40.0 bil, up from $25.7 bil in January) today o March Consumer Prices (cons 0.0% month over month, 1.6% year over year; excluding food & energy 0.2% m/m, 2.0% y/y), Housing Starts (cons 930,000, 1.4% m/m), Building Permits (cons 943,000, 0.4% m/m), Industrial Production (cons 0.2%) and Capacity Utilization (cons 78.4%) tomorrow o Wednesday the Federal Reserve releases its Beige Book at 2pm o Thursday is April Philadelphia Fed (cons 3.0), March Leading Indicators (cons 0.1%) and weekly Jobless Claims (cons 350,000) o No reports Friday Conferences & Events o Tuesday Treasury Secretary Jack Lew will testify to the House Budget Committee and the Senate Budget Committee on fiscal year 2014 economic policy If you re getting confused and/or frustrated while finishing up your taxes today, it s probably not just you the US tax code currently contains about 4 million words, or more than 5 times as many as the Old and New Testament combined As always, thanks very much for your interest and support. Adam Bergman, CFA abergman@sterling capital.com Josh Haggerty, CFA jhaggerty@sterling capital.com

7 Investment advisory services are available through Sterling Capital Management LLC, a separate subsidiary of BB&T Corporation. Sterling Capital Management LLC manages customized investment portfolios, provides asset allocation analysis and offers other investment related services to affluent individuals and businesses. Securities and other investments held in investment management or investment advisory accounts at Sterling Capital Management LLC are not deposits or other obligations of BB&T Corporation, Branch Banking and Trust Company or any affiliate, are not guaranteed by Branch Banking and Trust Company or any other bank, are not insured by the FDIC or any other government agency, and are subject to investment risk, including possible loss of principal invested. Opinions and estimates offered constitute our judgment and are subject to change without notice, as are statements of financial trends, which are based on current market conditions. We believe the information provided here is reliable, but do not warrant its accuracy or completeness. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The views and strategies described may not be suitable for all investors. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied upon for, accounting, legal or tax advice. References to future returns are not promises or even estimates of actual returns a client portfolio may achieve. Any forecasts contained herein are for illustrative purposes only and are not to be relied upon as advice or interpreted as a recommendation. BB&T Scott & Stringfellow Information obtained from independent source (Newspapers, Magazines, Internet, etc ) The firm is furnishing these materials for informational purposes only; the firm has not prepared this material or approved its contents. The information contained herein was obtained from sources believed to be reliable; however, the firm does not guarantee its accuracy or completeness. Nothing contained herein should be considered a solicitation to purchase or sell any specific securities or investment related services. The firm does not render tax or legal advice. As such, no one should act upon any tax or legal information contained herein without consulting a tax professional or attorney.