End of Market February 3, 2012 DAD99: 12/31/2003=100.00
Morning Market Comment:
Overview: Stock prices were mixed yesterday ahead of this morning’s employment report. In testimony before Congress, Fed Chairman Dr. Bernanke said the U.S. economy is still vulnerable to shocks. Retailers delivered slightly disappointing year-over-year same store sales for January. Costco (COST), Kohl’s (KSS), and Target (TGT) topped estimates, while a lengthy list of companies delivered disappointing or negative January comps, including JC Penney (JCP) and Nordstrom (JWN). Weekly initial jobless claims fell 12,000 last week to 367,000. Productivity in the U.S. economy rose 0.7% during 4Q 2011. There were no major announcements from Europe regarding the Greece debt situation on Thursday. The euro slid back versus the dollar, closing at $1.3088. Crude oil futures prices pulled back, closing at $96.52/barrel. Gold rose, closing at $1,761.40/ounce.Market Recap: The major stock market indices traded in a very narrow range on Thursday as traders stood back ahead of today’s employment report. Composite trading volume on the NYSE and the NASDAQ totaled 2.7 billion shares. Market breadth on the NYSE was positive with advancing issues outnumbering declining shares 1,695 to 1,289. The bond market rallied, sending the yield on the 10-year Treasury note down to 1.82%. Sector Overview: Six of the ten market sectors participated in yesterday’s market rally, led by Energy (+0.76%), Telecom (+0.56%), and Financials (+0.49%). Materials (-0.48%) and Health Care (-0.39%) saw the heaviest selling pressure. Three of the four investment style rallied, led by small cap growth (+0.56%). Large cap growth rose 0.48%, followed by small cap value, up 0.24%. Large cap value dropped 0.06%. Thursday's Leading Industry Groups:Home Entertainment Software (+6.10%), Coal & Consumable Fuels (+6.10%), Household Appliances (+4.41%), Specialized Finance (+4.33%), Data Processing & Outsourced Services (+2.53%) Thursday's Lagging Industry Groups: Trucking (-6.88%), Managed Health Care (-1.49%), Diversified Metals & Mining (-1.33%), Movies & Entertainment (-1.16%), Health Care Distributors (-1.15%) Companies in the News Today: Fourth quarter earnings reports continue to dominate the morning corporate news headlines as summarized below. In addition, the following companies are in the news this morning: Urban Outfitters Inc. (URBN) announced Tedford Marlow will return to the company as CEO, effective Feb. 6th. Companies reporting earnings above forecasts: UFS, ZOLT, SPB, ABMD, TSN, WY, BAH, BEAM, SIRO, AON Companies reporting earnings in line with forecasts: EL, MAC, SPG Companies reporting earnings below forecasts: TXCC, MGI Companies raising earnings or revenue guidance: MGI Companies maintaining earnings or revenue guidance: EL, TSN, BAH, ABMD, SPG, SRDX Companies lowering earnings or revenue guidance: MACAnalyst Upgrades (from Thomson, Briefing.com, Marketwatch.com): URBN, TTEK, PEET Analyst Downgrades (from Thomson, Briefing.com, Marketwatch.com): BMI, APKT Looking Ahead: I am on a plane heading back home (Tigard, OR) very early this morning after delivering speeches to client and civic groups in Kalispell and Missoula, MT this week. Thus, I will not be able to comment on the January employment report until much later today or when I write our Monday Market Comment and Weekly Market Comment over the weekend. I am expecting non-farm payrolls to rise 150,000 in January, with private payrolls expanding by 170,000. Predicting the monthly employment data is usually a very hazardous exercise as the data fluctuates widely on a month-to-month basis. Our forecast recognizes a dip in private payrolls as many temporary holiday employee hires disappeared in January. We would expect a nice positive market reaction if the non-farm payroll number is above 200,000 and a negative market reaction if its falls below 140,000. We continue to wait for news of an agreement between private holders of Greek debt maturing on March 22, the Greek government, and the European Union. So far, all we hear is that both sides are close to a restructuring agreement. It seems the discussions over restructuring Greek debt have been in limbo for several weeks. Investor patience regarding this process borders on amazing. Perhaps, some of the complacency relates to the fact that the European Central Bank continues to support debt auctions of troubled southern European countries, including Italy, Spain, and Portugal. Bond yields for debt issues by those countries have fallen sharply over the last month, contributing to improved investor confidence that Europe is not on the verge of disrupting the global financial system or ready to implode economically. Market Outlook: We expect stock prices in New York to open higher as stock futures are trading well above fair value following the stronger than expected employment numbers released this morning. Stock prices rose overnight in most Asian markets. The Tokyo Nikkei 225 fell 0.51%. The Hong Kong Hang Seng Index rose 0.08%. The Chinese CSI rose 1.00%. Stock prices in the European stock exchanges are trading higher at mid-session. The London FTSE is up 0.43%. The Euro STOXX 50 index is up 0.02%. The near-term contract of light sweet crude is trading at $96.26/barrel. Natural gas futures are at $2.469/mcf. Gold is trading at $1761.00/ounce. The euro is trading at $1.3179. The 10-year Treasury note is yielding 1.816%. The 2-year Treasury note is trading to yield 0.23%. 3-month Treasury bills are trading to yield 0.081%. The Fed Funds Target range remains 0% to ¼%. Today’s Earnings Releases: 27 companies reporting, includingAON (AON), Beam (BEAM), Clorox Co. (CLX), Domtar (UFS), Estee Lauder Cos. (EL), Simon Property Group (SPG), Tyson Foods (TSN), Weyerhaeuser Co. (WY)Today’s Economic Releases/Events: Nonfarm Payrolls, Nonfarm Private Payrolls, Unemployment Rate, Hourly Earnings, Average Workweek, Factory Orders, ISM Services Corporate Analyst Meetings, Conference Calls, and Investor Meetings: STJ Investor MeetingThis Week’s Institutional Investor Conferences: Houlihan Lokey Consumer & Food Conference, IPAA Oil & Gas Investment Symposium, JPMorgan Health Care Conference, Merriman Capital Investor Summit, Raymond James Global Airlines Conference, TD Ameritrade Institutional National Conference, UBS Global Emerging Markets 1-on-1 Conference
Technical Overview (updated 2/4/12):
Short-Term Trend
Intermediate Trend
Long-Term Trend
DJ Industrial Average
Up
Up
Up
NASDAQ Composite
Up
Up
Up
MSCI EAFE (EFA)
Up
Up
Down
Gold (GLD)
Up-Extended
Up
Up
Euro (FXE)
Up
Down
Down
Near-Term Support
Near-Term Resistance
Current Price
DJ Industrial Average
12,300
12,800
12,705.34
S&P 500
1,270
1,330
1,325.54
NASDAQ Composite
2,625
2,875
2,859.68
50-day Moving Avg.
200-day Moving Avg.
DJ Industrial Average
12,268 (up)
11,964 (up)
S&P 500
1,267 (up)
1,255 (flat)
NASDAQ Composite
2,665 (up)
2,655 (flat)
Upcoming Chief Investment Strategist Office Visits and Client Event Appearances/Speeches in 2012:
Feb. 3:
Return to Lake Oswego (AM)
Feb. 8:
West Linn, OR – Chamber of Commerce/Rotary Club Dinner Speech
Feb. 13-14:
Boston, MA – Institutional Client Meetings
Feb. 15-16:
New York City, NY – Institutional Client Meetings
Feb. 17:
Return to Lake Oswego
March 4-9:
Philadelphia, PA – SIFMA/Wharton Institute & Trustee Meetings
March 12:
Beaverton, OR – Pacific Power Retiree Forum Economic Presentation/Speech
March 14-16:
Medford, OR – Client Events
March 20-21:
Great Falls, MT – Corporate Meetings
March 22:
Helena, MT – Montana CPA Association Conference Speech
April 11-12:
Burlington, WA – Client Event
April 17:
Pendleton, OR – Client Event (Evening)
April 18:
Kennewick, WA – Client Event/Kennewick Rotary Club Speech (Noon)
April 23-24:
Great Falls, MT – Corporate Meetings
April 25-26:
Bozeman, MT – Client Events
April 27:
Return to Lake Oswego
May 4-5:
Bellevue, WA – Davidson Institute
May 9-10:
Seattle, WA – Davidson Banking/Financial Services Conference
May 16-18:
New York, NY – Wharton/SII Trustee Meetings
May 19:
Seattle, WA – Keynote Speech American Association of Women’s CPAs
Sept. 12:
Kennewick, WA – Client Appreciation Event
Sept. 13:
Lewiston, ID – Client Appreciation Event
Sept. 17-20:
East Coast media tour – SIFMA/Wharton Board Meeting
Oct. 25-26:
Boise – Client Events/Idaho Women’s Investment Forum Speech
Nov. 8-9:
Omaha/Lincoln, NE – Client Events
Nov. 15:
Redmond, WA – Client Event
Fred H. Dickson, CMT Senior Vice President, Chief Investment Strategist Davidson Companies 503.603.3059 fdickson@dadco.com
