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Weekly market recap: Mixed Markets due to mixed earnings

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For the week ending January 18, 2014

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Overview

The markets were mixed again, with the Dow and Nasdaq up and the S&P down. With earnings season having started, corporate news has been less than inspiring so far in comparison to 2013. Economic news was mixed with manufacturing showing strength, housing showing some weakness, and the consumer sector mixed.

On the corporate front, retailers posted dismal results due largely to over expansion (too many stores) while the financials posted strong results reflecting an increase in consumer spending of 8%. The financials should help fuel the rally for next week leading to new highs.

As earnings season continues, we expect revenues to be flat but cash flows should continue to hit record levels fueling further demand in the markets.

Overall, adjusting for the impact of bad weather, the economy appears to be improving with moderate growth for the fourth quarter. This is expected to continue even with continued tapering by the Fed at its current slow pace.

Europe had a better than expected industrial production number this week which bodes well for the flash PMIs scheduled for Thursday next week. Europe is likely to be another source of further short-term upward movement in the markets.

China will be reporting GDP, retail sales, and industrial production on Monday while the U.S. market is closed for Martin Luther King day. Some analysts are questioning China's growth, but as long as the numbers are not too low the U.S. markets should be ok.

The focus next week will be on housing with the Existing Home Sales report. We expect the number could be affected by the bad weather at year-end. The FHFA report on house prices will play an important role impacting the views of the market regarding the consumer sector.

Market Gauge

Year-to-date the markets are mixed: Dow -0.7%; S&P500 -0.5%; Nasdaq 0.5%.

The Markets for the past week were: DJIA up 0.1%; S&P500 down -0.2%; Nasdaq COMP up 0.5%.

Commodities (ETFs) for the past week were: Gold (GLD) up 0.56%; Silver (SLV) up 0.67%; Oil (OIH) down -0.38%; Dollar (UUP) up 0.69%; 30-yr Bonds dropped 5 basis points to 3.75%.

The VIX this past week (a measure of market sentiment and volatility) rose to 12.44 due to mixed earnings reports.

Top Headlines

In the U.S., tale of two consumers continues; US factories close out 2013 strong; weekly jobless claims slip again; housing starts take a December breather; factory growth accelerates but outlook worsens; builder sentiment falls slightly in January; Obama plans factory jobs as millions left behind; global economy at a turning point, says World Bank; resurgent gas fuels jump in December producer prices; US businesses expect consumers to spend more; Fed could ignore ugly jobs data for now; new Fed survey: Consumers expect better credit; Fed's Bullard not focused on jobs data for taper; Jack Ablin: Why we should raise the minimum wage; solving manufacturers' jobs dilemma; job growth weak, raising questions about Fed move; Obamacare slows health-care spending, not economy; layoffs plunge to lowest level since 2000; and retailers reporting weak profits, outlooks abound.

In Europe, Portugal: The 'market of the year'?; British retail sales surge in December; HSBC suspends 2 FX traders; Shell warns of 'significantly lower' profit; UD banks and wages take political center stage; Prince Harry quits job as helicopter pilot; HSBC needs '$111 billion capital injection'; Europe bank failure fund not 'big enough', says Jack Lew; deflation wars? Economists fear Japan-style lost decade; investors bet against UK retailers; Pope sacks 4 cardinals in Vatican Bank in cleanup; European car sales in sixth consecutive year of decline; is the euro headed for an Aussie-style crash?; Sports Direct takes put option on bigger Debenhams stake; Carrefour says Spain turns positive in fourth quarter; BoE's Carney opposes 'crude bonus cap' for bankers; Deutsche Bank suspends multiple traders; Portugal 'confident' on May bailout exit; RBS bonuses: Cameron to veto plans for a hike; EU cracks down on commodity speculation in new deal; Europe has lost its way, says former Slovakian PM; and Burberry posts strong Christmas sales and shares soar 6%.

In Asia, we don't mind losing 'fair elections', says Abhisit; data set in motion a strong year for Singapore; Japan's rocky January doesn't deter bulls; has Thailand's government survived the gauntlet?; China's luxury gift-giving slumps 25%; Apple takes a fresh bite into China's market; India's Rahul Gandhi to lead Congress election campaign; Richemont seeks entry into India's luxury retail market; cost of living a major worry for young Singaporeans; will Australia's jobs shocker put the RBA to work?; Japan Inc, is your 'animal spirit' calling?; early closure for China factories points to grim outlook; South Korean fund weighs Bank of America stake sale; China to IMF: More power to emerging markets; is a bruising ahead for Singapore real estate?; don't bet on China's luxury spenders, says Goldman; Singapore home sales collapse as cooling measures bite; Chinese general's home raided in corruption probe; India's December headline inflation eases to 5-month low; is Singapore set for an Icelandic-style crash?; Apple-China Mobile deal a 'watershed' moment, say Tim Cook; and Thai opposition leader's house attacked.

Weekly Review

On Monday, reconsidering the lousy employment report on Friday, the Dow dropped -1.1% to 16,257.

On Tuesday, with a strong holiday sales number in the retail sales report, the Dow rose 0.7% to 16,373.

On Wednesday, with upbeat economic news led by the Fed's Beige Book and the Empire State report, the Dow rose 0.7% to 16,481.

On Thursday, with soft earnings reports from Citigroup and Goldman Sachs, the Dow dropped -0.4% to 16,417.

On Friday, with mixed economic news, the Dow rose fractionally to 16,442. Gold rose $10 to $1,250.

Next Week's Calendar

The economic calendar for next week is light: on Monday – markets closed for MLK day; on Tuesday – nothing; on Wednesday – nothing; on Thursday – Weekly Jobless Claims, PMI Manufacturing Index Flash, Existing Home Sales; and Friday – nothing.

If the Markets move down, stay on the side lines or consider Contra ETFs. For Option players, selling premium is advised. To learn more about options and earning consistent weekly income, go to optionsannex.com.

To the Charts (see charts above)

The following ETFs (DIA, SPY, QQQ) provide a technical review of the Market (and are also excellent Option trading vehicles). Represented are the Dow Industrials (DIA), S&P500 (SPY), and Nasdaq 100 (QQQ).

The Charts for each include views for Monthly, Weekly (including Price Channels), and Daily (including monthly Pivot Points) with MACD and Stochastic indicators. The Pivots are: white for central pivot point; yellow for R1 and S1; magenta for R2 and S2; red for R3 and S3.

DIA

The Dow Industrials (DIA) closed down at 164.08. If the DIA drops, then the next level of support will be at 156.50 (weekly chart); the next level of major resistance is 165.51 (weekly chart).

The monthly chart indicates a bullish posture (up Arrow) with the MACD positive and strengthening, and the Stochastic moving up above the overbought area.

The weekly chart indicates a bullish posture (up Arrow) with the MACD positive but weakening, and the Stochastic moving up above the overbought area.

The daily chart indicates a bearish posture (down Arrow) with the MACD positive but weakening, and the Stochastic moving up at the midpoint.

SPY

The S&P500 (SPY) closed down at 183.63. If the SPY drops, then the next level of support will be at 176.09 (weekly chart); the next level of major resistance is 184.94 (weekly chart).

The monthly chart indicates a bullish posture (up Arrow) with the MACD positive but weakening, and the Stochastic moving up above the overbought area.

The weekly chart indicates a bullish posture (up Arrow) with the MACD positive but weakening, and the Stochastic moving up above the overbought area.

The daily chart indicates a bullish posture (up Arrow) with the MACD positive but weakening, and the Stochastic moving up toward the overbought area.

QQQ

The Nasdaq 100 (QQQ) closed up at 87.88. If the QQQ drops, then the next level of support will be at 82.00 (weekly chart); the next level of major resistance is 88.64 (weekly chart).

The monthly chart indicates a bullish posture (up Arrow) with the MACD positive and strengthening, and the Stochastic moving up above the overbought area.

The weekly chart indicates a bullish posture (up Arrow) with the MACD positive but weakening, and the Stochastic moving down above the overbought area.

The daily chart indicates a bullish posture (up Arrow) with the MACD positive but weakening, and the Stochastic moving up at the overbought area.

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