What I’m Watching This Week – 13 Jan 2014

The Markets

Believers in the so-called January indicator–the concept that the first five trading days suggest the stock market’s overall direction for the rest of the year–were likely discouraged last week. The S&P gave up roughly half a percentage point during 2014’s first five trading days. The other three domestic indices also slipped during those five days, with losses ranging from the Nasdaq’s quarter of a percentage point to the Dow’s nearly seven-tenths of a percent. A rebound at week’s end gave three of the four domestic indices a gain for the week. However, the small-cap Russell 2000 was the only one to see a slight gain for both the week and the year so far. Meanwhile, the yield on the benchmark 10-year Treasury fell as the new year saw a new interest in bonds.

Last Week’s Headlines

Only 74,000 new jobs were added to U.S. payrolls in December; that’s the lowest number since January 2011, according to the Bureau of Labor Statistics. However, the unemployment rate fell from 7% to 6.7%, largely because of people dropping out of the workforce.

Minutes of the meeting at which the Federal Reserve’s monetary policy committee decided to begin scaling back its bond purchases emphasized once again that tapering will be done gradually and will depend on economic data. Members also forecast stronger economic growth in coming years and a gradually declining unemployment rate.

The Senate made it official that Janet Yellen will oversee the Fed’s tapering efforts. Members confirmed her appointment as the first woman to chair the Federal Reserve Board. She will take over when Ben Bernanke steps down January 31.

Record exports helped cut the U.S. trade deficit to $34.3 billion in November. According to the Bureau of Economic Analysis, that was the lowest level since September 2009.

Orders placed with U.S. factories in November surged 1.8% for the month, putting them at their highest level since the Commerce Department began tracking the figures in 1992. Inventories, which have risen 11 of the last 12 months, were partly responsible, but new orders for durable goods, particularly transportation equipment, also have risen 3 of the last 4 months and were up 3.4% in November.

Growth in U.S. service industries slowed slightly in December as the Institute for Supply Management’s gauge fell almost 1% to 53% during the month. The ISM survey also showed new orders falling to 49.4% in December, which represents actual contraction.

Eye on the Week Ahead

The Q4 2013 earnings season will get into high gear as several major financial and tech companies release reports. Data on retail sales for the holiday season will shed light on the state of consumers’ wallets.

Have a wonderfully profitable week!