What I’m Watching This Week – 18 February 2014

The Markets

Stability ball: A congressional accord on the debt ceiling plus fresh reassurance about Fed policy seemed to outweigh lackluster economic news, helping domestic equities follow through on the previous week’s late rally. The Nasdaq’s week was its best since late October, while the Russell 2000’s gain was the best for any of the four domestic indices listed below so far this year. Meanwhile, the Dow edged above 16,000 once again. 

Last Week’s Headlines

• The contentious issue of the debt ceiling was resolved (at least until March 2015) after President Obama signed the bill passed by both the House and Senate, which contained none of the additional provisions that had created conflict in recent years.

• Many Americans apparently spent much of January shoveling instead of shopping. Though retail sales were 2.6% ahead of January 2013, the Commerce Department said sales for the month fell 0.4%, with a 2.1% drop in auto-related sales a major factor. However, severe weather couldn’t account for the downward revision in December sales, which went from a 0.2% gain to a 0.1% loss, and January sales outside brick-and-mortar stores also fell 0.6%.

• Weather also was a factor in a 0.8% drop in U.S. industrial production in January, according to the Federal Reserve. Construction took the biggest hit with a 1% decline.

• A report by China’s exports administration showed that Chinese exports accelerated in January, rising 10.6% compared to January 2013. The data from China’s official General Administration of Customs contradicted earlier private reports showing manufacturing slowing in January and raised questions about the true state of the world’s second largest economy.

• Steady as she goes: New Federal Reserve Chair Janet Yellen told Congress that absent any unexpected economic downturns, the Fed will continue to wind down its bond purchases while maintaining its target interest rate at its current low level.

• Eurozone countries experienced slightly higher growth in Q4 2013 as the region’s gross domestic product rose 0.3%. That would represent annualized growth of 1.1% and an improvement from Q3’s 0.1%. However, the official European Union statistical agency said actual eurozone GDP for all of 2013 shrank 0.4%. German GDP, which rose at an annualized 1.5%, was responsible for almost one-third of the quarter’s total growth. Meanwhile, Q4 growth in the 28-member European Union was slightly higher at 0.4%.

• The largest cable provider in the United States (Comcast Corp.) signed an agreement to acquire the second largest cable provider (Time Warner Cable). However, the deal must receive regulatory approval from the Federal Communications Commission and could face antitrust scrutiny by the Justice Department or the Federal Trade Commission.

• Two of the world’s largest exchanges of bitcoins–the five-year-old virtual currency created entirely on computers–temporarily halted withdrawals in the wake of hack attacks on their systems. The attacks followed the announcement of similar problems at a third major exchange, which had also frozen customer accounts after being hit with fraudulent transaction requests.

Eye on the Week Ahead

With the bulk of earnings season largely in the rear-view mirror, investors will have to dig their way through a blizzard of economic data.