Stock market participation is likely to be very light to start the week as most of the East Coast is still digging out from the Blizzard this weekend. Mass transit from Washington DC up to New York City is running at 50% capacity at best.
Particularly in the metro NYC area accumulations were at least twice what was expected.
US Equity Markets put in their first weekly gains this year, after closing at their lowest levels in 15 months after Wednesday’s trading.
A sharp reversal in Oil after trading below $26 mid week was backed up Friday by a 6% rally in Japan’s Nikkei and a 3% rally in the Eurozone markets following market friendly comments from their respective Central Bankers. Major Market averages still have a very Heavy Lift this week if they want to pull off a Houdini act of avoiding negative returns for the month of January.
Let’s take a closer look:
The DJIA at 16,0931 finished the week with a gain of +0.65% and was the only major market average to hold its late August closing low at midweek. The DJIA was clearly the worst performing benchmark index on Friday, fighting headwinds from AXP -12% at $55 a level it hasn’t seen since November of 2012. IBM and GE were also in the red by 0.4%, both also suffering from lackluster earnings reports.
International Business Machines Corp. (NYSE: IBM) shares are down more than 80 percent this week after reporting a slight Q4 EPS beat on a modest Q4 revenue miss. According to a report by Cantor Fitzgerald analyst Joseph Foresi, the mixed numbers are a good representation of the company’s uncertain future.
Latest Ratings for IBM DateFirmActionFromTo Jan 2016Credit SuisseMaintainsUnderperform Jan 2016JMP SecuritiesMaintainsOutperform Jan 2016BarclaysMaintainsUnderweight View More Analyst Ratings for IBM View the Latest Analyst Ratings
International Business Machines Corp. (NYSE: IBM) shares are trading lower by $7 at $121.11 in Wednesday’s session. Despite a Q4 EPS beat of $0.02, the Street is focusing on its revenue shortfall.
The DJIA remains -7.7% month to date.
The S&P 500 at 1906.90, +1.4% on the week was helped by the sharp reversal in Oil which ended the week just north of $32 for a 20% reversal off the midweek lows. I have the next real resistance for the S&P 500 in the 1935 to 1945 range, where it met serious selling pressure 2 weeks ago. The S&P is -6.6% for the month of January.
The NASDAQ, at 4591.18 gained +2.6% for the week but is still -8.3 MTD. The FANG gang has a lot to prove to regain their leadership status from 2015. There was serious profit taking among the Ultra High Beta momentum stocks to start the year. If we’re in a Valuation Correction at best, it’s hard to see these stocks leading the market in Q1.
The Russell 2000 at 1020.66 gained +1.2% on the week and remains drastically oversold, -10.1% MTD. The Russell was the only broad market average to close green on Wednesday, trading in a 5% range on the day. The Russell is 9.5% and 14% below its 50 and 200 day moving averages, but does have a history of being a leading indicator of a market turn after extreme overbought or oversold levels.
As the week develops we’ll get a healthy dose of 4 earnings, macro data on the economy, and input from the Federal Reserve. The FOMC concludes a 2 day meeting Wednesday with their policy statement at 2:00 pm. there is universal certainty they will leave rates unchanged after their initial rate hike at the December meeting.
Friday we’ll get the first look at Q4 GDP with very muted expectations of growth in the neighborhood of +1%.
Q4 Corporate Earnings could get more focus this week if market volatility doesn’t grab all the headlines and markets in Asia calm down a bit. MCD, HAL, and KMB lead the earnings parade this week, all of which are scheduled to report Monday before the opening.
Of Course we also have to keep one eye on Oil as it continues to be the 800 lb Gorilla in the room. Most significantly, how will markets react if Oil makes a serious retest of last week’s lows around the $26 level. Oil is starting the day -3%, but holding the $30 level which was certainly a trigger point for heightened market the last 2 weeks.
The Early Line: We’re setup to start the week by giving back some of the gains from Friday. In very early trading US Stock Futures are lower by -1% to -1½%, but maybe the good news is that they are holding up a lot better than Oil futures.
It’s likely to be another long week. We’ll see if digging out from the storm on the east coast wears on investors as much as the volatility of the last 2 weeks.
The weather on the east coast is fitting for traders and investors alike, it’s officially the stock market blizzard 2016 edition. Watch closely how the Russell finishes the month vis-a-vis the other market averages.
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