On 12/30/11, Friday, the last trading day of the year, the markets move sideways with the SPX positive on the year—until the last five minutes of trading where the SPX drops to close at 1257.60, four pennies lower than the starting year number. The SPX finishes the year dead even, from 1258 to 1258, 0% return. The Dow Industrials moved from 11578 to 12218 during 2011, a gain of 640 points, or 5.5%. Traders are chasing the dividend stocks as seen by the Dow’s performance. The Nasdaq went from 2653 to 2605 losing 48 points, or down 1.8% for 2011. Broad markets have limited upside if technology is moving in reverse. The small cap Russell 2000 went from 784 to 741, down 43 points, or down 5.5%. Note how the small caps were hit proportionally larger as would be expected during weak economic times. Small caps rally stronger in good economic times. Thus, mixed markets in 2011 with money chasing perceived safety in blue chip divvy stocks with the Dow up 5.5%. The broader SPX flat lined for the year while technology performance did not match the constant media hype, the Nasdaq down 2%. Small caps receive a harder beating as money moves out of the riskier speculative stocks, the RUT down 5.5% during 2011.
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On 1/3/12, Tuesday, the first day of trading for 2012 is underway. Copper and gold jump 3%. Oil leaps 4%. The broad markets start the year strong. SPX finishes up 19 points, or 1.6%. The Dow Industrials finish up 180 points, or 1.5%. The Nasdaq starts the new year up 44 points, or 1.7%.
On 1/4/12, Wednesday, the U.S. wakes to find Mitt Romney the winner of the Iowa Caucus. Unicredit Bank tumbles 8%. Spain 10-year yields are moving up on talk that they are discussing loans with the IMF. The markets give back a laarge portion of yesterday’s gains.
On 1/5/12, Thursday, France auctions go off without much of a problem although the euro drops under the 128 level hurting the U.S. futures. Papademos told the Greek people that cuts in income are needed otherwise the country will collapse. Better-than-expected ADP Employment data and Jobs Claims bounce the futures but markets begin the day on the weak side anyway. Markets languish until an article hits the Internet from Jimmy Pethokoukis, a financial tv commentator and blogger, mentioning a $1 Trillion dollar Fed plan for the housing market. The broad indexes leap higher as traders smell stimulus and recover back to even by the end of the day. Semiconductors and financials help maintain market buoyancy. BAC jumps 9%. After the close, however, news is released that the U.S. has no such $1 Trillion dollar plan for the housing market. Fitch rating agency downgrades Hungary.
On 1/6/12, Friday, European bond yields continue to rise with the Italy 10-year above 7%, consistent with levels where the bailouts occurred with Greece and Portugal. France 10-year yield is now over 3.4%. Germany 10-year yield dropped under 1.90% as money seeks safety. Unicredit is down 35% in only four days. Europe is in a sour mood after poor German factory data is released. European and U.K. retail sales are weak. LaGarde says the IMF will defend the euro. Sarkozy says that France will charge a fee on financial transactions even if other Euro countries do not. The France banks weaken on the news. The Jobs Report announces a better-than-expected 200K jobs number and 8.5% unemployment rate. The futures react positively but slowly leak lower as analysts realize the jobs created were in construction due to a mild winter, and holiday seasonal help including retail clerks and packaging delivery workers, all not expected to be sustainable employment. Markets also receive some buoyancy due to rumors that China may step in at any time with stimulus. The broad indexes finish the week positively; the SPX is up 20 points for the first week of the new trading year, or 1.6%.
……………………the saga continues…………..
On 1/9/12, Monday, the Merkozy (Merkel and Sarkozy) meeting results with the leaders ……………………..
Looking ahead,
Watch the European bond market, especially Italy and France 10-year yields. Use the Italy 7%, Spain 6% and France 3.3%-ish level as a signal of trouble. Italy ventured above 7% again and France is above 3.3% again. Listen for the pending S&P downgrade of France debt occurring at any time over the next couple weeks. One-notch downgrade may be priced in but not a two-notch downgrade or other bad news from S&P.
Global recovery is stalling. China real estate bubble is popping.
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Lots of hot air this week with different Fed Heads speaking every day except Thursday.
On 1/9/12, Merkozy meeting. Earnings season begins with AA after the close.
On 1/10/12, Wholesale Trade 10 AM.
On 1/11/12, Oil Inventories 10:30 AM. 10-Year Note Auction 1 PM. Beige Book 2 PM.
On 1/12/12, ECB Rate Decision and Press Conference, more rate cuts. Spain Bond Auctions. Jobless Claims and Retail Sales 8:30 AM. Business Inventories 10 AM. 30-Year Bond Auction 1 PM. Treasury Budget 2 PM.
On 1/13/12, Friday the 13th. Italy Bond Auctions. International Trade and Import Export Prices 8:30 AM. Consumer Sentiment 9:55 AM.
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On 1/16/12, Markets are Closed for Observance of Dr. Martin Luther King Day.
On 1/19/12, France and Spain Bond Auctions.
On 1/20/12, E.U. Summit (tentative scheduling, these dates are a moving target). OpEx.
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On 1/23/12, Congress returns.
On 1/24/12 and 1/25/12, Fed Rate Decision and Press Conference.
On 1/26/12, Italy Bond Auctions.
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On 1/30/12, Italy and Belgium Bond Auctions
On 1/31/12, EOM.
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