Julex Market Weekly 01-19-2014 | US Equities Fell on Earning Concerns

Top Stories Last Week

• US Equities Fell on Earning Concerns

The Standard & Poor’s 500 Index fell for the week, after touching an all-time high, as weaker-than-estimated earnings at companies from Citigroup Inc. to CSX Corp. offset an improving outlook for the global economy. Last week, S&P index dropped 0.3%, and MSCI EAFE index remained flat. Even worse, the MSCI Emerging Market tumbled 1.1%. On other hand, gold climbed 0.6%, and the SPGC commodity index rose 0.2%. The bond markets rose as investors took profits from stock markets. Barclays US Treasury index was up by 0.3%, while US high yield bonds rose by 0.2%.

• Fourth Quarter Earnings Were on the Weak Side

Citigroup, Intel and CSX dropped as quarterly results missed analysts’ estimates. Best Buy Co. sank 35% after price cuts failed to draw as many holiday shoppers as expected. About half of the 50 or so S&P 500 companies that have reported so far have beaten earnings forecasts, below the historical average of 63%, according to Thomson Reuters.

• US Retail Sales Rose 0.2% in December

Retail sales rose 0.2% in December as frigid temperatures prodded Americans to buy discounted winter clothing and shop online for the holidays, capping what may have been the strongest quarter for consumer spending in three years. That follows strong gains in October and November. The car and truck sales fell 1.8% due to colder weather and Black Friday discounts that moved some sales into November. Excluding spending on autos, gas and building supplies, retail sales rose a solid 0.7%. Economists say this figure is a better proxy for confidence in the economy, because it does not include the most volatile categories.

• US Inflation Rate Remained Tame

U.S. consumer prices rose last month by the most since June, driven up by higher gas prices, but excluding energy, inflation was tame. The consumer price index rose a seasonally adjusted 0.3% in December, after a flat reading the previous month. Prices increased 1.5% in 2013, down from 1.7% in 2012. That’s below the Federal Reserve’s target of 2%. Excluding the volatile food and energy categories, core prices increased just 0.1% in December. Car prices were flat and airline fares plummeted 4.7%, the most in 14 years. Those declines were offset by a big increase in clothing costs, which followed three months of decreases, and rents also rose. Core prices increased 1.7% in 2013, down from a 1.9% increase in 2012.

• Euro Zone Inflation Rate Stayed at 0.8%

Consumer price inflation in the euro zone held steady in December, unchanged from a preliminary estimate, official data showed on Thursday. In a report, the consumer price inflation rose by a seasonally adjusted 0.8% last month. Euro zone inflation rose by 0.9% in November. The rate remains firmly below the European Central Bank’s target of near but just below 2%. Core CPI, which excludes food, energy, alcohol, and tobacco costs rose by a seasonally adjusted 0.7% in December, down from an initial estimate of 0.9%.

Top Stories to Watch This Week

• US Existing Home Sales

US existing home sales in December are likely to rise to 4.95MM from 4.90MM in November.

• Chinese GDP Growth

The Chinese economy is expected to slow further to 7.6% in the fourth quarter from 7.8% in the third quarter.

• Bank of Japan and Bank of Canada Monetary Policies Decisions

BOJ and BOC are likely to keep the monetary policies unchanged.

• Earning Reports

Tech companies will step into the spotlight with earnings due from Microsoft, Texas Instruments, IBM, eBay, and Netflix. Other bellwether companies reporting this week include: McDonald’s, Advanced Micro Devices, Halliburton, Johnson & Johnson, Travelers, E*Trade Financial, and Lockheed Martin.