A mixed job picture caused turmoil for this week’s traders as they tried to handicap the next move by the Fed. Employers added a less-than-expected 151,000 jobs in January, but wage growth was better than forecast and the unemployment rate fell to 4.9%. On the heels of an uninspiring jobs report, the S&P 500 tumbled 3.1% for the week and the NASDAQ was lower by 5.4%. The Dow Industrials was able to better manage the rout and closed down “only” 261 points or 1.6%. This week Federal Reserve chair Janet Yellen will testify before congress on the state of and outlook for the economy and her comments will be highly scrutinized for clues on interest rake-hikes. Personally, I believe that a tremendous amount of time is wasted by traders trying to parse every word written or spoken by members of the Federal Reserve, but these are unfortunately the times we live in. The employment report wasn’t the only economic news that had traders on edge this week as the Institute of Supply Management released its service sector on Wednesday with a drop in the index of 2.3% and the manufacturing index has fallen below 50 – meaning a shrinking of output rather than growth.
The U.S. stock market looks to be on the fragile side, with mixed economic data on the home front and signs of waning growth from China to the euro zone keeping investors worried. Some say that much of the bad news is priced into the market after the New Year selloff, but valuations are far from compelling and vulnerable to the conundrum that may either cause interest rates to rise or the economy to slow. Hence, volatility remains – and will remain – elevated. And the market appears to be taking its cue from the movement in oil prices on a minute-by-minute basis. Oil fell again to end at $30.89/bbl. about 10% below from where it began the week. While energy shares took a hit, the market was led lower by technology and consumer services, retreating 5.6% and 5.0%, on average. Basic material stocks, however, were the big gainers, advancing 4.3% and gold in particular gained over $41/oz. to $1,158.00. Utilities moved higher on the prospect the Fed may hold off a March rate hike.
So far earnings season painted a mixed picture with low expectations translating any positive results and guidance into price gains. This week, blog readers will hear from conservative choice CVS Health which is expected to have earned $1.53 for the all-important fourth quarter vs. $1.21 in 2014. Also, French energy giant Total, SA in the income list will report on Thursday and likely to show a profit of only $0.70 per share vs. $1.22 a year ago. In all, investors will need to remain patient while maintaining their long-term investment goals.
Here is the answer to last week’s trivia question: Vanguard Group signaled it is on pace to break a record set in 2014 for the largest inflow for a mutual fund firm. How much investor money did it take in through the ten months ending October, 2015? $565 billion; $85.05 billion; $278.1 billion or $196 billion. Answer: $196 billion. The index-investing pioneer said it had attracted the record amount, topping the $163 billion it drew in the same period in 2014. Vanguard took in $216 billion for the full year in 2014, to set an annual record.
Today’s Trivia Question: Which country, according to Forbes, ranks highest for being the best for business? Denmark, New Zealand, United States, Singapore?