The S&P 500 has now recovered much of what was lost in the first few months of the year and is now below where it ended 2015 by 2.2% vs. nearly 7% a few weeks ago. Over the past twelve months, the index remains negative by around 4.7%, excluding dividends. As pointed out last week, however, volume to the upside has been low and lacks conviction – a technical negative. Also, the fundamentals have not been that great and traders appear to be covering short sales and taking advantage of an oversold situation for some stocks severely beaten down. For the week, all market sectors were in the green led by the depressed energy sector, which advanced over 6%. Financials and basic materials were also strong with average gains of about 4%. In all, it has been a three-week positive stretch for equities with the major averages up about 2.3% for the past five trading sessions. Oil prices have stabilized of late and rose $3.14/bbl. this week to close Friday at $35.91. Gold prices have skyrocketed with a $50/oz. gain this week alone and closing in on $1,270 per ounce compared to $1,048 in mid-December, a 21% advance.
With oil and commodity prices perking up, original fears of a major meltdown in global economies has subsided for now. However, demand for oil remains week and the abundance of supply has not eased. The Labor Department on Friday reported better-than-expected job growth, as nonfarm payrolls added 242,000 jobs, well above the predicted 192,000 and January’s figure was revised upward by 30,000. However, wages fell and the unemployment rate remained unchanged. With inflation still benign and international growth less than robust, the Federal Reserve is less likely to boost short-term interest rates at its March 15th meeting. Other signs of strength are in the housing market and auto sales. But the U.S. trade deficit widened more than expected in January as a strong dollar and weak global demand helped to push exports to a more than five-and-a-half-year low, suggesting trade will continue to weigh on economic growth in the first quarter.
Looking out to the next few weeks, the European Central Bank is expected to take further steps to stimulate the economies within the Euro zone. Also, a host of retailers will be reporting fourth quarter results over the next few days, providing some insight into consumer spending habits. The political climate is heating up and the outcome is still in doubt on the GOP side, but the effects of any of the leading candidates taking the keys to the White House is, in my opinion, not a rosy picture.
Here is the answer to last week’s trivia question: January saw one of the highest turnovers in corporate Chief Executive Officers:19% over January, 2015. How many CEO positions were replaced? 15, 542, 131 or 209. Answer: 131, according to human resources firm Challenger, Gray & Christmas.
Today’s Trivia Question: Uniroyal Tires (originally U.S. Rubber Co.) and BF Goodrich, are now part of which international tire and rubber company? Michelin, Bridgestone, Goodyear or Pirelli?