Welcome to 2,014. Will that turn out to be an accurate closing forecast for the S&P 500, as Morgan Stanley's Adam Parker predicts? We've got 364 days to find out. What we do know is that the first day of trade may not echo last year's surge out of the gates.
Here's the early read:
DJIA -82 points
Nasdaq Composite -34 points
S&P 500 -10 points
OK, 2013 was the best year for the Dow since 1995 and for the S&P 500, since 1997, with gains of over 26% and 29%, respectively. On any other day, the word "profit-taking" might come up. But we also have some econ data to talk about.
From China, the HSBC/Markit manufacturing survey eased to 50.5 in December, slower than November's, though it shows factory activity still in expansion.
ISM data just out is sending stocks to the day's lows.
DJIA -108 points
Nasdaq Composite -37 points
S&P 500 -12 points
What caused stocks to sell further after ISM? It wasn't the headline or some main components. The details:
The headline index fell to 57% in December from 57.3% in November. But that was higher than the drop to 56.6% forecasts by economists.
New orders rose to 64.2% -- the highest since April 2010.
The employment gauge rose to 56.9% from 56.5%.
Is this a "good news/bad news" trade?
Some of the downtrodden of 2013 are getting some life in 2014. Namely, gold and silver.
After gold tumbled 28% in 2013, the metal is gaining 1.7% in the new year, to $1,222.50 an ounce.
Silver, which suffered a 36% decline last year, is up more than 3%.
Could be an uninspiring short squeeze. But RBC Capital Markets' George Gero is more optimistic. Here's a note from his morning email blast:
"Good beginning for the new year with a fundamental rally from oversold price levels due to tax and mark to market considerations."
Apple is down 1.4% to $553.47. Wells Fargo's Maynard Um cut his rating on the stock to market perform on gross margin concerns. Cantor Fitzgerald's Brian White is sticking by his $777 call on the stock, listing off a string of innovations (iWatch, for instance) that should boost shares.
Apple, once the darling of Wall Street and the mo-mo crowd, has some catching up to do. It gained a measly 5% last year year while the Nasdaq Composite galloped 38%.
The symbolic 'first day of trading' needs a little perspective. Today's losses break the 6-year streak in which the S&P 500 traded 'up' on the first day in the year since 2008. More on the subject is in the Need to Know column.
Researches at MKM Partners crunched some numbers to see if the 'up' day on the first day means positive returns for the year and the answer is: it is not all that predictive.
Their bottom line:
As with most quantitative data, it should be put into context with the broad trends. Our point from this data is to show that strong markets that close the year on the highs tend to bode well in the following year. However, putting too much emphasis on the first day of trading is likely not prudent. If weakness should persist later into January, we might have some bigger issues to deal with.
Main indexes deepened losses with Dow average shedding 102 points.
S&P 500 -12.72 points
Nasdaq Composite -31.71 points
The reports of rising mortgage rates are hurting home builders. According to FreddieMac, the average rate for a 30-year fixed-rate mortgage rose to 4.53% in the week that ended Jan. 2, the highest rate since September.
The S&P 500 home builder index dropped 2% by midday.
The sub-index bottomed in late 2008 and since then has risen more than four-fold. The housing market has seen solid improvements in the past few years and rising mortgage rates are seen as damaging to the recovery.
D.R. Horton, Inc -2.7%
PulteGroup, Inc -2.1%
Lennar Corporation -1.1%
Nouriel Roubini, the respected NYU economist and best known as "Dr. Doom" has penned an opinion piece on the Project Syndicate website in which he sounds slightly more optimistic about 2014. You can find more details in the Tell blog post by Ben Eisen.
The takeaway: his not-so-pessimistic outlook for 2014 is predicated on improving economic growth in both developed and emerging markets coupled with less-salient tail risk
It seems like profit-taking has intensified as markets are moving deeper into red.
DJIA -130.4
SPX -16.51
COMP -35.87
Even as broader markets are selling off, there are some bright spots. Bank of America Corp was upgraded by a competitor and the share price rallied. Analysts at Citigroup Inc. upgraded the bank to buy from neutral and raised the price target to $19 from $16. More details are in the story by Sital S. Patel.
Shares rose 3.8% by midday.
"2013 was quite possibly the year of bitcoin..." writes Saumya Vaishampayan in her blog post on the virtual currency.
But as the price and popularity rose, regulators in China, India and Europe cracked down on the crypto-currency, citing risks associated with using it.
We wonder if this is the beginning of the end.
Quincy Krosby, market strategist at Prudential Financial said she would be watching the markets carefully this afternoon, to see if institutional investors come by the end of the day with 'buy orders'.
"If we see buy orders coming in by the end of the trading day, it would indicate that smart money is taking advantage of the dip, as momentum in economic growth is evident from today's jobless claims and manufacturing data."
An hour and a half before the end of the trading session, markets are even deeper in negative territory.
S&P 500 -18.86
Dow -146.2
Nasdaq -42.28
Tobias Levkovich, chief U.S. equity strategist at Citi Research, thinks stocks are likely to continue to outpace gains in gold in the years ahead - via Wallace Witkovski.
In his “chart of the month” for January. Levkovich charted how many ounces of gold it would take to “buy” the S&P 500 Index (or more practically, buy 10 shares of the SPDR S&P 500 ETF nowadays) and found that stocks still have room to run given trends reaching back to 1886.
BlackBerry Ltd. is soaring today, up nearly 4%. The company announced today that it is parting ways with singer Alicia Keys, after a year-long collaboration with the smartphone maker.
From the twittersphere:
Twitter shares gained 6% today. Stock prices were very volatile in December, but still gained more than 50% last month. Chuck Jaffe talks to Charles Rotblut, editor of AAII Journal about Twitter's valuations, who made the stock his “Sell of the Week.”
Rotblut said:
“If a stock was trading at 10 times sales, I would say a stock was extremely over-valued, if it was trading at 20 times sales, I’d say the stock was extraordinarily highly valued. At 56 times sales, you are more than factoring in future growth, you are really paying too high a price. It really is a point where it puts the point into hot-potato range, where you don’t want to be the last person holding the stock, because it’s not a question of if the valuation is going to drop, it’s only a question of when.”
It's a rough ending tally for the first day of the year.
The Dow average is ending down 135 points, or 0.8%, at 16,441.
The S&P 500 has lost 0.9% to 1,832.
The Nasdaq Composite is off 0.8% at 4,143.
The S&P 500 hasn't ended down on the first day of trade for a new year since 2008, a period knee-deep in financial-crisis investor fear. With a loss of 0.9%, the day's performance was also the worst since Dec. 11. Should you be worried?
Nah, writes technical analyst Jonathan Krinsky of MKM Partners. He crunches the historical data to find:
With 2013 now in the books, we know that the SPX closed the year on the highs (12/31/13). Since 1927, the SPX has made its YTD high on the final trading session of the year 11 times. Of those years, the smallest gain was 8.99% in 2004, and the largest gain was 44.21% in 1954. As we have previously mentioned, years that close out strong tend to bode well in the following year. The ONLY time when the SPX has made its YTD high on the final session of the year, and closed DOWN the following year was 1928.
So we could still end higher, which is all anyone rubbing their eyes over their nest egg's newly rotund size wants to know. If history is any guide, of course.