U.S. stocks treaded water last week in quiet trading, sans the volatility that has characterized 2015 so far. The rest of the world’s equities, however, rocked ahead.

Though U.S. major indexes finished little changed, there was enough action to make yet another new high in the Standard & Poor’s 500 index Tuesday. Prices eventually fell back and trading was light.

Friday saw a revision of the U.S. fourth quarter gross domestic product growth rate down to 2.2% from 2.6%. Other economic reports released during the week were similarly mixed, notes Chris Gaffney, president of EverBank World Markets. The data wasn’t enough to push the indexes out of their recent range, he adds.

Last week, the Dow Jones Industrial Average lost seven points to 18,132.70, while the S&P 500 index fell six to 2104.50, after hitting a high of 2115.48 Tuesday. Both rose over 5% last month. The Nasdaq Composite gained eight points, or 0.2%, to 4963.53, and was up 7% in February.

As March begins, investors will have lots of data to parse, especially the February unemployment report Friday, adds Gaffney. After Federal Reserve chair Janet Yellen spoke to Congress last week, the market appears to be moving its expectation of the first rate hike to later in the summer from the beginning.

Stock markets outside the U.S. were ebullient, and “pretty much every other market is beating the U.S.,” notes Michael Shaoul, chairman of Marketfield Asset Management. The MSCI World Index excluding the U.S. rose almost 1% last week. Year to date, that index has doubled the S&P 500’s 2.5% rise, even in dollar terms.

(Source: Barrons Online)

Greece gave U.S. investors a gift. Stocks stormed to new highs after the debt-laden country and its euro-zone creditors reached an agreement late Friday on a four-month extension of its bailout package. Trading activity was moderate.

Action in major indexes ebbed and flowed all week with continuing negotiations, which were played out in the headlines. Markets were headed for a loss until rumors of an accord began to swirl Friday and after better European growth data released earlier the same day.

Market observers said that to some extent a rise in the U.S. 10-year Treasury yields, to 2.14% from 1.67% a few weeks ago, plus relatively stable oil prices, went some way to easing fears in the equity markets of deflation, for now.

The verbal warfare between Greece and Germany weighed on the market. The deal is just an extension, notes Milton Ezrati, market strategist for Lord Abbett, but “the sense right now is that Europe is going to pull it off,” and keep Greece in the euro zone.

Last week, the Dow Jones Industrial Average picked up 121 points or 0.7% to 18,140.44, a new high. The Standard & Poor’s 500 index did the same, closing at 2110.30 up 13. The Nasdaq Composite gained 62, or 1.3%, to 4955.97.

Friday, Markit, a financial information services firm, said its February Composite Flash Purchasing Managers’ Index for the euro zone rose to 53.5 from 52.6 last month, its highest level in seven months and topping forecasts. Business activity in services led. Overall, it’s not blazing growth, but investors took solace that it’s not contracting.

With Friday’s data, U.S. investors are more upbeat on Europe’s growth prospects, says RDM Financial Group’s chief market strategist, Michael Sheldon. German business sentiment improved, and even French data were better. “Europe is showing a pulse, and investors are warming to the fact that growth in Europe is starting to improve,” he says.

Investors might not have noticed that European stock markets have sharply outperformed the U.S. since the mini-correction last October in local currency terms, almost doubling up the S&P 500 index’s 13% rise. Over the next few years, Sheldon thinks U.S. equities, which have had a better run in recent years, will continue that underperformance. The European market is trading at a lower valuation, with a price/earnings ratio of 16.2 times versus 17.7 for the U.S., and lower operating margins, which have room to expand. Moreover, for this year at least, earnings estimates for S&P 500 companies are coming down, he adds.

This week investors will focus on Federal Reserve Chair Janet Yellen’s testimony in Congress on Tuesday and Wednesday. The Greek drama isn’t over, just postpone.

(Source: Barrons Online)

The broad market soared to all-time highs last week, surfing 2% higher on a wave of reassuring—if short term—developments. Small-caps made a comeback, outperforming megacaps, which some take as supportive of a more sustained resurgence after the year’s so-far desultory move.

“A confluence of factors both geopolitical and fundamental helped global markets rise, not just the U.S.,” says Joseph Amato, chief investment officer at Neuberger Berman. With a Ukrainian cease-fire agreed to on Thursday, and Greece and its creditors seen to be talking rather than bickering, “at least for now, it seems to have calmed fears,” Amato says. Whether the actions last week presage long-term solutions remain to be seen.Investors were also heartened by rising oil prices, more promising German economic data, and a “reasonable” showing from fourth-quarter earnings reports, he adds.

Crude prices rose for the third consecutive week. While there is an oversupply of the black gold, the sustained oil increase is easing fears about oil demand and global growth.

Though euro-zone economic data on Friday showed some big countries are still stagnating, Germany—the Continent’s engine—posted 0.7% fourth-quarter gross-domestic-product growth, significantly better than the previous quarter.

Last week, the Dow Jones Industrial Average picked up 195 points, or 1.1%, to 18,019.35, while the Standard & Poor’s 500 index jumped 42 to 2096.99, a record close. The Nasdaq Composite tacked on 149, or 3.2%, to 4893.84, and the Russell 2000 small-caps index gained 1.5% to 1223.13.

After underperforming for a year, small-cap stocks played catch-up last week, says Rick Fier, a trader at Conifer Securities. Given that the group didn’t outperform as the greenback strengthened, contrary to expectation, the latest rise is seen as confirming the bull, he says. Fier expects the S&P to surpass 2100 soon and then grind higher.

(Source: Barrons Online)

The market’s wild moods continue, as bulls returned in force after being routed from the field the previous week. Stocks soared 3%, recovering all of the lost ground, on a rally fuelled by rising energy prices and robust U.S. economic data.

Oil rose 7% to $51.69 per barrel, and is up over 13% in the past two weeks. Although the European Central Bank took Greek bonds off its list of acceptable collateral, talks are ongoing about easing the country’s overwhelming debt problems. U.S. fourth-quarter earnings reports are meeting—albeit lowered—expectations.

What the state of global growth means to the Federal Reserve and when it will begin hiking interest rates—expected in midsummer—remain hotly contested. Action in 10-year U.S. Treasury notes suggests sooner rather than later, with the yields jumping 0.26, to 1.94%, the largest one-week increase since June 2013. (Bond prices move inversely to yields.)

Last week, the Dow Jones Industrial Average jumped 659 points, or 3.8%, to 17,824.29. The Standard & Poor’s 500 index tacked on 61, to 2055.47. The Nasdaq Composite rose 109, or 2.4%, to 4744.40.

Oil has become something of a Rorschach test for the global economy, says David Donabedian, chief investment officer at Atlantic Trust Private Wealth Management. The market is interpreting the energy rebound as a positive indicator for world growth.

A “nice stable level of crude gives investors confidence,” adds Randy Frederick, managing director of trading and derivatives at Charles Schwab. “The jobs data was universally positive, too.”

The Labor Department said on Friday that the unemployment rate in January rose to 5.7% from 5.6% on higher participation, but the details below the headline, such as payrolls and wage growth, were strong.

The economy is in the sweet spot—“not too hot and not too cold,” Donabedian says. Quarterly earnings are coming in better than expected, and a high-profile merger doesn’t hurt, he adds. On Thursday, Pfizer (ticker: PFE) agreed to buy Hospira (HSP) for about $16 billion. It rose 34%, to 87.43.

If evidence were needed that 2015 was more volatile than 2014, Frederick points out the average daily swing in the S&P 500 index so far this year is 19 points, nearly 1%, compared with 12 points in the same period of 2014 and a 10-points average for all of 2014. Volatility gives traders opportunities but investors agita.

(Source: Barrons Online)

Stocks were spanked last week, falling nearly 3% amid low trading volumes. Ostensibly, investors were disappointed by data on U.S. economic growth, but the deeper issue is a nascent feeling that the worldwide quantitative easing (QE) cycle has reached the limits of encouraging growth.

This thinking is sustained by tumbling oil prices—which rose 6% last week to $48.24 per barrel but have fallen for seven consecutive months. Where once that plunge was welcome, investors now see it as a barometer of weak global gross-domestic-product (GDP) growth in 2014. The ongoing Greek drama over the country’s huge fiscal imbalances is also fueling uncertainty and keeping pressure on stock prices.

Friday, the Commerce Department said that U.S. GDP rose 2.6% last quarter, below expectations and far below the 4.6% to 5% seen in the previous two quarters. Strong fourth-quarter earnings reports from marquee names weren’t enough to keep spirits up.

The Dow Jones Industrial Average lost more than 500 points or 2.9% on the week, to 17,164.95. The Standard & Poor’s 500 index dropped 57, to 1994.99. The Nasdaq Composite gave up 123 points, or 2.5%, to 4635.24.

Jason DeSena Trennert, managing partner at Strategas Research Partners, says the long-term benefits of lower crude will outweigh the negatives. For consumers in the U.S. as well as some emerging-market countries like China and India, “It’s very positive,” he says.

Nevertheless, he adds, investors currently have a more jaundiced view of the drop, preferring to see it as a litmus test of global growth and as evidence of the limits of QE’s usefulness. (Central-bank QE policy moves support equities by depressing bond yields, making stocks more attractive.)

John Brady, a managing director at broker R.J. O’Brien, concurs, adding that in Europe the stimulative effect of the European Central Bank’s QE program remains an open question. The Continental bank system hasn’t recovered from the crisis as well as American banks, and the fiscal and political strife is rising, he says. That makes stocks “hard to price.” Volatility will stay elevated, if not get worse, he adds. DeSena Trennert adds that the QE anxiety and accompanying volatility will probably continue until oil prices stabilize.

There’s a “constant battle” among investors over whether to focus on macroeconomic factors or fundamental factors such as fourth-quarter earnings, says J.T. Cacciabaudo, director of institutional sales trading at Sterne, Agee & Leach. Last week saw strong quarterly profit from market leaders like Apple (ticker: AAPL) and Amazon.com (AMZN) but it wasn’t enough.

Despite the volatility, the market is where it was three months ago. “We haven’t gained or lost,” says Cacciabaudo, and the trading volume hasn’t been great. It feels worse, but the market has been running in place.

(Source: Barrons Online)

They’re saying that in markets ’round the world, now that Mario Draghi, the European Central Bank’s president, has announced a massive bond-buying program to help Europe shake off its economic malaise. The news spurred equity markets to rally, and helped U.S. stocks soar in a holiday-shortened week.

The beaten-down energy sector recovered somewhat, with stocks gaining 2%, even though crude oil prices fell 7% last week, to a new low of $45.59 per barrel. Tech stocks rose 3%. With the widely anticipated ECB move out of the way, investors are likely to turn their focus to fourth-quarter earnings releases.

Draghi announced that the ECB will buy €60 billion ($67 billion) a month in assets, including government bonds, beginning in March and running until September 2016, at least. This quantitative easing program, which would expand the central bank’s balance sheet by about €1.1 trillion, met market expectations. Central-bank QE policy moves support equities by depressing bond yields, making stocks more attractive.

The Dow Jones Industrial Average gained 161 points last week, or 1% to 17,672.60. The Standard & Poor’s 500 index rose 32 to 2,051.82. The Nasdaq Composite tacked on 124.70 points, or 2.7%, to 4757.88. The MSCI world stock market index jumped.

The market was already up from the previous Friday in anticipation of ECB move, notes Robert Pavlik, chief market strategist at Banyan Partners, suggesting investors felt the early January drop had driven prices down to where the bull’s “buy on dips” reflex kicked in again. There was no 10% correction in either 2014 or 2013.

(Source: Barrons Online)

The stock market was whipsawed last week by volatile share prices, finishing 0.7% lower by Friday’s close. Investors can’t seem to decide if the continuing plunge in oil prices is good or bad for stocks. That uncertainty was partly reflected in half-hearted activity, with volume in the downdraft low and on the rebound even lower, a not particularly encouraging technical sign.

Oil fell 8%, hitting a 52-week low of $47.93 a barrel by Tuesday, and stocks followed. But equities revived when crude edged up later in the week to $48.37. That wasn’t enough to help energy stocks, the worst-performing sector, down 3% last week.

Investors got a lift from comments by Charles Evans, president of the Chicago Federal Reserve. Late Wednesday, he said he wasn’t in favor of raising interest rates until 2016. The Fed is expected to begin hiking in mid-2015.

Last week, the Dow Jones Industrial Average gave up 96 points, or 0.5%, to 17,737.37; and the Standard & Poor’s 500 index lost 13 to 2,044.81. The Nasdaq Composite index retreated 23, or 0.5%, to 4704.07. Bond investors took Evan’s remark to heart, as the yield on the ten-year U.S. note fell below 2% to 1.975%. (Bond prices move inversely to yields.)

“The V-shaped week made it seem like we had a full year’s worth volatility in one week,” says Brian Reynolds, chief market strategist at Rosenblatt Securities. The downside and upside last week was less vigorous than October’s big drop and rebound, says Reynolds. “That tells us there is less investor conviction.” He expects more “violent” ups and downs this year.

Charles Schwab chief investment strategist Liz Ann Sonders also looks for more pullbacks this year and even perhaps a 10% correction, though she doesn’t expect that to “upend” the six-year-old bull market. For some investors at this point in the bull, the “fear of missing out” that fuelled previous snapback rebounds and kept corrections mild is giving way to “fear of losing money.” The willingness to buy on the dips is not as strong as it was, she avers.

Contributing to the rocky 2015 start is uncertainty over the Fed’s path to higher interest rates, she says. Unlike previous Fed tightening courses, this time it’s started from an artificially low level and with an inflated balance sheet.

In the background, there are some tangential factors, adds Reynolds. Worries remain that the European Central Bank will fail to produce a quantitative easing plan later this month that meets investor expectations.

And fears of Greece exiting the European Union could deepen soon. Sunday, Jan. 25, sees a parliamentary election in Greece. The leftist Syriza party, which opposes the country’s international bailout plan and austerity measures, has the lead in pre-election surveys.

(Source: Barrons Online)

Like a heavyweight trying to win a judge’s card in the last round, the bull market forcefully stated its case in the year’s waning days. The holiday-shortened week brought news of consumer sentiment at a seven-year high, and a revised annualized growth rate of 5% for third-quarter gross domestic product, making it the best period in 11 years.

Friday was the lowest-volume day of the year for stocks, but there was still plenty to talk about on the week. After crossing 18,000 for the first time ever, the Dow Jones Industrial Index, finished the week up 1.4%, at 18,053.71. The Nasdaq, meanwhile, edged ever closer to its all-time record, rising 0.9% on the week to 4806.86.

In another positive sign, the Commerce Department said that consumer spending was up a better-than-expected 0.6% in November from the previous month.

“The U.S. definitely still looks like the bright spot, and the information out this week is the confirmation of that,” says Jason Pride, director of investment strategy at Glenmede. “Broadly speaking, the U.S. economy is shaking out nicely to a point where the Federal Reserve backing away from stimulus is not that big of a dampening effect.”

Crude oil, the market’s recent obsession, continued its descent, falling 4.2% on the week to $54.73 a barrel.

“At this point the market has had its period of worrying about energy-related investment, and may now be stepping back and finally recognizing that lower prices on the whole may be a good thing for the economy because of the consumer impact,” Pride says.

But low oil prices, like interest rates, remain a double-edged sword, says Scott Wren, senior equity strategist for Wells Fargo Advisors. Weak prices and low rates are a troubling signal about the long-term health of the economy, he says, noting that investors seemed to brush off the strong GDP figure. “I don’t think the market believes at all that we’re in a far more accelerated economic growth environment,” Wren says. “If the market thought we’d be in a 4% to 5% GDP growth [mode], the bond market would be getting hit hard, yields would be rising, and stocks would be pulling back.”

After nearly falling to 17,000 in mid-December, the Dow has now rallied 1,000 points in the last 10 days. Hank Smith, chief investment officer at Haverford Trust, argues that those gains have probably stolen some thunder from 2015. And yet, he says, we’re probably still in the fifth inning of the bull market.

“Bull markets don’t die because of geopolitical events or exogenous events,” Smith says. “They almost always die in anticipation of the next recession. And, there are no risks of an impending recession. None of the traditional indicators are flashing any warning signs.”

(Source: Barrons Online)

Wow. Stock prices jumped 3% in another volatile week that nearly erased the previous week’s 3.5% thrashing. Anxiety diminished over the possible financial contagion from collapsing ruble and oil prices, and investors were encouraged by the Federal Reserve’s stance on interest rates.

Last week, the Dow Jones Industrial Average jumped 524 points or 3% to 17,804.80. The Standard & Poor’s 500 index gained 68 to 2,070.65, while the Nasdaq Composite index added 112 points, or 2.4%, to 4765.38. The Russell 2000 index of small-caps soared 3.8% to 1195.94.

Wall Street began its ascent before Fed Chair Janet Yellen began her news conference Wednesday afternoon in the U.S. Investor concerns had mounted in recent weeks over the sharp plunges in both oil and the Russian ruble, which fell 16% in just two days last week.

Banks could get hit hard if Russia were to default on its loans or if oil companies would not be able to meet debt payments. By the time American investors came to their desks that Wednesday the ruble and oil rose, and such fears receded—for now. That set the stage for Fed-inspired bigger gains, says Mark Luschini, chief investment strategist at Janney Montgomery Scott.

The Fed’s statement appeared to appease nervousness about the expected fed-funds rate hike next year. The words “considerable time” were effectively dropped from the statement, and officials can now be “patient.” The FOMC’s median projection for the likely appropriate funds rate at year-end 2015 dropped to 1.12% from 1.37%.

Luschini is surprised that the market interpreted the statement so “dovishly,” and we agree. Yellen was clear that the Fed will begin to raise rates in 2015 and very likely around midyear. James O’Sullivan, chief economist of High Frequency Economics, wrote after the Fed meeting: “The ‘patient’ wording is reminiscent of the change in language in 2004—five months before tightening began.”

The rally “shows that the market is pretty powerful and you have to respect it,” says Richard Weeks, a partner at Hightower Advisors. The small-cap rise last week was healthy too, he says. But, he adds, roiling currency and oil markets “suggest some big forces have been unleashed, forces that will take a long time to reach equilibrium.”

Investors should be wary of the volatile days of recent weeks. It’s hard to understand the race back into stocks that just a few days ago were deemed too expensive by investors.

The remarkable aspect to the rally is that in the past 48 hours the negative catalysts that sparked investor caution over the past couple of weeks “have not passed. They have arguably intensified,” says JonesTrading chief market strategist Mike O’Rourke.

(Source: Barrons Online)

U.S. equity markets suffered their largest point declines in more than three years last week, as investors, spooked by oil’s decline, went on a broad-based selling-spree. The Dow Jones Industrial Average gave back 678 points, and dropped more than 100 points in the last 30 minutes of trading on Friday.

The Dow dropped 678 points, or 3.8%, last week, to 17,280.83, its largest point and percentage drop since 2011. The Standard & Poor’s 500 index 500 fell 73 points to 2002.33, its largest point drop since 2011 and largest percentage drop since 2012. The tumble came after seven consecutive weeks of gains. The Nasdaq Composite index fell 127 points, or 2.7%, to 4653.6.

European markets also plunged, with major indexes including the FTSE 100 and the DAX registering their largest losses since 2011. Oil led the market lower, with crude futures dropping $8.03 per barrel, or 12.2%, to $57.81, the lowest price it has settled at since May 2009. Oil hit its 52-week high of $107.26 in June, and has since fallen 46%—24% just in the past three weeks.

Oil bulls got bad news on both the supply and demand fronts. The International Energy Agency cut its estimate for oil demand growth Friday. Saudi Arabia’s oil minister said Thursday he had no intentions of cutting production amid the recent price plunge, adding to oil’s skid. “The story for crude remains the same—slower global growth, excess supply, and an unwillingness of OPEC and others to cut production as they continue to vie for market share,” wrote Yousef Abbasi, the global market strategist at JonesTrading.

(Source: Barrons Online)