This was written over the weekend but I am just posting it now as I was out of town:
The markets took a tumble in January as the SP500 (SPY) lost 3.52%, the Dow (DIA) 5.27% and the Nasdaq (QQQ) 1.92%. In terms of individual sectors, utilities (XLU) were the star performer with a +2.98% gain and health care was up 0.94%. Consumer discretionary (XLY) lost 6% followed by energy (XLE) -4.80% and materials (XLB) -4.72%. Globally, Brazil (EWZ) -12.18%, China (FXI) -9.88% and Russia (RSX) -12.5% were the big losers. Frontier markets (countries like Bulgaria and Vietnam) managed a slight gain of 0.4%. Emerging markets as a whole (EEM) lost 8.63%. Commodities that were in the black included natural gas (UNG) +16.87% and gold (GLD) +3.42%. The falling markets pushed Treasuries higher as the 10-year Treasury note rate declined from 3% to 2.6%.
Economic news in January with not that bad, kind of split between good and bad, but the market reacted more negatively to the bad news. Below are some of the key reports for the month:
Jan 2, 2014 – jobless claims drop to a 1-month low
Jan 6, 2014 – services in US grow at slower pace than forecast
Jan 8, 2014 – German factory orders rise
Jan 9, 2014 – fewest jobless claims in a month
Jan 10, 2014 – payroll numbers miss
Jan 14, 2014 – December gains in retail sales
Jan 16, 2014 – Rising US sales for home builders
Jan 17, 2014 – consumer sentiment in US falls
Jan 23, 2014 – industrial production in the US rises for the 5th month
Jan 24, 2014 – Emerging markets slide on disappointing China data and currency problems in Turkey and Argentina
Jan 27, 2014 – Apple I-phone sales and outlook disappoint
Jan 28, 2014 – Turkey doubles main interest rate
Jan 30, 2014 – US economy grew at a 3.3% rate in Q4, matching estimates and consumer spending rose the most in 3-years, 3.3%, but that was less than estimates.
Companies have been reporting good earnings overall, with 65.5% beating earnings estimates and 63.8% beating sales estimates.
The market had been on an almost non-stop winning streak and sentiment was high, so it was probably time for a pullback. Even so, the overall losses have not been that great, at least so far. The market had the chance to pullback further, especially on Friday as it gapped down at the open but it managed to hold the support established earlier in the week. That for now is the line in the sand, about 176.80 on the SPY.