January 25th, 2011 12:13 PM by Mel Samick
Major market indications were mixed during the holiday shortened week last week. Mixed fourth- quarter earnings and moderate economic indicators were giving investors hope of good economic growth in the first quarter of 2011. However, efforts from emerging economies, mainly China, to curb rising inflation are hurting economies that are still in their recovery phase. By week's end, the S&P closed at 1,283 while the Dow ended the trading week at 11,787. The Utility sector, gaining nearly 1 percent, was the leader while the Materials sector was the biggest laggard.
With major financial firms reporting earnings last week, Goldman Sachs, Wells, and Morgan Stanley beat market expectations while Bank of America and Citi disappointed investors. To investors' joy, major blue chip companies like Apple and Google beat market expectations. However, Apple was under sell pressure after news of CEO, Steve Jobs, taking an indefinite medical leave.
In other CEO news last week, the White House announced that Jeffrey Immelt, General Electric's longstanding boss, will chair a new Council on Jobs and Competitiveness - he will become the successor to the President's Economic Recovery Advisory Board which Paul Volcker chaired. I guess when the President asks for help it would be difficult for even the busiest corporate chief to say "no." Immelt's 'simple' task will be to advise President Obama on how to make the United States a job-creating colossus again. Shareholders, already cheered by GE's stellar fourth-quarter earnings, including a strong showing by its troublesome GE Capital unit, don't seem bothered that Immelt will have to divert some of his attention to the president's agenda. After all, many of the objectives such as strengthening America's manufacturing might and promoting access to foreign markets fit together nicely with GE's own global industrial businesses. While GE's share price has nearly tripled from the dark days of the financial crisis, it's still around 50 percent off the highs. Immelt should be credited with steering the company; with generous support from the government through debt guarantees and short-term loans, in the right direction. Gaining access to the president's ear has its advantages, and there's a long history of executives, including former GE officials, advising a commander-in-chief while continuing to run their own firms. Yet, the current climate carries a distinctive disadvantage i.e. a backlash from the public if it suspects the relationship is too cozy.
In economic reports, Leading Indicators were up by 1 percent while the Empire State Manufacturing Survey was also up by nearly 2 points. Both indicators show that economy is moving in the right direction and sectors other than financial, mainly industrial, are starting to provide their support. The troubled housing sector saw some stability this past week with the Home Builders Report. There was zero improvement in activity this month and some think that's good news since it didn't worsen either. Housing Starts for December were down by 4.8 percent mainly due to the weather after a jump in November but Housing Permits were up for December which shows builders' optimism for future new construction. Mortgage rates ticked up a little as the Conforming Fixed 30-year rate leveled out at around 4.75 percent, while the Conforming Fixed 15-year rate finished the week at around 4.15 percent. Standard 5/1 ARM rates were hovering around 3.36 percent.
Information provided by NYCB Capital Markets