January 30th, 2013 11:13 AM by Mel Samick
Stocks have been on a tear in January, moving major indexes within striking distance of all-time highs. Earnings have exceeded expectations, the housing and labor markets have strengthened, and money has returned to stock funds again. The S&P 500 Index has gained 5.4 percent this year and closed at 1,502 last week. The Dow is 2.2 percent away from all-time highs reached in October 2007. The Dow ended Friday's session at 13,895, its highest close since October 31, 2007. The S&P has risen for four straight weeks and eight consecutive sessions, the longest streak of days since 2004. The new year has brought a sharp increase in flows into U.S. equities, and that has helped stocks rack up four straight weeks of gains. Meanwhile Wall Street's love affair with Apple has waned somewhat. Weaker-than-expected holiday sales of Apple's iPhone reinforced fears that it is losing its dominance in smart phones, driving down its shares and drawing another round of stock price target cuts. Apple dropped 12 percent after its disappointing quarterly earnings announcement. Exxon Mobil surpassed Apple as the most valuable company by market cap as the stock is 40 percent down from its all time high of $705 set last September.
The number of people who applied for new U.S. jobless benefits fell again last week and remained at a five-year low. It is unclear whether the decline reflects improved hiring or dwindling layoffs. It will take another few weeks to see if the number of people filing new claims remains at their current lows, as there is little evidence in other economic data to suggest that the labor market has dramatically improved. Experts are skeptical as jobs are the driver of housing, and unemployment may not be low enough and wage growth may not be high enough to drive this kind of homeowner demand. The U.S. unemployment rate stands at 7.8 percent. Meanwhile, economic growth is bumpy with U.S. GDP posting low single digit growth. Big banks are hoping the housing boost continues as they had a blockbuster last quarter, primarily due to housing. The Washington Post reported mortgage activity accounted for 15 percent of the profits at Wells Fargo. Meanwhile, JPMorgan Chase saw a 33 percent jump in mortgage originations, and Bank of America posted a 41 percent increase in loan originations.
There was mixed news in the housing market last week. Applications for U.S. home mortgages rose last week for the third week in a row, boosted by increased demand for refinancing. The refinance share of total mortgage activity held steady at 82 percent of applications. Fixed 30-year mortgage rates averaged 3.62 percent, up 1 basis point from the week before. Sales of new homes fell 7.3 percent in December, the Commerce Department reported last Friday. Also, the National Association of Realtors reported the annual price for existing homes jumped to the highest level since 2005. The median price for all existing housing types was $180,800 in December.
Brace yourselves for the Super Bowl of economic data. Investors will get smothered by a stream of economic smoke signals this week, starting with demand for big ticket U.S. made goods and ending with the key January jobs report. Tucked in between is fourth-quarter GDP, a measure of how fast the U.S. economy grew in the last three months of 2012. And throw in the Federal Reserve's first big meeting of the year. Along with that we will get a slew of earnings from the likes of Caterpillar, Yahoo, Ford, Amazon.com, Boeing, Facebook, ExxonMobil, and Merck.
Information Provided by NYCB Capital Markets