Mel's Blog

January 9, 2013 Market News

January 9th, 2013 9:31 AM by Mel Samick

 

Finally, on January 1st, politicians agreed to avert scheduled tax increases and spending cuts, also known as the "Fiscal Cliff," after two months of negotiations. Individuals making less than $400,000, middle- and upper-middle class taxpayers can breathe a sigh of relief. However, the payroll tax cut won't be extended for another year, meaning that working Americans will see their paychecks reduced by 2 percent in 2013. But it could have been worse. Big losers were 'Hurricane Sandy' hit residents, who were left waiting for a vote on $60 billion of Federal assistance, which was eventually passed.

Last week, the stock market ended the year "on a roll" while maintaining the momentum from the end of the year. At the end of the first week of 2013, all major indices ended with modest gains. The S&P closed at 1,402 while the Dow ended the trading week at 12,938. However, for the year 2012 the S&P 500 registered a solid 13 percent gain, but was slightly outperformed by the NASDAQ and Russell 2000. In major economic indicators released last week, Non-farm Payrolls and Private Payrolls for the month of December 2012 were down from previous month but very much in line with market expectations. Also, the Unemployment Rate ticked up to 7.8 percent, as expected, from 7.7 percent last month. Overall slowing labor markets had become a major factor in slowing economic growth.

In other economic indicators, the ISM Manufacturing Index posted another mildly improved December month, a sign of an improving economy. The same momentum was witnessed in the non-manufacturing sector -- which posted a 1.4 point gain and the strongest rate of monthly growth since February. In the housing sector, private residential Construction spending jumped 0.4 percent but with the drop in private non-residential construction overall construction spending was down for the month of November.

The minutes of the December 2012 FOMC meeting showed heavy debate on the exit strategy pertaining to quantitative easing. The minutes suggested that the majority of FOMC participants view the program as running throughout 2013, but others suggested that sooner might be more appropriate. Turning to the bond market, due to investors' putting their confidence in stocks after the fiscal deal, yields were seen going up last week. At the end of the week, the Ten-year treasury yield was up nearly 20 basis points and ended at 1.90 percent. Towing the same line, conforming mortgage rates jumped upwards. At the end of the week the Conforming Fixed 30-year rate leveled out at around 3.29 percent, while the Conforming Fixed 15-year rate finished at around 2.75 percent. Standard 5/1 ARM rates were hovering around 2.75 percent.

This week, investors focus will be on fourth-quarter corporate earnings. Alcoa will be the first one to release after Tuesday's close. Economic indicators to watch for this week will be Goldman Store Sales and Consumer Credit on Tuesday, Wholesale Trade and International Trade on Thursday and Friday respectively.

Mel

Information provided by NYCB Capital Markets

Posted in:General
Posted by Mel Samick on January 9th, 2013 9:31 AM

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