Equity indices followed Monday's broad-based sell-off with a daylong rebound. The S&P 500 gained 1.1% while the Nasdaq (+1.7%) outperformed, turning positive for the year.
After playing a significant part in Monday's weakness, retailers participated in today's rebound as the SPDR S&P Retail ETF (XRT 84.31, +0.95) gained 1.1%. The industry group likely received a slight bump from the December retail sales report, which came in ahead of estimates. However, gauging the true impact of the report was a bit of a challenge considering the November reading was revised lower.
Although most retailers took part in the rebound, GameStop (GME 36.28, -9.04) was not as fortunate. The stock plunged 20.0% after issuing disappointing guidance.
Elsewhere among cyclical groups, the financial sector (+0.8%) was unable to catch up to the broader market as JPMorgan Chase (JPM 57.74, +0.04) and Wells Fargo (WFC 45.59, +0.03) weighed. The pair ended little changed after both reported modest bottom-line beats. Notably, both banks saw large declines in mortgage originations.
Even though all ten sectors ended higher, materials (+1.4%) and technology (+1.9%) were the only outperformers among growth-sensitive groups. The tech sector rallied thanks to all-around support from its components. Top-weighted members like Apple (AAPL 546.39, +10.66), Google (GOOG 1149.40, +26.42), Microsoft (MSFT 35.78, +0.80), and Oracle (ORCL 38.21, +0.46) added between 1.2% and 2.4% while chipmakers displayed strength as well. The PHLX Semiconductor Index surged 2.3% after Intel (INTC 26.51, +1.01) was upgraded to ‘Overweight' from ‘Neutral' at JPMorgan.
The big gains among tech shares contributed to the outperformance of the Nasdaq, which also drew strength from biotechnology as the iShares Nasdaq Biotechnology ETF (IBB 244.05, +8.54) surged 3.6%. In turn, this underpinned the health care sector (+1.3%), which ended ahead of other defensive groups. The remaining countercyclical sectors—consumer staples (+0.6%), telecom services (+0.4%), and utilities (+0.1%)—lagged.
Treasuries were trapped in a steady downtrend, sending the 10-yr yield higher by four basis points to 2.87%.
Participation was on the light side with only 636 million shares traded at the NYSE.
We would also note that Philadelphia Fed President Plosser and Dallas Fed President Fisher both gave speeches today in which they left an impression that they remain in favor of continued tapering efforts. Both men are FOMC voters this year and both are known for their hawkish stances with respect to the Fed's asset purchase program.
The recognition that the market held up well in the wake of their remarks underscores that a similar view insinuated by Atlanta Fed President Lockhart (who doesn't have an FOMC vote in 2014) on Monday served as a convenient headline excuse to take some profits and was not the primary cause of the weakness.
Today's economic data was limited to a pair of reports.
- Retail sales increased 0.2% in December after rising a downwardly revised 0.4% (from 0.7%) in November. The Briefing.com consensus expected no change in the December reading. Given the weak jobs report and the corresponding decline in aggregate wages, there was real potential for a dismal retail sales report. Our analysis of debt trends suggested that consumers could increase their debt load without feeling much pain, but the psychological effect of maintaining high savings was outweighing low debt ratios. It seems that the mental hold on spending may be ending.
- Business inventories increased 0.4% in November, down from an upwardly revised 0.8% (from 0.7%) in October. The Briefing.com consensus expected business inventories to increase 0.3%. Total inventories consist of manufacturers, merchant wholesalers, and retailers. Both manufacturers (0.0%) and merchant wholesaler (0.5%) inventories were announced prior to the total inventory release. The only unknown was retailer inventories, which increased 0.8% in November after increasing 1.1% in October.
- Nasdaq +0.2% YTD
- Russell 2000 0.0% YTD
- S&P 500 -0.5% YTD
- DJIA -1.2% YTD
Leaders & Laggards
Next Day in view
After a bearish first week and massive sell down yesterday, the bull is back with the Dow +115.92 at 16373.86, Nasdaq +69.71 at 4183.02, S&P+19.68 at 1838.88. The major indices are back to their highs again.
Candlesticks are showing bullish harami sign, perhaps signalling the market is posing for another high however total volume traded on the NYSE is only 647m.
Market Call : Flat to upside
Date : 15 Jan 2013