Market Monitoring – 06 January 2014

Edited by Vani Rao

Markets Off to Lacklustre Start in 2014

US stocks end mostly lower after Bernanke’s speech amid lower volumes

US stocks ended mostly lower after a volatile trading session on Friday as investors digested comments from Federal Reserve officials on how quickly the central bank will end its stimulus program.

Source: Bloomberg
Source: Bloomberg

The S&P 500 slipped less than a point, or 0.03%, to end at 1,831.37. For the week, it dropped 0.55%.

The Dow Jones Industrial Average closed up by more than 28 points, or 0.16%, at 16,469.99; however, it finished the week marginally lower by 0.05%.

The tech- heavy Nasdaq Composite Index shed 11.16 points, or 0.27%, to close at 4,131.91 of Friday. For the week, it lost 0.59%.

Seven out of 10sectors ended in the red, but the market remained positive throughout the trading day. Financials (+0.64%), Healthcare (+0.21%), and Industrials (+0.27%) spent the entire session in the green.

Movers & Shakers

mm pic 2FireEye Inc. (NASDAQ:FEYE) shares jumped 38.63%. The computer-security firm has announced on Thursday that it has acquired Mandiant Corp., known for its report linking cyber attacks on US-based companies to the Chinese military published in early 2013, in a deal worth about $1 billion.

Source: WSA
Source: WSA

Delta Air Lines Inc. (NYSE:DAL) surged 5.52% after the firm reported an increase in passenger revenue.

Rite Aid Corp. (NYSE:RAD) advanced 8.53% after the drug store chain reported a same store sales increase in December over the same period a year ago, due to growth in its pharmacy division.

Shares of Twitter Inc. (NYSE:TWTR) rose 2.22%. The social media company’s stock jumped 6.1% on Thursday, the first trading day of 2014.

Apple Inc. (NASDAQ:AAPL) shares fell 2.20% to close at $540.98, just above the 50-day moving average of $540.32.

Jos. A. Bank Clothiers Inc.(NASDAQ:JOSB) slipped 0.46% on Friday after the clothing retailer adopted a shareholder rights plan to limit investors take in the company, known as a poison pill. Jos. A. Bank recently fended off a buyout offer from larger competitor Men’s Wearhouse Inc. (NYSE:MW), whose shares were up 0.4% on Friday.

Hertz Global Holdings Inc. (NYSE:HTZ) edged down 0.63% after a report said activist investor Carl Icahn had bought a substantial stake in the car-rental company.

Futures

Treasuries ended modestly lower in a volatile trading session after Ben Bernanke, Federal Reserve Chairman, expressed cautious optimism about the economy and said that the Central bank would support the stimulus policy even as it lowers the bond buying rate. Ten-year Treasuries notes were down 3/32 to yield 2.99% .Thirty-year bonds fell 3/32, yielding 3.92%.

Gold rose after rallying for a second consecutive day with a boost from renewed fund buying and equities’ weakness after the bullion posted its worst annual decline in 2013 in more than three decades. Interest in buying gold coins, strong Chinese physical demand, and new positions initiated by funds helped lift gold to a weekly gain of more than 2%, its largely rise in 10 weeks. Spot gold was up 1.0% to $1,236.73 an ounce. Gold futures for February delivery settled up 0.89% to $1,236.10 an ounce.

Crude Oil dropped on US Energy Information Administration data showing a larger-than-expected build in distillates. Distillate stocks in the US rose five million barrels to their highest level in just over two months, after demand for the fuel took a hit while production approached record highs. Oil fell 1.24% to $94.26 a barrel.

Economic Front

Ben Bernanke delivers his final speech as Federal Reserve Chairman

The Federal Reserve is no less committed to a highly accommodative policy, now that it has trimmed its bond-buying stimulus, Ben Bernanke said in what could be his speech as Federal Reserve. Bernanke said that the central bank has the tools including adjusting the rate on excessive bank reserves and so-called reverse repurchase agreements, or repos, to return to a normal policy stance without resorting to asset sales. Separately, Philadelphia Fed President Charles Plosser said that the Federal Reserve faces “immense” challenges now that it has reduced bond-buying, and needs to be cognizant of a rapid rise in future inflation.

Meanwhile, Jeffrey Lacker, President of the Richmond Fed, said that the Federal Reserve’s December move to begin to wind down its massive bond-buying stimulus was the right call in light of US job market gains, and further cuts to the program are likely in the offing.

Top News

US auto sales leaps ahead with sales highest in six years

The US auto industry raced to its best year since the boomtimes before 2008, but results came up short in December asconsumers proved to be more focused on buying presents than new cars and trucks. In 2013, US auto sales were expected to finish near 15.6 million vehicles, up about 8%.GM’s (NYSE:GM) December sales fell 6% to 230,157 new vehicles, Ford’s (NYSE:F) salesrose 2% to 218,058 vehicles, missing expectations. Toyota Motor’s US December sales fell 1.7% to 190,843vehicles. Chrysler reported a 6% gain last month in its US auto sales to 161,007 vehicles. That was the automaker’sbest December since 2007.

JPMorgan closer to a $2-billion settlement in Madoff case

JPMorgan Chase & Co. (NYSE:JPM) is nearing a $2-billion settlement with Federal authorities to resolve suspicions that the bank ignored signs of Bernard Madoff’s Ponzi scheme, the New York Times reported.

The bank’s civil and criminal settlements would involve a deferred prosecution agreement, a criminal action that would suspend an indictment as long as the bank acknowledged the facts of the government’s case and changed its behaviour.

As per the deal, JPMorgan will pay more than $1 billion to prosecutors in Manhattan and the remainder to the Office of the Comptroller of the Currency (OCC), and a unit of the Treasury Department investigating breakdowns in the bank’s safeguards against money laundering.

Madoff was convicted in 2009 of defrauding thousands of investors and is serving a 150-year prison sentence. JPMorgan has been accused of ignoring warning signs that Madoff’s business was a fraud, often to win more fees and commissions for services that they provided.

News to look forward next week

Janet Yellen is expected to get US Senate approval sometime in the upcoming week to become the next Chairperson of the Federal Reserve and takethe reins from Ben Bernanke on 1 February 2014. On Wednesday, the Fed’s Policy Making Panel will issue minutes from its 17-18 December meeting, when policymakers made the historic decision to begin dialling down the US central bank’s massive stimulus program. Investors will mine the documents for clues as to the likely path for the program this year.

Economic Releases

Monday January 6, 2014

  • Institute of Statistical Management (ISM) Non-manufacturing PMI – Monthly

Tuesday January 7, 2014

  • Trade Balance – Monthly

Wednesday January 8, 2014

  • ADP Non-farm Employment Change – Monthly

Thursday January 9, 2014

  • Interest Rate Decision – Euro Zone
  • Jobless Claims – Weekly

Friday January 10, 2014

  • Average Hourly Earnings
  • Non-farm Payroll

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