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Weekly Market Commentary- (Jan 25-Jan 29)

DJIA Industrial Average

Open: 10175.10

High: 10323.00

Low: 10,014.35

Close: 10,067.33

Change: -107.77 (-1.0%)  

RSI: 27.19

MACD:  -32.29

Strategy: The stock indices have been showing signs of tiring out and are showing a sell off on all negative reports. Traders should wait for lower levels of a double bottom around 10000 before re-entering the markets.

Highlights of week:

·        U.S. stocks declined for a third week, sending the Standard & Poor’s 500 Index down the most for any month since February, as technology companies missed earnings estimates. Compared to a 1.6% fall on S&P 500 index, even the Dow Index also fell by around 1.0% or 107 points to levels close to 10075 points. However, the Nasdaq Composite took a harder knock following a strong sell off following the results disappointment in many stocks like Qualcomm, Motorola, and some uncertainty in Apple Inc and Yahoo etc.

·        Federal Reserve chairman Ben Bernanke finally won the confirmation for a second term after a lot of debate, leading to some comfort in the market for a short time in the week.

·        US GDP clocked an initial estimate of 5.7% GDP growth, much higher than expected.

·         In all, the Dow Industrial Average ended up the entire week with losses of 435.39 points or 4.2%.

·        After touching $82 earlier, crude oil, retraced to nearly $73 per barrel in the futures.

·        The Dollar Index remained strong for a major part of the week, and the same ended the week at a level of around 79, due to strengthening of US $ against Euro.

·        Gold continued to slip for a major part of the week due to strong US $, dragging it to a level below $1075 at one stage during the week.

·        After the tightening of monetary policy by China, India also followed the same by raising the CRR by 75 bps in two trenches over the next one month.

·        China clocked a GDP growth rate of 10.7% for last December.

·        Commodities continued to remain weak including most of the non-ferrous metals like copper and aluminum.

·        US Present announced some additional tax credits of $22 billion to create more jobs, as the unemployment rate has shot up beyond 10% in the country.

The Weekly Commentary

The DJIA retraced by 1.0% to 10067.33 points, or 107 points, which was largely led by some correction in some of the technology stocks, whose results failed to subsequently cheer the markets. A weak sentiment prevailed even in the financial stocks like Bank of America, Amex, JP Morgan Chase and a Citigroup Inc barring the last couple of sessions.

Amongst the non index stocks, Berkshire Hathway and Eastman Kodak got into focus, as the former gained a place in S&P 500 and Eastman Kodak earnings beat the street expectations by a wide margin. However, Qualcomm and Motorola Inc. remained subdued after the earnings, and even the Microsoft did not gain after the earnings, due to possibilities that it may not grow in near future due to slow recovery in US. Apple remained volatile after the launch of its ipad, due to mixed reactions on account of success of product due to pricing issue.  

Amongst the basic material stocks, U.S. Steel fell the most in the S&P 500, dropping 19 percent to $44.43. Fitch Ratings slashed its senior unsecured notes to below investment grade as the company struggles to return to profitability.

Meanwhile, the only positive economic indicator was that the US GDP growth for Q4 came at 5.7% compared to an expected 4.8%.

The precious metal continued to show a correction during the week following the strength in the US $, and retraced to almost $1075 per ounce.

Meanwhile, the Dollar Index continued to strengthen throughout the week, mainly due to the US $ gains against Euro. The Dollar Index ended around 79.

Crude also slipped during the week, which was around $73 at the end of Friday.

A lot of index companies from Dow components are releasing their earnings in next week. These include Telecom major Cisco Systems Inc.,  Exxon Mobil Corp., UPS Inc., Time Warner Inc., and Pfizer Inc.

The Week Ahead

Monday: Construction spending for December

ISM Manufacturing Index

Tuesday: ICSC-Goldman Sachs Retail Stores Sales

Wednesday: ADP will release its January employment data.

ISM services report for January.

Weekly crude inventories report

Thursday: The Labor Department's weekly jobless claims report

Friday: U.S. non-farm-payrolls data

Latest reading on the unemployment rate.