Week in Review
A look back on the week that was...
The "Four Sisters" faced a tough week as inflation fears resurfaced when the Department of Labor released its December report. Higher than expected housing starts coupled with wage pressures substantially reduced any hopes for a Fed rate cut in the near future. Consequently, high multiple stocks, namely technology, sold-off on high volume.
Volatile trading days like we've been experiencing this year could be the norm short term as market participants attempt to discount future earnings, anticipate the Fed's next move, and digest the economic data. One sector which will be the focus of attention going forward is Transportation. With crude oil briefly trading below $50/barrel this week, the DJT tested the resistance level of 4785. A break-out of the Transports from this level would certainly support the Bull's argument and the marketplace.
As earnings season continues to unfold with more economic data looming in the near future, it will be important to keep the following technical levels in mind: DJIA – 12,340; SPX – 1405; NDX – 1745; and RUS – 768. The trend is still up, but a breach of these necklines would certainly quiet the Bulls… and add more fuel to the VIX's fire.
The Four Sisters Performance
The consumer price index (CPI) for the month of December came in line as expected, but the year-end figure still remains outside the Fed's comfort zone with namely wage inflation a concern. The Labor Department also reported an unexpected rise in housing starts. (Fri 19th)
Vornado Realty Trust countered an offer by Blackstone Group to acquire Equity Office Partners. Vornado's bid represented a 7% premium to Blackstone's offer and would create the largest office real estate investment trust in the U.S. (Wed 17th)
Earnings Snapshot It now appears the worst times are over for the airline industry amid lower fuel costs and higher passenger loads. American Airlines (AMR) and Southwest (LUV) were able to swing to a quarterly profit while Continental Airlines was able to narrow its losses. (Wed 17th & Thurs 18th)
Discount broker TD Ameritrade Holding Corp. (AMTD) reported record results for its first-fiscal quarter. Rival broker Chares Schwab (SCHW) reported earnings which more than doubled. (Tue 16th & Wed 17th)
Intel (INTC) continues to feel the pain from a massive restructuring effort and price war with rival chipmaker Advanced Micro Devices (AMD) as its outlook failed to impress investors. (Tue 16th)
A week after announcing the launch of its new iPhone, Apple (AAPL) reported a record quarter, but investors were cautious over the company's outlook. (Wed 17th)
Dow component International Business Machines (IBM) reported blockbuster results for the year, but gave guidance that was merely in–line for next quarter. (Fri 19th)
The nation's largest bank, Citigroup (C), beat Wall Street estimates, but investors are still concerned over rising expenses which have been outpacing revenue growth. (Fri 19th)
General Electric (GE) reported that its 4th quarter earnings more than doubled as the company continues to focus on faster growth areas such as energy equipment and health care technology. (Fri 19th)
Market Movers: Winners and Sinners
It now appears the worst times are over for the airline industry amid lower fuel costs and higher passenger loads. American Airlines (AMR) and Southwest (LUV) were able to swing to a quarterly profit while Continental Airlines was able to narrow its losses. (Wed 17th & Thurs 18th)
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