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MarketView
Events defining the day's trading activity on Wall Street
Lauren Rudd
Tuesday, December 24, 2013
Summary
Wall Street chalked up modest gains in a short
session ahead of the Christmas holiday, with the Dow and S&P 500 once
again ending at record highs. Markets closed early on Tuesday and will
remain shut until Thursday for the holiday. Trading was extremely light
during the day's abbreviated session, which ended at 1 p.m. Many market
participants were out of the office on the day before Christmas. Volume
is expected to remain muted throughout the week and the light trading
could allow for greater volatility. Both the Dow and S&P 500 continued to ascend to
all-time highs, with the Dow reaching a record high for the fifth
consecutive session, while the S&P 500's record streak stood at three
days in a row. Further upside may be limited at these levels, especially
in the absence of major trading catalysts. In the latest positive sign for the economy, data
indicated that durable goods order rose 3.5 percent during November and
a gauge of planned business spending on capital goods marked its largest
increase in nearly a year. A separate report revealed new home sales fell in
November, but sales in October were revised to show the highest pace in
more than five years and house prices rebounded. The S&P 500 is up 28.5 percent this year and is on
track for its best year since 1997. The Dow is up 24.8 percent in 2013
while the Nasdaq is up 37.6 percent for the year. Private equity firm Carlyle Group is nearing an
agreement to acquire Johnson & Johnson's ortho clinical diagnostics unit
in a deal expected to be worth around $4 billion. Carlyle Group shares
gained 2.1 percent to $36.11. Johnson & Johnson gained 3 cents, to end
the day at $92.06. Volume was light because of the abbreviated session,
with only about 2.17 billion shares changing hands on the major equity.
exchanges - well below the 6.43 billion average so far this month,
according to data from BATS Global Markets.
Durable Goods Up Sharply
The Commerce Department reported Tuesday morning
that durable goods orders were up 3.5 percent as demand increased for a
range of goods from aircraft to machinery and computers and electronic
products during November. At the same time a gauge of planned business
spending on capital goods recorded its largest increase in nearly a
year, pointing to sustained strength in the economy. Last month's increase in durable goods orders, which
exceeded expectations for a 2 percent increase, reversed October's 0.7
percent decline. Excluding transportation, orders rose 1.2 percent, the
largest increase since May. Non-defense capital goods orders excluding aircraft,
a closely watched proxy for business spending plans, surged 4.5 percent,
breaking two straight months of declines. It was the largest increase
since January. The report suggested rising strength in
manufacturing and was further evidence of a continued economic growth
outlook. From consumer spending to employment and trade, the foundations
appear to be in place for sustained and strong economic growth in 2014.
The data support the Fed's decision last week to start trimming back its
monthly bond purchases from January, a process which is likely to
continue for much of next year. The expectation had been for orders for so-called
core capital goods to increase 0.7 percent in November after a 0.7
percent fall in October. The data indicated that shipments of core
capital goods, which are used to calculate equipment spending in the
government's measure of gross domestic product, increased 2.8 percent
last month. It was the largest increase since March 2012. Shipments had declined during September and October,
and last month's increase could see an increase in fourth-quarter GDP
estimates. Last month, durable goods orders rose almost across the
board, with notable gains in transportation. Transportation equipment orders increased 8.4
percent after falling 3.5 percent. Civilian aircraft orders jumped 21.8
percent and orders for motor vehicles recorded their largest increase
since February. Boeing received orders for 110 aircraft in November,
up from 79 aircraft the prior month, according to information posted on
the aircraft company's website.
Retailers Appear To Be Hurting Fewer Americans hit the malls the last week before
Christmas even as store visits plummeted 21 percent and retail sales
dropped 3.1 percent in the week through Saturday, signaling a lackluster
finish for stores' most important selling season, Chicago-based
researcher ShopperTrak said yesterday. Falling store traffic in recent weeks and uneven
demand especially for apparel spurred chains to risk earnings by piling
on the discounts. Retailers including Neiman Marcus were offering as
much as 75 percent off, and some, including Macy's and Kohl's were
keeping stores open around the clock starting Friday. At the same time,
consumers are increasingly shopping online. Holiday purchases increased 2 percent from Nov. 1 to
Dec.22, ShopperTrak said. Sales will rise 2.4 percent for the whole
season, the smallest gain since 2009. ShopperTrak compiles sales and
traffic data. Holiday sales grew 3 percent last year, 3.4 percent in
2011 and 4 percent in 2010, according to the firm's measure. The National Retail Federation reiterated on Dec. 12
its prediction that total sales will rise 3.9 percent in November and
December, more than the 3.5 percent gain a year ago. Although the
economy grew at a surprising 4.1 percent annualized rate in the third
quarter, the gain was driven by increased spending on services such as
health care and recreation as well as companies boosting software
investments. Therefore the expansion has largely by passed
retailers such as Wal-Mart, which last month trimmed its profit forecast
as unemployment and higher taxes kept many customers from increasing
spending. Even Michael Kors's hot namesake leather goods brand
could not avoid discounts. A larger portion of the company's inventory
was marked down than last year, indicating a slower-than-expected
holiday season. Gap's Old Navy chain on Dec. 22 started offering as much
as 75 percent off throughout the store. Meanwhile, Target had its own challenges. After
reporting that data for about 40 million debit and credit cards may have
been compromised at the height of the holiday shopping season, the chain
tried to lure shoppers with a 10 percent discount this past weekend. Yet
the number of transactions at Target slipped 3 to 4 percent compared
with the final weekend before Christmas last year, according to Customer
Growth Partners. Sales in November and December account for 20
percent to 40 percent of retailers' annual revenue and 20 percent of
profit, according to the NRF, a Washington-based trade group. Consumer
spending represents about 70 percent of the economy. Not all retail sectors are faring equally.
Home-improvement and furnishing chains will generate 7 percent growth in
fourth-quarter same-store sales while auto retailers will see 6 percent
growth and discounters 1 percent, according to Retail Metrics, while
sales at department-store chains will fall 1 percent and they will sink
7 percent at teen-apparel chains, the firm said. Estimates show luxury chains will post a 5 percent
gain, smaller than last year's 5.4 percent increase. The group monitored
by Retail Metrics is made up of Coach, Tiffany, Kors, Williams-Sonoma,
Blue Nile and Zale.
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MarketView for December 24
MarketView for Tuesday, December 24