MarketView for January 7

MarketView for Tuesday, January 7
 

 

 

MarketView

 

Events defining the day's trading activity on Wall Street

 

Lauren Rudd

 

 

Tuesday, January 7, 2014

 

 

Dow Jones Industrial Average

16,576.66

p

+72.37

+0.44%

Dow Jones Transportation Average

7,400.57

p

+49.37

+0.67%

Dow Jones Utilities Average

490.57

p

+1.29

+0.26%

NASDAQ Composite

4,176.59

p

+22.39

+0.54%

S&P 500

1,848.36

p

+7.29

+0.40%

 

 

Summary

 

The major equity indexes were higher on Tuesday, ending the S&P 500's three-day losing streak as the index chalked up its first positive session of 2014. A sharp decline in the trade deficit and positive German economic data helped improve market sentiment as the data indicated strengthening economic fundamentals in both the United States and Europe.

 

The day’s economic data indicated that exports hit a record high in November, while weak oil prices restrained import growth, resulting in our smallest domestic trade deficit in four years. German unemployment unexpectedly fell in December on a seasonally-adjusted basis.

 

The S&P 500's gains followed a three-day losing streak, which pushed the benchmark index down more than 1 percent as traders took profits in the wake of 2013's rally that drove the benchmark index up nearly 30 percent.

 

Among the day’s winners was the S&P healthcare index, which gained 1 percent making it the best performer among the 10 S&P sectors. Adding to the momentum was a Deutsche Bank upgrade of UnitedHealth Group to a "buy." Shares of UnitedHealth, a Dow component, gained 3.1 percent to close at $76.51. Tenet Healthcare rose 4.9 percent to end the day at $46.10.

 

Community Health Systems rose 3.8 percent to close at $43.49 a day after the company said the Affordable Health Care Act should give a slight increase to its 2014 earnings.

 

Shares of Google hit a record intraday high of $1,139.69 before closing up 1.9 percent at $1,138.86. JPMorgan, which has an "overweight" rating on Google, raised its target price on the stock to $1,305 from $1,100.

 

Economic activity may be hurt by a polar vortex - strong upper-level winds in the Northern Hemisphere that normally hover over the polar region - that has been pushed south to envelop a large part of the United States.

 

JPMorgan Chase fell 1.2 percent to $58.32 after the bank holding company said it would pay more than $2 billion of penalties to settle charges by federal authorities that it failed to report suspicious activity involving Bernard Madoff's Ponzi scheme.

 

GameStop was down 8.4 percent, closing at $44.14, its largest decline since May 2013, and ranked as the S&P 500's worst performer after Sony said it will begin testing a new PlayStation-based streaming service that could cut into the video game retailer's used game sales. Sony was up 0.1 percent to close at $17.32.

 

In the pharmaceutical space, Neurocrine Biosciences closed up 89.7 percent to end the day at $18.51, its highest level since June 2006, a day after it said its movement disorder drug showed a reduction in symptoms compared with a placebo in a mid-stage study.

 

Stereotaxis shares rose 12.5 percent to close at $4.50 following completion of a clinical trial.

 

Bob Doll, chief equity strategist of Nuveen Asset Management, forecast further upside for equities in 2014, with a year-end target of 1,950 for the S&P 500.

 

Volume was modest, with about 6.11 billion shares changing hands on the major equity exchanges, slightly above the 6.01 billion average number of shares traded so far this month, according to data from BATS Global Markets.

 

Trade Deficit at Four Year Low

 

The U.S. trade deficit fell to its lowest level in four years in November as exports hit a record high and weak oil prices held down the import bill, the latest evidence of strengthening economic fundamentals.

 

Tuesday's report could result in a far stronger growth pace for the fourth-quarter than previously expected, with the possibility that trade could contribute as much as a full percentage point to output during the period.

 

The trade gap fell 12.9 percent to $34.3 billion, the Commerce Department said. That was the smallest deficit since October 2009 and was below economists' expectations for a $40 billion shortfall. The deficit stood at $39.3 billion in October.

 

When adjusted for inflation, the gap narrowed to $44.6 billion in November from $47.0 billion the prior month. This measure goes into the calculation of gross domestic product.

 

With more of what Americans consume being produced at home and exports rising, economists pushed up their fourth-quarter growth estimates by as much as 1 percentage point to as high as a 3.3 percent annual rate.

 

The economy grew at a 4.1 percent rate in the third quarter, but there had been fears that GDP growth could slow to a rate of not more than 2.5 percent as businesses worked through an inventory glut and a 16-day government shutdown in October reduced federal workers' output.

 

The trade data added to reports on employment, manufacturing and consumer spending that have suggested the economy is positioned for faster growth this year.

 

The outlook has been strengthened by a pick-up in domestic demand and diminishing uncertainty over U.S. fiscal policy.

 

U.S. stocks rose on the data, after three days of losses. The dollar gained against a basket of currencies, while U.S. Treasury debt prices were little changed.

 

In November, exports rose 0.9 percent to $194.9 billion. That was the highest on record and marked a second straight month of gains. There were increases in exports of industrial supplies, capital goods and automobiles.

 

Petroleum exports hit an all-time high.

 

Exports to China also reached a record high in November, narrowing the politically sensitive U.S. trade deficit with the world's second-largest economy. Exports to China were up 8.7 percent in the first 11 months of the year.

 

There were also increases in exports to Germany and Japan.

 

Overall imports fell 1.4 percent to $229.1 billion in November. Part of the decline reflected a lower petroleum import bill, which was the smallest since November 2010.

 

Crude prices fell over the month and there was also a decline in the volume of oil imported as the United States ramps up domestic production. The petroleum deficit was the smallest since May 2009.

 

"The shale revolution and increased energy efficiency have pushed the U.S. a long ways towards energy independence," said Ted Wieseman, an economist at Morgan Stanley in New York.

 

Imports of industrial supplies and materials were the lowest in three years. But auto and capital goods imports hit a record high.

 

Strengthening consumer spending, however, should draw in more imports, widening the deficit in the months ahead.