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MarketView
Events defining the day's trading activity on Wall Street
Lauren Rudd
Tuesday, January 7, 2014
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.
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MarketView for January 7
MarketView for Tuesday, January 7