MarketView for January 8

Summary

The S&P 500 finished nearly flat on Wednesday as equity indexes had little reaction to the minutes from the Fed's most recent meeting, while Micron's strong results helped buoy the Nasdaq. The S&P 500 has now fallen 0.6 percent over the first five sessions of the year.

According to the January effect watched by some market participants, the first month dictates the stock market's fortunes for the year - and the first five trading days are important in determining the outcome. However, Credit Suisse data shows that any month, except October, could be used to determine the market's momentum 11 months ahead more than 50 percent of the time.

Minutes of the Fed's December 17-18 meeting indicated that the Fed was careful to tread lightly as they embarked on the tapering process. The Fed's accommodative policies were the main driver of the S&P 500's rally of nearly 30 percent in 2013. The program is expected to keep a floor under stock prices for as long as it continues.

Early in the day’s trading session, a report by ADP, a payrolls processor, showed U.S. private-sector employers added 238,000 jobs in December, more than expected and the best read since November 2012, while November 2013 numbers were revised higher.

Micron Technology ended the day up 9.9 percent to close at $23.87 and helped add some momentum to the Nasdaq a day after the chipmaker reported higher-than-expected quarterly profits.

Microsoft fell 1.8 percent to $35.76, pressuring the Dow. Microsoft is closer to naming a new chief executive officer but it lost a leadikng candidate on Tuesday when Ford's CEO Alan Mulally said he would not be going to the software giant. Ford's stock rose 1 percent to end the day at $15.54.

Shares of JC Penney fell 10 percent to close at $7.37 after the department store chain said on Wednesday that it was "pleased" with its holiday season sales without giving specific results. That prompted many to say the retailer's sales may have actually  declined last month.

Apollo Education Group closed up 14.2 percent at $30.76 after the owner of the University of Phoenix reported a quarterly profit well ahead of Street expectations.

The pharmaceutical sector remained a hotbed for mergers and acquisitions. Forest Laboratories agreed to acquire privately held specialty pharmaceutical company Aptalis Holdings for about $2.9 billion. Forest Labs' stock ended the day up 17.9 percent to close at $69.30 and ranked as the S&P 500's largest gainer.

NuPathe closed up 35.6 percent to $4.38 after the company said it received a buyout offer from Israel's Teva Pharmaceutical Industries for $114 million plus milestone payments related to NuPathe's migraine treatment. Teva ended the day down 0.4 percent to close at $41.05.

Volume was modest, with about 6.05 billion shares traded on U.S. exchanges, slightly below the 6.19 billion average so far this month, according to data from BATS Global Markets.

ADP Job Numbers Surprise

According to the ADP National Employment Report private employers added 238,000 jobs in December, after an upwardly revised 229,000 in November. It was the fastest pace of job creation in 13 months and the largest monthly gain since November 2012, with the result of bringing the three-month average of corporate hiring to nearly 225,000 per month, the fastest such pace in 21 months. The next jobs reading will come on Friday when the Federal Government releases its jobs data.

In another positive read on the economy, the National Federation of Independent Business on Wednesday said small businesses hired the most workers in nearly eight years in December.

The data were likely a welcome affirmation of positive economic momentum for policy-makers at the Federal Reserve. The minutes from the Fed's December meeting indicated that many Fed members wanted to proceed with caution in trimming asset purchases, and most wanted to stress that further reductions were not on a preset course.

The ADP report comes two days ahead of the government's nonfarm payrolls report, a measure of the labor market that is more comprehensive and includes both public and private sector employment. The Street is looking for 196,000 jobs to have been added in December, and a rise in private payrolls of 195,000. Both numbers would represent slight declines from November.

Recent data has pointed to accelerating improvement in economic conditions. Retail industry tracker ShopperTrak said sales rose 2.7 percent in the November-December holiday shopping season, boosted by promotions and discounts. J.C. Penney described its holiday performance as pleasing and affirmed its fourth-quarter outlook.

Also on Wednesday, applications for home mortgages rose 2.6 percent in the latest week, rebounding from a 13-year low set at the end of last year, according to the Mortgage Bankers Association.

Investors have been especially sensitive to signs of economic improvement ever since the Fed said in December it would begin to slow its massive stimulus program, which was a major contributor to the S&P 500 stock index's rally of nearly 30 percent in 2013.

Since the Fed said it would begin to slow the program when certain economic indicators met its targets, some traders had previously taken strong data as a negative because it suggested a faster end to the program.