Jan 19, 201204:24 PMBlog: Alaska's Eye on Wall Street
Week in Review, Jan. 16, 2012
The S&P 500 stocks rose +0.9% to 1,289 last week while the yield on 10 year treasuries fell 10 bp to 1.86%. Stocks are up +2.6% in the U.S. so far this year.
There was not much economic data last week other than a sluggish retail sales report (+0.1%) and the Fed's beige book which reported stronger production and job growth in December.
ALCOA, the biggest U.S. aluminum producer, kicked off the Q4 earnings season last Monday reporting a modest $0.03 per share loss (in line with street estimates). Revenues were up +6% (higher than expected).
J.P. Morgan was the first bank out of the blocks to report earnings Friday. Q4 profits were $3.7 billion (in line with expectations but down from the year before). For 2011, the bank made a record high $19 billion, up +9% from 2010.
Deutsche Bank reports that "the busiest weeks in earnings season are the weeks of January 23rd and 30th when nearly 50% of the S&P 500 market cap reports." Q411 earnings are expected to be up +7.7% YoY.
Chinese policymakers are calling for measures to boost confidence in the stock market! Analysts expect monetary ease in the first half of the year. Recent inflation data is encouraging with inflation at 4% YoY. Chinese shares had their worst performance in 18 years in 2011. Their P/E is 9.3x and the lowest in 10 years.
Merkozy rides again. Angela Merkel and Nicholas Sarkozy met last Monday to discuss the European crisis and upcoming European summit on January 30. They said that boosting growth was important and that austerity could be taken only so far.
Italian and Spanish debt auctions went well and yields have fallen sharply. It looks like the ECBs liquidity injections and term financing are working. The ECB held their short term rates unchanged at 1% at their monthly meeting. The Bank of England did the same standing pat at 0.5%
Always ready to spoil the party, the Mr. Magoos at rater S&P, announced on Friday downgrades to France (from AAA to AA+) and a number of other European countries. With Greece teetering, the timing couldn't be much worse.
Next week expectations are for monthly industrial production to be +0.5%, producer prices +0.1%, and consumer prices +0.1%, while a plethora of housing data is expected to be mixed.
Happy Birthday to a great man, Martin Luther King. He would have been 82 had he not been assassinated in 1968.
Jeff Pantages, CFA
Chief Investment Officer
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