About 75 % of the 39 Standard & Poor's companies reporting earnings to date have exceeded expectations. The percentage is usually a bit higher. The fourth quarter profits increased 2.5 %, a less than stellar performance. Boeing was possibly one of the drags on the indices as the Japanese and Nippon airlines grounded about half of the fleet for about two days after an emergency landing. JP Morgan was up 0.6 % on better revenue on the earnings. Goldman Sachs was up 4.1 % as profits exceeded expectations. Northern Trust was down 5.9 % falling short of expectations. Smith & Wesson Holding Corp. was up 5.7 % to $8.91 perhaps in light of the gun controversy. Apple (AAPL) had literally been the apple in the eye of the investment world, and today did not disappoint as the stock was up 4.2 % to $506.09 coming back after some setbacks on the iPhone 5. Hewlett Packard was up 2.6 %. World Bank set expectations for the global economy to grow by 2.4 % this year. The earnings season kicked off last week with Alcoa Inc. (AA). The potential advances in light of the economic drag created by the "fiscal cliff", the election and hurricane Sandy may have kept a lid on any aggressive buying. The Chicago Board of Options Exchange Volatility Index (VIX) decreased 1 % to 13.42.
The Beige book came out today with mixed manufacturing, some growth in consumer spending, real estate as moderate to strong and auto sales were steady to stronger. The December US Consumer Price Index (CPI) was unchanged at -0.3 % last month. Gasoline prices fell 2.3 %. Food costs increased 0.2 %. The US National Association of Home Builders housing market index held steady at 47 in January. The US November Business Inventories increased 0.3 % to a seasonally adjusted $1.622 trillion. The sales was up 1.0 % to a seasonally adjusted $1.272 trillion. US Retail Sales increased 0.5 % in December 2012 to a seasonally adjusted $415.70 billion. The US budget deficit for December totaled $260 million while for the year the budget deficit was about $1 trillion. The US leaders are projecting a $990.56 billion deficit for 2013. The public debt may have exceeded $16 trillion. The US Trade Gap increased 15.8 % to $48.73 billion in November while the previous reading was $42.06 billion. US imports were at 3.8 % to $231.28 billion. US exports were at $182.55 billion. The trade deficit with China had narrowed by 1.7 % to $28.95 billion. Exports decreased 2.1 % to $10.59 billion and imports decreased 1.8 % to $39.55 billion. Thursday, the Housing Starts forecast is 0.887 million units while the previous reading was for 0.861 million units. The forecast for the Housing Permits is for 0.910 million units while the previous reading was 0.899 million units. The Initial Jobless Claims is forecast at 368,000 while the previous revised reading was 371,000 new applications for unemployment benefits. The US Philadelphia Fed Survey general business conditions index is forecast at 6.0 while the previous reading was at 8.1. Friday, the forecast for US Reuter's/University of Michigan's Consumer Sentiment is forecast at 75.0 while the previous reading was 80.5.
US Federal Reserve Chairman Ben Bernanke spoke at the University of Michigan Monday reiterating the same rhetoric regarding the bond-buying. He reassures that the Fed will continue to analyze the bond-buying programs to make sure that they are working as they monitor the growth and labor in the US. The Fed has said in the past that they would keep the bond programs in place until US Unemployment was cut to 6.5 % or that inflation reached 2.5 %. In the meantime, they had announced last week that the program may end in 2013. The next Fed policy meeting is scheduled for January 29th and 30th. Japan has increased its holdings of US debt to $1.13 trillion as of October competing with China as the largest holders of US Treasuries. The Feds loose monetary policy has increased the money supply. The banks have additional reserves parked at the Fed adding up to about $1.5 trillion.
US Treasury Secretary Timothy F. Geithner has warned that if Congress failed to raise the debt ceiling soon that perhaps by mid-February, economic hardship may ensue. US President Barack Obama announced that US Treasury Secretary Timothy Geithner will be replaced January 25th by White House Chief of Staff Jacob Lew! US Congress authorized a tax cut bill on January 1 making the Bush reductions permanent for the majority of the population! US individuals earning $400,000 per year or households earning $450,000 per year or more may see an increased tax rate to 39.6 % from the previous 35 %. Taxes on capital gains and dividends may see an increase to 23.8 % from the previous 15 %. The deal effects the upper 2 % income brackets and yet there is still much to be done. Spending cuts and the debt limit remain on the table and in the eyes of the credit rating agencies, there is no meaningful improvement in the government's debt ratio. Recalling the Standard & Poor's credit rating downgrade of the US in August of 2011, the effects on the stock indices can be quite severe! The US economy remains fragile and can still dip into a recession this year. The credit ratings agencies are looking for a long-term plan of deficit reduction. Moody's credit rating agency had warned that the agreement in place does not address the long-term concerns for debt reduction. The US needs to now focus on raising the debt ceiling. The debt ceiling has been raised 79 times since 1960. The $16.4 trillion debt ceiling must be addressed by mid-February. Spending cuts by the US government may turn into a hard pill to swallow for the current administration. The announcement in the change of staff may reflect the current administration's commitment to structural changes.
Thursday, we have US Initial Jobless Claims and Housing Starts & Permits due out at 7:30 AM CST!
E-Mini S&P 500 Chart.
Thursday, what to expect? We maintain a bullish bias until the (March) E-Mini S&P 500 penetrates $1425.75! Thursday, we anticipate an inside to higher to outside day! Today's range was $1469.00 - $1460.00. The market settled at $1465.50. Our comfort zone or point of control for this market appears to be $1465.00. Our anticipated potential range for Thursday's trading could be $1471.50 - $1456.50.
Please note that timing is everything and while we may divulge a brief overview of what may affect tomorrow's market, trade set-ups are strategically planned according to time and price action. In this marketplace, a trader needs to arm themselves with the weaponry to deploy into a complicated marketplace. The CFRN Live trading room is your boot camp for your commodity future.
"Although this crisis in some ways started in the United States, it is a global crisis. We bear a substantial share of the responsibility for what has happened, but factors that made the crisis so acute and so difficult to contain lie in a broader set of global forces that built up in the years before the start of our current troubles."
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