Daily Market Update – January 14, 2015 (Close)
This morning was already getting off to a bad start as last night’s futures trading had the DJIA down nearly 100 points. Given the kind of reversal that we saw yesterday, the continuing weakness in the after hours futures market wasn’t very good.
This morning, when we could have expected a little bit of help from the earnings reports of both JP Morgan and Wells Fargo, that help didn’t come.and the market sold off even more.
Then came news of the Retail Sales Report, which isn’t usually that big of a deal, but this time it was.
That’s because people were expecting to see some evidence of increased consumer spending as people were supposed to be feeling richer from the drop in oil prices and then converting that feeling into spending.
I know that I was.
But according to those retail sales figures that wasn’t the case. That’s even though yesterday’s JOLT Survey showed that the majority of the new jobs created in 2014 were at wages that were above the average of all wages in the US, meaning that it was higher paying jobs that were being created and not just more burger flipper jobs.
But this morning the interpretation of all of that news was decidedly negative, as oil fell a bit more, as well, to start the trading day.
With today’s expected downturn, it was reasonable to believe that this may have ended up being the lightest trading week in a long while, as the added downturn, after the first two weak days already encountered, made the ability to rollover positions more out of reach and also made it less likely that new call positions will be sold on existing uncovered positions.
It’s not lost on me that it has been the Gold Miners ETF (GDX) options that have seen a lot of trading activity lately. That’s generally not a very healthy sign when you see that proxy for precious metals bouncing back and forth. Certainly that kind of bouncing has also been seen in the broader market, but when you see it in that very speculative sector it demonstrates lots of uncertainty among those that generally thrive in uncertainty and chaos.
I actually tried to get yet another rollover in those shares done today, trying to match last week’s two rollovers of that position.
The market opened really weakly this morning as the preliminary earnings from JP Morgan and Wells Fargo were disappointing. You generally need strong performance from the financial sector to have a strong market. Those two banks represent very different markets and so together they send a powerful message when reporting in tandem. That message can be one speaking of a strong economy or one of a weak one.
Today it was on the weak side.
It will still be a few weeks before we start to hear from the major retailers, but today’s Retail Sales Report makes it less likely that they will be able to report earnings that reflect any significant increase in consumer spending. However, they will have had the advantage of seeing a few weeks of data after the close of the quarter that may indicate whether any trend in increased spending is developing.
If it is and ends up being part of a more optimistic pattern of forward guidance, the market may respond very positively.
In the meantime, if those sales aren’t there and there is no upward pressure on prices, the likelihood of an interest rate coming from the FOMC is reduced, and that can be a positive for the markets.
For the rest of the week, though, it may be a case of strapping in and hanging on to see whether fear or opportunism takes hold.
For a brief while, as oiul unexpectedly started climbing higher in the final 90 minutes, at least there was some market recovery, well off its nearly 400 point decline.
Somehow, even amid all of the negative tone there was at least some opportunity to rollover a couple of positions today and even the nerve to open a new position in Fastenal, a favorite, that I hope doesn’t let me down tomorrow, as it reports earnings.
It often disappoints on earnings, but it usually does so a few weeks after lowering guidance. This time around it didn‘t offer lower guidance, so I’m hopeful that it may be a good acquisition at a time when there’s lots of uncertainty.
At least today wasn’t as bad as it looked as if it was going to be and we still have two days left to resurrect something from this week.