Daily Market Update – January 14, 2015 (9:00 AM)
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.
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 is decidedly negative, as oil falls a bit more, as well, to start the trading day.
With today’s likely downturn, this may end up being the lightest trading week in a long while, as the added downturn, after the first two weak days already encountered, makes teh ability to rollover positions more out of reach and also makes 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.
The preliminary earnings from JP Morgan and Wells Fargo are disappointing, as 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.
Later this week we also hear from Goldman Sachs and they could offer some saving grace.
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.