YAHOO [BRIEFING.COM]: The broad market spent Friday plodding along
narrowly above the neutral line, despite quadruple witching options
expiration. The lackluster action comes as stocks trade at multi-year highs.
Gains in the final session of the week were only modest, but they
helped the S&P 500 secure a weekly gain of more than 2%. That stands as the
stock market's fifth straight weekly gain, or tenth in 11 tries. That hot
streak has the S&P 500 up more than 11% year to date and sitting above 1400
for the first time since mid-2008. Along the way the stock market has managed to
overcome precarious conditions in
The S&P 500 now trades at about 14.3x trailing 12-month
earnings and 13.0x forward earnings. The 5-year historical price-to-trailing
earnings average stands at about 16.5, while the 5-year historical average for
price-to-forward earnings is about 13.2.
The latest Investor Sentiment Survey from the American Association
of Individual Investors suggests that more than 45% of members remain bullish.
Its long-term average is closer to 39%.
As a corollary, the Volatility Index is back near its multi-year
lows beneath 15. In little more than a week the euphemistically labeled Fear
Gauge is down approximately 30%.
Financials had a quiet Friday, but were the primary drivers behind
the stock market's advance this week. Conveying its confidence and effectively
hinting at satisfactory stress test results, JPMorgan Chase (JPM 44.57, -0.13) announced earlier this
week a dividend increase and a $15 billion share repurchase authorization. That
brought about concerted buying interest among bank stocks, which collectively
climbed close to 7% this week. Citigroup
(C 36.69, +0.42) sat out some of that due to disappointment
that it, along with three other outfits from a total of 19 firms, came short of
certain targets set in the latest round of government mandated stress tests.
Collectively, the Financial sector's constituents climbed nearly 6% this week.
Year to date, the sector is up more than 20%, which is better than what any
other sector has achieved.
Tech, the largest sector by market weight, isn't far behind the
Financial sector in terms of its performance in 2012. Year to date tech stocks
are collectively up almost 20% after a 3% advance this week. Apple (AAPL 585.57, +0.01) has been
an absolute juggernaut and a leader for Tech in 2012; even though it is the
largest stock by market cap, which is actually greater than the combined weight
of both IBM (IBM
206.01, +0.01) and Microsoft (MSFT
32.60, -0.25), the stock has rallied more than 40% year to date. However, since
hitting $600 per share the stock has started to waver some.
The belief that the economy is strengthening helped the dollar
trade up to its highest level in nearly two months earlier this week. It lost
momentum more recently, resulting in a couple of losses that left the greenback
to book a weekly loss of about 0.3%.
Fixed Income Focus
Treasuries were trounced on a couple of occasions this week. Their
slide sent the yield on the benchmark 10-year Note as high as 2.35%, which was
notched early on Friday before it fought to pare its loss. The Note's yield
hasn't been that high since October.
There were a few auctions earlier in the week, but none of them generated
results that induced buying interest. The offering of 3-year Notes drew a
bid-to-cover ratio of 3.44, dollar demand of $110.1 billion, and an indirect
bidder participation rate of 34.6%. For comparison, the an average of the past
six auctions results in a bid-to-cover ratio of 3.42, dollar demand of $109.4
billion, and an indirect bidder rate of 36.2%.
The 10-year Notes sale drew a bid-to-cover ratio of 3.24, dollar
demand of $68.0 billion, and an indirect bidder participation rate of 38.6%. An
average of the past six auctions results in a bid-to-cover ratio of 3.07,
dollar demand of $67.2 billion, and an indirect bidder participation rate of
44.0%.
The week's final auction, a 30-year Bond sale, drew a bid-to-cover
of 2.70, dollar demand of $35.1 billion, and an indirect bidder participation
rate of 29.0%. For comparison, an average of the past six auctions results in a
bid-to-cover of 2.72, dollar demand of $37.8 billion, and an indirect bidder
participation rate of 31.6%.
A Bevy of Economic
Reports
The economic calendar this past week was highlighted by the latest
FOMC statement. To little surprise the Committee opted to keep the fed funds
target rate at 0.00% to 0.25%. It also maintained an outlook that would likely
to warrant exceptionally low levels for the fed funds rate at least through
late 2014. Although the Fed has been accommodative in its policy efforts, there
has been a growing belief among market pundits that further stimulus will
likely be put on hold because since the economy continues to improve, albeit at
a slow pace.
Retail sales in February increased by 1.1% to outpace the upwardly
revised 0.6% increase of the prior month. February results were also slightly
better than the 1.0% increase that had been widely expected. Excluding autos,
retail sales increased by 0.9%. That bested the Briefing.com consensus call for
a 0.6% increase, but it still wasn't as strong as the 1.1% climb in the prior
month.
Import prices were up 0.4% in February. Excluding oil, import
prices were down 0.1%. In the prior month overall import prices and prices less
oil increased by 0.3% and 0.1%, respectively. Export prices increased by 0.4%,
or 0.5% when excluding agricultural items. Respective increases of 0.2% and
0.5% were experienced in the prior month.
The fourth quarter current account deficit reportedly totaled
$124.1 billion. A deficit of $113.8 billion had been expected, on average,
among economists polled by Briefing.com.
Initial jobless claims for the week ended March 10 totaled 351,000.
Down 14,000 week over week and not too different than the 355,000 initial
claims that had been broadly expected, weekly jobless claims trends continue to
suggest improvement in the labor market.
Overall producer prices increased by 0.4% in February, but core producer
prices increased by just 0.2%. The general consensus had pegged the increase in
overall producer prices at 0.5% and the increase in core producer prices at
0.2%. During the prior month overall producer prices were up only 0.1%, while
core producer prices were up 0.4%.
As for consumer prices, they climbed 0.4% in February, while core
prices increased by a mere 0.1%. The increase to overall prices was precisely
what had been expected, on average, among economists polled by Briefing.com,
but the increase in core prices was actually less than the 0.1% increase that
had been generally expected. Both overall prices and core prices had increased
by 0.2% in the prior month.
In contrast to the consensus call for a drop to 15.0, the Empire
Manufacturing Survey for March improved to 20.2, which stands as its highest
level in well over a year. Meanwhile, the Philadelphia Fed Survey for March
improved to a multi-month high of 12.5, exactly as had been commonly
forecasted.
Industrial production in February was flat. That contrasted with
the Briefing.com consensus call for a 0.5% increase. Prior month numbers were
revised upward to reflect a 0.4% increase, though.
Overall action in the commodity complex drove the CRB Index to a
0.6% gain today. That was enough to put the CRB in positive territory for the
week. The corresponding 0.1% weekly gain comes after the CRB Index suffered
back-to-back weekly losses of 1.1% and 1.5%, respectively.
Precious metals were under pressure in electronic trading, causing
both gold and silver to hit lows of $1639.70 and $32.13, respectively, ahead of
pit trade. However, the pair was helped by renewed weakness in the dollar,
which was recently quoted with a loss of about 0.5% against a basket of
competing currencies. Gold prices settled at $1656.10 per ounce with a loss of
just $3.30, while silver settled at $32.61 per ounce with a loss of $0.11.
Oil benefited from relatively steady buying interest that kept the
energy component in positive territory all session. Gains mounted as the
session progressed, such that a session high of $107.30 per barrel was notched
only minutes before pit trade closed. Oil settled with a gain of $1.84 at
$107.03 per barrel. Natural gas popped into positive territory prior to the
open of floor trade. It gained a nickel to close the day at $2.33 per MMBtu.
The University of Michigan released its preliminary March reading
on consumer sentiment. A reading of 75.8 had been broadly anticipated to follow
the one-year high of 75.3 printed in the prior month, but instead the reading
eased down to 74.3. DJ30 -20.14 NASDAQ -1.11 NQ100 -0.1% R2K -0.2% SP400 -0.1%
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