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Market Update

Swiss Avalanche Rolls On? Stocks Remain Volatile

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January 16, 2015

The stock market is staring down a sixth straight loss today after a surprise move by the Swiss to unpeg their currency (now affectionately known as the Swiss Mess) kicked off a volatile session on Thursday. Friday has the makings of a hangover trade in stocks from continued currency-market volatility—the highest measurable currency volatility since June 2013. Fridays have been notably volatile in recent weeks as major participants showed their reluctance to sit on risk into the weekend. Amid the forex flurry, the S&P 500 (SPX) closed below 2000, a feat that leaves the bulls wringing their sweaty hands a little. That move leaves the broader market now talking about SPX support at 1981.

FIGURE 1: S&P 500 (SPX) charted on TD Ameritrade’s thinkorswim® closed below the closely watched 2000 line. Data source: Standard & Poor’s. For illustrative purposes only. Past performance does not guarantee future results.

Inflation No-Show. Inflation is a tricky little beast. It eats up the value of your buck and your portfolio. Too much, not good. That’s the easy part. But any growing economy should have a certain amount of inflation to give pricing power some traction (just ask Europe). In the U.S., the puzzle lies with trying to figure out just how short term (or transitory, the Fed likes to say) are some of these drags on prices, the energy space in particular. This morning’s report showed U.S. consumer prices fell 0.4% in December, the largest drop since the end of 2008; it was about in line with Street expectations. Energy prices plunged 4.7% in December, the biggest drop since the end of 2008, as gasoline fell 9.4%. Excluding the volatile categories of food and energy, the "core" reading of inflation showed that prices were unchanged in December. Industry economists had expected core inflation of 0.1%. Now bigger picture:  Consumer prices grew 0.8% in 2014—the second smallest calendar-year increase in the last five decades.

Another Bank Disappoints. Count Goldman Sachs (GS) among the big investment banks with a sloppy quarter hit with weaker trading revenue. GS reported a profit of $2.17 billion, compared with a year-earlier profit of $2.33 billion. On a per-share basis, Goldman's profit was $4.38. That did beat analysts polled by Thomson Reuters, who had expected earnings of $4.32 a share. Revenue fell to $7.69 billion. Analysts had expected $7.64 billion.

Narrow Miss for Intel’s Outlook. Intel (INTC) moves in choppy early trading after matching Street expectations with a Q4 revenue figure reported after hours on Thursday. The bigger deal may lie in its guidance. It indicated Q1 sales could be slightly below earlier expectations and what industry analysts had been expecting. For the first three months of 2015, the chipmaker is anticipating sales of $13.7 billion, plus or minus $500 million, compared with the Street consensus of $13.8 billion.

Good trading,
JJ
@TDAJJKinahan

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