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Market Update

U.S. Focus Back on Earnings as Greece Put in its Place

February 5, 2015

Early indicators point up for U.S. stocks as a late-day scare from Greece apparently looks a little better in the light of a new day. That wasn’t the case initially as stocks slumped in late trading Wednesday and remained volatile overnight. Investors scurried into U.S. bonds and back out again. All attention was on a European Central Bank snub of Greece’s planned use of Greek bonds as collateral as the troubled nation works to whittle down its debt. That means the newly elected government may not have the flexibility it sought to refinance but it also means the rest of Europe continues to hold a hard line when it comes to Greece. That is, perhaps, what allowed Wall Street to exhale today?  Still, enough negative news continues to pepper trading, limiting the S&P 500 (SPX) once again from a fresh charge above key resistance at 2050 (see figure 1). The market may opt to mark time ahead of Friday’s highly anticipated January payrolls report.  


Range Bound. The broader S&P 500 (SPX) lately moves within a band of 1980-1990 as support and 2050 -2060 as resistance; it pulled back in a hurry from 2050 late in Wednesday’s session. Data source: Standard & Poor’s. Chart source: TD Ameritrade’s thinkorswim® platform. For illustrative purposes only. Past performance does not guarantee future results.

Social Stocks Due Up. The social sector is in the earnings spotlight after hours Thursday. Twitter (TWTR) is due to report and while its revenue figures have largely impressed its Street fans, increased pressure on user numbers persists. Twitter ended Q3 with 284 million monthly active users. That was an increase of less than 5% from Q2. By and large, Street analysts don't think Twitter can reverse this slowdown in user growth and they have reduced expectations for Q4. In fact, they estimate user growth of just 2.8% to 292 million. That would be the smallest quarterly gain in Twitter's history. Now, Twitter is already out with some headlines this week, including the announcement that tweets will return to Google (GOOGL, GOOG) search. Stay tuned for the after-hours release. LinkedIn (LNKD) is also due to report its latest results.

Cloudy Claims Data? Another clue filters in ahead of Friday’s employment report. Labor data out this morning shows that the number of people who applied for U.S. unemployment benefits rose by 11,000 to 278,000 in the seven days ended Jan 31; it was as big a climb as Street economists had braced for. The average of new claims over the past month, meanwhile, fell by 6,500 to 292,750. Also, the government said continuing claims increased by 6,000 to a seasonally adjusted 2.4 million in the week ended Jan 24. Continuing claims reflect the number of people already receiving benefits. Little new news in today’s report (what about tomorrow’s, though?) to sway the Federal Reserve. There’s no sign U.S. inflation is moving higher, said Eric Rosengren, the president of the Boston Federal Reserve in a speech in Germany Thursday. “A policy of patience in the United States continues to be appropriate,” he said.

Deal Boost.  In other news Thursday, more M&A to rally the bulls. This time, Pfizer (PFE) agreed to buy Hospira (HSP), a maker of injectable drugs and infusion technologies, for about $16 billion.

Good trading,

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