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Market Update

Oil, Greece Bring Waiting Game to Stocks

February 20, 2015

Friday is possibly shaping up to mirror Thursday’s very narrow stock action, a day that left the Dow Jones Industrial Average (DJIA) and S&P 500 (SPX) just below the flat line but the tech- and bio tech-concentrated NASDAQ Composite logging a seventh straight gain (figure 1). Oil’s quick rebound after a blip lower on a surprisingly strong inventory build looked to help support the broader stock market. And, of course, a decision on Greece looms.

FIGURE 1: SEVEN STRAIGHT. The NASDAQ Composite has flashed green for seven uninterrupted sessions through Thursday. It’s tipping higher early Friday, in largely unchanged broad-market action. Data source: NASDAQ. Chart source: TD Ameritrade’s thinkorswim® platform. For illustrative purposes only. Past performance does not guarantee future results.

Hard Deadline or More Delay? A potential last-ditch effort on the part of Greece finance officials to rework their loan but limit the degree of austerity requirements hangs over financial markets. The pending news may be keeping stock markets in suspense but the degree of impact is fairly muted. In fact, U.S. stock averages and even most of Europe’s are on track for weekly gains. What’s the difference between now and 2011-2012, which was the last time Greece’s debt problems risked sinking the European financial system? Most analysts argue that the risk of contagion, or Greece tugging other smaller euro-zone countries down with it and compromising the whole Continent, is much lower now than then. The euro/dollar is drifting back down toward the cycle-low, buying $1.1327 early Friday compared to $1.1369 late Thursday and some currency strategists have commented on the relative stability in the euro considering the euro-zone make-up may have to change. Uncertainty on U.S. interest-rate hike timing is also likely holding the dollar in check. So, stay tuned for the conclusion (or further delay) to these tense talks, with Germany apparently still standing its ground.

Oh Deere, What Happened? The tractor and equipment-maker did its best to prepare Wall Street for a disappointing quarter hurt by a global ag slump and the strong dollar. And it STILL disappointed to the downside with figures released late Thursday, sending shares about 1% lower in early action on Friday. Deere & Co. said its net income was $386.8 million, or $1.12 per share, for the quarter that ended Jan. 31, the equipment-maker's first fiscal quarter of 2015. That was a drop of 43% from the year-earlier net income of $681.1 million, or $1.81 per share. Worldwide revenues for the first quarter decreased 17%, to $6.383 billion, compared with $7.654 billion last year. Deere's ag business slumped, but other operations were strong and able to follow up a Street-beating performance in the previous quarter.

Coming Next Week. Next week wraps up the month which can sometimes invite interesting flows from 401(k) funds and others. Keep an eye on that. But really the story is the variety basket of economic measures coming our way: existing home sales and new home sales, both good proxies for consumer confidence and consumer as we continue to ask, where is all this job growth taking the broader economy? Also on tap: durable goods data that follow a very disappointing report last month. Consumer price inflation and GDP, the broadest of economic measures also hit. We should be able to take a pretty good temperature reading of the U.S. economy by week’s end.

Good trading,

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