US Stock Market Trending Down
Canadian Stk Mkt Trending Up
We are seeing the underlying trends that resulted in a stock rally in 2013 change. In 2013, growth was accelerating most of the year and inflation remained tame. Interest rates and the value of the USD were going up (positive for the stock market). So far, in 2014 we are seeing growth SLOWING, inflation RISING and the USD and interest rates going DOWN. As a result, the US stock market has been correcting. So far the correction has been greater than any correction that occurred in 2013 and it may not be over yet.
The proprietary indicators that I use resulted in several of the strategies that I use moving to cash. So our cash position is higher than normal awaiting the signal for that money to be moved back into equities. The bonds funds have benefitted from the recent decline in yields.
All eyes will be on Janet Yellen today and we’ll see whether she is going to continue to add more punch to the punch bowl. If she hints that they will slow down their tapering (thus stimulated the economy more) we could see another market rally.
Market Summary from TRowePrice:
Week Ended February 7, 2014
Major indexes mixed for week
In a week dominated by economic headlines, large-cap stock indexes overcame a sharp early selloff and ended higher. Small- and mid-cap stocks ended the week lower, hurt by their greater vulnerability to weaker domestic growth signals. The smaller-cap indexes also held up better in the previous week’s declines, which may have made them more vulnerable to this week’s selling.
Disappointing manufacturing growth unnerves investors
Markets got off to a very poor start to the week following the release of disappointing manufacturing data. The Institute for Supply Management reported that the rate of growth in factory activity slowed sharply—although the sector continued to expand. Poor vehicle sales in January, which the auto makers attributed to fewer Americans venturing out to showrooms in the cold weather, added to the dour mood.
The coldest January in years may be partly to blame
T. Rowe Price economists agree that unusually severe winter weather may have been partially to blame for the downbeat economic data—the nation experienced its coldest January in two decades. However, they also note that very strong growth in the ISM index in the last months of 2013 was due for a correction, if only because wholesalers need to trim inventories. Regional surveys and other manufacturing gauges suggested that manufacturing activity continued to expand moderately in January.
Initial jobs data is reassuring
The disappointing manufacturing and auto data left investors waiting anxiously for labor market data later in the week. The initial reports were reassuring. Private payrolls firm ADP reported a healthy gain in its count of private sector jobs created in January, while Thursday’s weekly report on initial jobless claims showed a sharp drop.
Job growth data lags expectations, but households report better conditions
The Labor Department’s nonfarm payrolls report on Friday showed that employers added only 113,000 jobs in January, well below expectations. Investors appeared to focus on bad weather as an explanation, however, and stocks rallied as the week ended. T. Rowe Price economists note that a different government gauge of the labor market, known as the household survey, was more positive. The household survey showed a large increase in the number of Americans reporting that they had a job, helping bring down the unemployment rate to 6.6% in January—its lowest level since October 2008.
|Index2||Friday’s Close||Week’s Change||% Change
|S&P MidCap 400||1307.77||-7.13||-2.59%|
This chart is for illustrative purposes only and does not represent the performance of any specific security. Past performance cannot guarantee future results.