Saturday, January 26, 2013

Bears hibernate as stocks near record highs

By Ryan Vlastelica

NEW YORK (Reuters) - Stocks have been on a tear in January, moving major indexes within striking distance of all-time highs. The bearish case is a difficult one to make right now.

Earnings have exceeded expectations, the housing and labor markets have strengthened, lawmakers in Washington no longer seem to be the roadblock that they were for most of 2012, and money has returned to stock funds again.

The Standard & Poor's 500 Index (^GSPC) has gained 5.4 percent this year and closed above 1,500 - climbing to the spot where Wall Street strategists expected it to be by mid-year. The Dow Jones industrial average (^DJI) is 2.2 percent away from all-time highs reached in October 2007. The Dow ended Friday's session at 13,895.98, its highest close since October 31, 2007.

The S&P has risen for four straight weeks and eight consecutive sessions, the longest streak of days since 2004. On Friday, the benchmark S&P 500 ended at 1,502.96 - its first close above 1,500 in more than five years.

"Once we break above a resistance level at 1,510, we dramatically increase the probability that we break the highs of 2007," said Walter Zimmermann, technical analyst at United-ICAP, in Jersey City, New Jersey. "That may be the start of a rise that could take equities near 1,800 within the next few years."

The most recent Reuters poll of Wall Street strategists estimated the benchmark index would rise to 1,550 by year-end, a target that is 3.1 percent away from current levels. That would put the S&P 500 a stone's throw from the index's all-time intraday high of 1,576.09 reached on October 11, 2007.

The new year has brought a sharp increase in flows into U.S. equity mutual funds, and that has helped stocks rack up four straight weeks of gains, with strength in big- and small-caps alike.

That's not to say there aren't concerns. Economic growth has been steady, but not as strong as many had hoped. The household unemployment rate remains high at 7.8 percent. And more than 75 percent of the stocks in the S&P 500 are above their 26-week highs, suggesting the buying has come too far, too fast.


All 10 S&P 500 industry sectors are higher in 2013, in part because of new money flowing into equity funds. Investors in U.S.-based funds committed $3.66 billion to stock mutual funds in the latest week, the third straight week of big gains for the funds, data from Thomson Reuters' Lipper service showed on Thursday.

Energy shares <.5SP10> lead the way with a gain of 6.6 percent, followed by industrials <.5SP20>, up 6.3 percent. Telecom <.5SP50>, a defensive play that underperforms in periods of growth, is the weakest sector - up 0.1 percent for the year.

More than 350 stocks hit new highs on Friday alone on the New York Stock Exchange. The Dow Jones Transportation Average (.DJT) recently climbed to an all-time high, with stocks in this sector and other economic bellwethers posting strong gains almost daily.

"If you peel back the onion a little bit, you start to look at companies like Precision Castparts (PCP), Honeywell (HON.N), 3M Co (MMM) and Illinois Tool Works (ITW) - these are big, broad-based industrial companies in the U.S. and they are all hitting new highs, and doing very well. That is the real story," said Mike Binger, portfolio manager at Gradient Investments, in Shoreview, Minnesota.

The gains have run across asset sizes as well. The S&P small-cap index (.SPCY) has jumped 6.7 percent and the S&P mid-cap index (.MID) has shot up 7.5 percent so far this year.
Exchange-traded funds have seen year-to-date inflows of $15.6 billion, with fairly even flows across the small-, mid- and large-cap categories, according to Nicholas Colas, chief market strategist at the ConvergEx Group, in New York.

"Investors aren't really differentiating among asset sizes. They just want broad equity exposure," Colas said.

The market has shown resilience to weak news. On Thursday, the S&P 500 held steady despite a 12 percent slide in shares of Apple after the iPhone and iPad maker's results. The tech giant is heavily weighted in both the S&P 500 and Nasdaq 100 (.NDX) and in the past, its drop has suffocated stocks' broader gains.


In the last few days, the ratio of stocks hitting new highs versus those hitting new lows on a daily basis has started to diminish - a potential sign that the rally is narrowing to fewer names - and could be running out of gas.

Investors have also cited sentiment surveys that indicate high levels of bullishness among newsletter writers, a contrarian indicator, and momentum indicators are starting to also suggest the rally has perhaps come too far.

The market's resilience could be tested next week with Friday's release of the January non-farm payrolls report. About 155,000 jobs are seen being added in the month and the unemployment rate is expected to hold steady at 7.8 percent.
"Staying over 1,500 sends up a flag of profit taking," said Jerry Harris, president of asset management at Sterne Agee, in Birmingham, Alabama. "Since recent jobless claims have made us optimistic on payrolls, if that doesn't come through, it will be a real risk to the rally."

A number of marquee names will report earnings next week, including bellwether companies such as Caterpillar Inc (CAT), Inc (AMZN), Ford Motor Co (NYS:F) and Pfizer Inc (PFE).

On a historic basis, valuations remain relatively low - the S&P 500's current price-to-earnings ratio sits at 15.66, which is just a tad above the historic level of 15.
Worries about the U.S. stock market's recent strength do not mean the market is in a bubble. Investors clearly don't feel that way at the moment.

"We're seeing more interest in equities overall, and a lot of flows from bonds into stocks," said Paul Zemsky, who helps oversee $445 billion as the New York-based head of asset allocation at ING Investment Management. "We've been increasing our exposure to risky assets."

For the week, the Dow climbed 1.8 percent, the S&P 500 rose 1.1 percent and the Nasdaq advanced 0.5 percent.

(Reporting by Ryan Vlastelica; Additional reporting by Chuck Mikolajczak; Editing by Jan Paschal) Yahoo news

Monday, January 14, 2013

U.S. economy to grow 2.5 percent this year: Fed's Evans

HONG KONG (Reuters) - The U.S. economy is expected to grow by 2.5 percent in 2013, improving to 3.5 percent growth in 2014, top Fed official Charles Evans said on Monday.

Evans also forecast the U.S. unemployment rate would be 7.4 percent this year, easing to about 7 percent in 2014.

"One good indicator of labor market improvement would be if we saw payroll employment increase by 200,000 each month for a number of months. We've been averaging about 150,000, but it's been very uneven ... we need a higher pace of employment growth and less volatility in that pace," Chicago Fed President Evans said.


Stock index futures trade flat to higher

LONDON (Reuters) - Stock index futures pointed to a flat to higher open on Wall Street on Monday, with futures for the S&P 500 up 0.1 percent at 0844 GMT.
Dow Jones and Nasdaq 100 futures were unchanged.

European shares were also flat, with the FTSEurofirst 300 (.FTEU3) just shy of a two-year high. The pan-European index has risen almost 3 percent since the start of the year.

The U.S. economy is expected to grow by 2.5 percent in 2013, improving to 3.5 percent growth in 2014, top Fed official Charles Evans said on Monday. Evans also forecast the U.S. unemployment rate would be 7.4 percent, easing to about 7 percent in 2014. Fed Chairman Ben Bernanke speaks at 2100 GMT. [ID:nL4N0AJ1JA]
Americans are beginning to feel the pinch from austerity measures. Paychecks across the country have shrunk over the last week due to higher federal tax rates, and workers say they are cutting back on spending.

Apple Inc (AAPL.O) has almost halved its order with suppliers of LCD panels for the iPhone 5 in the current quarter due to weak demand, Japanese daily Nikkei reported on Monday.

Oracle Corp (ORCL.O) released an update to its Java software for surfing the Web on Sunday, which security experts said fails to protect PCs from attack by hackers intent on committing cyber crimes.

Transocean Ltd (RIG.N) said billionaire activist investor Carl Icahn bought a 1.56 percent stake in the offshore rig contractor and is looking to increase his holding.
Japan Airlines Co (JAL) <9201.T> said on Sunday that a Boeing Co (BA.N) 787 Dreamliner jet undergoing checks in Tokyo following a fuel leak at Boston airport last week had leaked fuel during tests earlier in the day.

Pickup truck sales are expected to outpace the broader U.S. auto market this year helped by a recovering housing market and a slew of new models from the three big U.S. automakers, executives and analysts said on Sunday.

American International Group Inc (AIG.N) has filed a lawsuit against a vehicle created by the Federal Reserve Bank of New York to help bail out the insurer, in a bid to preserve its right to sue Bank of America Corp (BAC.N) and other issuers of mortgage debt that went sour.

Bank of America Corp directors have reached a $62.5 million settlement to resolve investor claims over the bank's acquisition of Merrill Lynch & Co, a person familiar with the matter said, after a federal judge expressed reservations about an earlier version of the accord.

JPMorgan Chase & Co's (JPM.N) board is expected to dock the 2012 bonuses of Chief Executive James Dimon and another top executive because of the "London Whale" trading debacle, the Wall Street Journal reported, citing people close to the company.

The first big earnings week of 2013 features major banks Goldman Sachs (GS.N) and JPMorgan Chase & Co, as well as online retailer eBay (EBAY.O) on Wednesday.

Thursday's reports include Citigroup, Bank of America and chip maker Intel (INTC.O). General Electric, the largest U.S. conglomerate, is due to post fourth-quarter earnings on Friday.

The Dow Jones industrial average (^DJI) gained 17.21 points, or 0.13 percent, to 13,488.43. The Standard & Poor's 500 Index (^GSPC) dipped 0.07 points to 1,472.05. The Nasdaq Composite Index (^IXIC) added 3.88 points, or 0.12 percent, to 3,125.64.

(Reporting By Francesco Canepa; Editing by John Stonestreet) yahoofinance

Saturday, January 5, 2013

Most profitable hedge fund: SAC Capital

SAC Capital International, Cohen’s flagship fund, was the world’s most profitable hedge fund in the first 10 months of 2012, earning $789.5 million for Cohen, 56, and his managers, according to Bloomberg Markets’ annual ranking of hedge funds.

SAC Capital International is No. 1 not because of performance; it ties for No. 86 on that measure, with a 10 percent return in the Markets ranking of the 100 top-performing funds. Rather, the fund earned the most money because Cohen charges some of the highest fees on Wall Street. While most funds impose a 1 to 2 percent management fee and then take 15 to 20 percent of the profits, Cohen levies 3 percent and as much as 50 percent, according to investors.

The fund manager, who’s largely an equities investor, has produced an average annual return of 30 percent since starting his firm two decades ago. He’s had just one money-losing year, 2008, when the flagship fund tumbled 19 percent. For calendar 2011, he and his managers shared $907 million. The hedge fund has been closed to new investors since August 2011.

U.S. economy increase by 155,000 jobs (December)

The unemployment rate is at 7.8%, the same as November.

Despite the threat of the so-called fiscal cliff employers kept hiring at a slow and steady pace in December. The job growth has been mediocre in which older workers and men garnered most of the gains and healthcare, restaurants and temporary-help firms accounted for almost half of the new payroll jobs.

The economy grew by 155,000 jobs last month, in line with analysts' expectations and right at the average monthly pace of growth over the last two years. Job growth for November was revised up slightly to 161,000 after October brought an increase of 137,000, the Bureau of Labor Statistics said Friday.

The nation's unemployment rate ended the year at 7.8%, the same as the revised figure for November. That rate, also hit in September, is the lowest since January 2009.

source latimes