Market volatility remained at the forefront last week, as the major indexes vacillated with a general down trend. While the Dow Jones Industrial Average did eke out a gain on Friday, the index is down 0.7% so far in January, compared to a loss of 0.5% for the S&P 500 and a gain of 0.5% for the Nasdaq.
Economic data was relatively positive on Friday with U.S. job openings reaching a five-year high, and December industrial production climbing more than forecast. Sectors of the S&P were mostly lower after a report showed that consumer confidence slipped more than expected. Treasurys gained ground (yields lower) and the dollar rose against major currencies.
The trade
Don't let emotions get the best of you. With volatility at the forefront of market action, hedging is expensive. Corporate earnings are shaping up reasonably well, supporting my thesis that markets will climb in the first quarter of 2014. With central banks acting constructively and inflation being non-existent, stocks are unlikely to fall sharply, so stay put and ignore market "noise" will likely prove the wisest (non)action this week.
Looking ahead
Overnight central-bank intervention by the People's Bank of China helped reverse a spike in yields, easing market concerns and reversing some early trading losses in Asian markets. U.S. equity futures are pointing to a higher open, as investors await key earnings reports from the likes of Verizon (VZ) , IBM (IBM) , Lockheed Martin (LMT) and McDonald's (MCD) this week. Market participants will also be focused on key economic data being released later this week, including Thursday's existing-home sales and home-prices reports, and PMI data.
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