Market Report – October 22, 2012

Filed under: Investor Blogs |

In The Rear View Mirror:

Despite a Friday sell that resulted in the worst one-day performance for U.S. equities since June, the S&P 500 was able to eke a small weekly gain. The same cannot be said of the Dow Jones Industrial Average, which plunged more than 200 points on Friday, sending the blue-chip index into the red on the week.

The Nasdaq was little changed, an accomplishment considering the carnage wrought by the accidental pre-announcement of Google’s (NASDAQ: GOOG) unimpressive third-quarter results on Thursday.

Black Monday in the news again

The irony of Friday’s sell-off will not be lost on history buffs because Friday was the 25th anniversary of the Black Monday dive. On that day in 1987, the Dow tumbled 23 percent.

This is how far we have come in those 25 years: If the Dow lost that much today, it would be the equivalent of 3,000 points, according to MarketWatch.

With earnings quality mediocre at best and fear and unease elevated last week, it was a tricky week for micro-caps broadly speaking. The iShares Russell Microcap Index Fund (NYSE: IWC) lost nearly two percent on the week and is now looking vulnerable on a technical basis. The Guggenheim Wilshire Micro-Cap ETF (NYSE: WMCR) outperformed its iShares rival, losing just 0.4 percent for the week. WMCR’s chart looks a little bit better at the moment.

The Markets @ 10/19/2012
 
Index Close Weekly % Change YTD Change YTD%
DJIA 13343.51 14.66 0.11% 1125.95 9.22%
NASDAQ 3005.62 -38.49 -1.26% 400.47 15.37%
S&P 500 1433.19 4.6 0.32% 175.59 13.96%
NYSE Comp 8324.15 97.07 1.18% 847.12 11.33%
NYSE MKT  2408.54 -17.43 -0.72% 130.2 5.71%
RUS 2000 821 -2.09 -0.25% 80.08 10.81%
RUS MICRO 315.59 -5.05 -1.57% 39.87 14.46%
VANG INTL 14.41 0.2 1.41% 1.35 10.34%
USX CHINA 4315.65 3.2 0.07% -214.15 -4.73%
EMERG MKTS 6737.02 69.18 1.04% 731.71 12.18%

Market Report

In economic news, the Labor Department said the Consumer Price Index rose 0.6% last month, matching the increase seen in August. Economists expected an increase of 0.5% in September.

The Federal Reserve said industrial production increased 0.4% in September following a 1.4% drop in August. Economists expected a September increase of 0.2%.

The Commerce Department said housing starts surged 15% last month to a seasonally adjusted annual rate of 872,000 units. The September reading is the best since July 2008. The Philadelphia Federal Reserve Bank said its business activity index for October rose to 5.7 from minus 1.9 in September. Economists expected an October reading of one.

Initial claims for jobless benefits rose by 46,000 to 388,000 last week. The less-volatile four-week moving average increased 750 to 365,500 claims.

The week ended with a thud!!!

On Friday, the DJIA lost 205 points (-1.52%); NASDAQ lost 2.19%; S&P 500 down 1.66%; NY Composite minus 1.41%…that’s a complete sweep for the majors.

Every index we track flashed red with the exception of our Emerging Markets metric…which was flat…0.00%.

Poor corporate earnings reports drove the market lower…Microsoft, General Electric and McDonald’s disappointed investors; in fact, all 10 industry groups in the S&P 500 fell as bad news continued to pour into the market.

Gold continued its downward trend…off $35.20 last week…closing at $1,722.80

Jon Nadler, senior analyst at Kitco.com, says gold buying in China and India is down significantly and it’s putting a damper on gold prices. The Street.com

The US Dollar was basically unchanged against the Euro (closing at 0.768 Euros, -$0.0040); bonds lost the little ground they gained last week…the 10-year bond was off $0.969 to close at $98.750 and the 30-year bond lost $2.000 to close at $96.359.

WTI Crude Oil gave back $1.81 to close at $90.05 on Friday.

The Bottom Line for Stocks

One pleasant surprise has come by way of a sector that we have been mentioning quite a bit lately, that being financials. For the most part, earnings reports from the large-cap banks have been decent if not quite good and that could portend positive tidings for the higher quality micro-cap regional banks.

Another sector that has held up quite well for essentially all of this year has been consumer discretionary. That group deserves plenty of credit for delivering solid gains amid economic data points that can be described as volatile at best.

While many discretionary names across the various market cap spectrums do appear a tad overbought, it does pay to remember that the group usually performs quite well in the fourth quarter and the early part of the first-quarter. To that end, it would be advisable to have some micro-cap discretionary or retail names on your shopping list.

Research and Editorial Staff
MicroCap MarkePlace
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