Market Report – January 14, 2013

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MicroCap Market Report: The S&P 500 touched a five-year high earlier this week, but stocks finished the week in lethargic fashion, posting modest gains during Friday’s session. Overall, it was a decent though not extravagant week as the S&P 500 added 0.39 percent while the Dow Jones Industrial Average climbed 0.4 percent. Technology issues and small-caps showed some signs of leadership as the Nasdaq climbed 0.77% while the Russell 2000 Index touched a new all-time high.

Small-cap ebullience predictably lead to some good cheer for micro-caps as the iShares Russell Microcap Index Fund (NYSE: IWC) added 0.37 percent on the week while the Wilshire Micro-Cap ETF (NYSE: WMCR) climbed 2.2 percent. Importantly, both of those micro-cap ETFs are showing technical breakouts on their charts and both are not trading in new, higher ranges…positive signs indeed.

Capitol Hill quite…but for how long?

Overall, it probably would not be accurate to say this was a week full of risk appetite, but that is to be expected after the S&P 500 raced to its highest levels since 2007. It was a week light on headline risk and domestic data points. After what feels like an eternity of watching Capitol Hill, a break from political imbroglios is not such a bad thing.

The Markets @ 1/11/2013
Index Close Weekly % Change YTD Change YTD%
DJIA 13488.43 53.22 0.40% 384.29 2.93%
NASDAQ 3125.63 23.97 0.77% 106.12 3.51%
S&P 500 1472.12 5.65 0.39% 45.93 3.22%
NYSE Comp 8712.4 44.72 0.52% 268.89 3.18%
NYSE MKT  2401.72 13.05 0.55% 46.06 1.96%
RUS 2000 882.99 6.08 0.69% 33.64 3.96%
RUS MICRO 54.38 0.2 0.37% 2.06 3.94%
VANG INTL 47.65 0.45 0.95% 1.35 2.92%
CHINA INDEX 4662 90.02 1.97% 223.48 5.04%
EMERG MKTS 7202.32 -32.18 -0.44% 162.35 2.31%

MicroCap Market Report

Generally speaking…it was an “Up Week”

All except one index we follow closed the week in the GREEN…the majors were led by a 0.77% gain in the NASDAQ and a relatively modest 0.39% gain in the S&P 500…that is, relatively speaking, as compared to the robust 4.6% gain last week.

The Russell Microcap Index was up 0.37% for the week and is up 3.94% YTD.

Our China Index gained a gaudy 1.97% for the week and is now showing a 5.04% gain for 2013.

Microcaps were winners in 2012 and the trend continues into 2013

As we noted in our last issue… the Russell Microcap Index gained 17.18% for the year and the Russell 2000 gained 14.63%. With the Russell Microcap up close to 4% at 3.94 in the first half of January, the Russell 200 was not to be outdone…it’s up 3.96% YTD. Our micros are off to a good start.

Our Emerging Markets Index was the only one to disappoint this week…off 0.44%, but still up 2.31% YTD.

The Dollar showed mixed results for the week ending 1/11/2013

The US Dollar loss a bit against the Euro (closing at 0.7495 Euros; minus $0.0157 for the week); bonds reversed the trend and moved higher…the 10-year bond gained $0.39 to close at $97.80 and the 30-year bond gained $1.09 to close at $94.11.

Oil prices continue slight upward move

WTI Crude Oil gained $0.49 this week to close at $93.56. Here’s a more conservative opinion for oil prices this year. David McCormack on commented… Today, West Texas Intermediate crude (WTI) is at $93 a barrel. I predict that growing demand and Middle East conflict will provide moderate upward pressure, but that 2013 will not bring us an oil shock. Oil prices will remain high, but stable and 2013’s average WTI price should not exceed $97 a barrel.”

Gold moved higher this week, up$11.90…to close at $1,660.00; but where does it go from here?

Gold Price Forecast by Nadeem Walayat, “The Market Oracle”

The bottom line is that whilst the Gold bull market will likely continue until ZIRP ends, however Gold bugs are not going to like hearing that the best years of gains are now probably behind gold, and that the best they can expect to achieve is gains of about 10% per annum as Gold is now in a mature bull market. Therefore my analysis resolves to the following key conclusions for 2013 –

1. That Gold looks set to trade within a range for most of the year of between $1550 and $1800.

2. That Gold should trend higher towards the end of the year with overall probability targeting a year end close in the region of $1760, which on the last close of $1660 implies a gain of about 6%, with a 40% risk of a small down close year i.e. between $1659 and $1550.

Click on this link for the full article:

In economic news…as was noted in our opening comments, it was a quiet week on the economic data front with just one report of significance released during the week. Initial claims for jobless benefits rose to 371,000 last week from 367,000 the previous week. It was the fourth consecutive week of higher readings. Analysts expected a reading of 365,000 new claims. The less volatile four-week moving average rose to 365,750 from 359,000.

However, there were some marquee earnings reports out during the week. Dow component American Express (NYSE: AXP) said it expects a fourth-quarter profit of $637 million, or 56 cents per share, compared with $1.2 billion, or $1.01 per share, a year earlier. On an adjusted basis, the company will earn $1.2 billion, or $1.09 per share on revenue of $8.01 billion. Analysts expected EPS of $1.06 on revenue of $8.01 billion.

American Express is taking an after-tax charge of $287 million related to 5,400 job cuts announced on Thursday. The company will report those results in full on January 17.

Wells Fargo (NYSE: WFC) reported a fourth-quarter profit of $4.9 billion, or 91 cents per share, up from $3.9 billion, or 73 cents per share, a year earlier. Revenue rose 7% to $21.9 billion. Analysts expected a profit of 87 cents on revenue of $21.3 billion.

All of this is important because an array of big name U.S. companies report earnings next week, including Bank of America (NYSE: BAC), Citigroup (NYSE: C), Goldman Sachs (NYSE: GS) and J.P. Morgan Chase (NYSE: JPM) and those are just the type of stocks that could determine near-term risk appetite.

The Bottom Line for Stocks

Next week is heavier on economic reports with the housing starts numbers and the Philadelphia Federal Reserve factory activity index due out on Thursday and the Thomson Reuters/University of Michigan consumer sentiment number slated to be released Friday.

In other words, for one week at least, it will be all about earnings and data, not politics. That is just the way the market should be. Clearly, micro-cap financials have a chance to rally next week if they can catch a bid on the back of their large-cap counterparts. As we suspected, energy and materials micro-caps are starting to creep higher as well.

In last week’s post, the microcap we suggested you start tracking, Black Ridge Oil and Gas (ANFC) gained 8.3%. Keep this one on your radar if you like the energy sector.

Research and Editorial Staff
MicroCap MarkePlace
Mike Casson, Executive Editor

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