Market Perspective for January 8, 2018

Stocks opened to mixed trading on Monday before moving on to new all-time highs. Technology pulled the market higher, while healthcare weighed. Semiconductors rebounded from last week’s flawed CPU news. iShares PHLX Semiconductor (SOXX) approached its all-time high. The Dow Transports also pushed into record territory.

The National Federation of Independent Business will publish its small-business index tomorrow. November’s reading of 107.5 was the highest since 1983. The Job Openings and Labor Turnover Survey (JOLTS) is also due. Economists expect 6.0 million November job openings.

Economists forecast a 0.2-percent increase in December producer prices. CPI is expected to rise by 0.1 percent, core CPI 0.2 percent. Analysts predict December retail sales rose 0.5 percent, with sales ex-autos up 0.3 percent.

Chinese inflation data, Eurozone industrial production, unemployment rates, and the minutes of the December meeting of the European Central Bank are due midweek.

German Chancellor Angela Merkel started talks with the largest opposition party on Sunday to avoid a minority government or new elections. iShares MSCI Germany (EWG) opened the year strong, but slipped on Monday. Elsewhere in Europe, U.K. Prime Minister Theresa May might appoint a new cabinet official to prepare for an EU exit without a deal in place.

The 10-year Treasury yield approached 2.5 percent in Monday trading before easing back. The yield bottomed at 2.0 percent in September. The U.S. Dollar Index opened the week with a gain. It bounced off critical support late last week and is trading close to 3-year lows.

West Texas Intermediate crude traded at $61 and change on Monday. WTI’s first rebound following the 2014 sell-off was in early 2015. It spent two months, in May and June, trying to rally past $62 and failing. Bulls are looking for a run to $70, but bears may give them a fight at $62 this week.

Earnings season will officially kick off on Friday with J.P. Morgan (JPM), Wells Fargo (WFC), BlackRock (BLK) and PNC Financial Services (PNC). Analysts forecast earnings increases at three firms, but JPM 2 cents below year-ago levels. Investors may focus on guidance as banks should benefit greatly from tax reform. Homebuilders Lennar (LEN) and KB Home (KBH), and Delta Air Lines (DAL) will also report this week.

 

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