Pressure Points If the first trading day of January was any indication, then 2015 could have its share of ups and downs. Well know more in due time, but what is known now is that the stock market is on track to begin the second trading day of January on a down note. The S&P futures, at 2041, are 12 points, or 0.6%, below fair value. Most of the early attention is focused on the euro (1.1917), which plumbed a 9-year low in overnight action amid reports that German Chancellor Merkel opined that a Greek exit from the eurozone would be manageable. This wasnt her prediction, mind you, yet the glimpse of her mindset has touched off an episode of uncertainty that has pressured the euro and has pressed the dollar higher. The dollars strength, which is evident in a 0.7% gain in the U.S. Dollar Index, is weighing on commodity prices along with festering concerns about end demand. Oil (-3.6% to $50.77/bbl) and copper (-2.1% to $2.76/lb) prices clearly reflect those dual pressure points. Other pressure points weighing on the futures market include a JPMorgan Chase downgrade of Caterpillar (CAT) to Underweight from Neutral, a Citigroup downgrade of Chevron (CVX) to Neutral from Buy, a Morgan Stanley downgrade of Amgen (AMGN) to Equal Weight from Overweight, and a general sense of angst that the huge rally in the latter half of December set the market up for a pullback phase in early 2015. The stock market is under a lot of pressure to justify a 6.0% gain in two weeks, so in the absence of positive data points, its mind can drift pretty easily to negative developments that raise questions about the validity of that move. To that end, falling oil prices arent being talked about so much these days as an overwhelmingly positive development. Instead, the markets consciousness is allowing for the possibility that there could be some latent financial, or economic, risk in the plummeting price of oil and the commensurate collapse in copper prices, which have fallen 16% from their highs last July. Again, its not a given. Its just a thought process that is driving some selling pressure to begin the year. Auto sales for December will be reported throughout the day; otherwise, there arent any economic releases on the calendar today. That will leave the stock market to dwell largely on currency and commodity price swings and to ruminate about what it all could ultimately mean for monetary policy here and around the globe. Vacation time is over. Its back to business.
Posted on: Mon, 05 Jan 2015 14:03:18 +0000
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