The averages got a nice mid week jolt from the Fed to help save what was an otherwise generally weak market. For the week, the Dow fell .5%, the S&P500 gained .1% while the Nasdaq led with a 1.1% gain.
Even though this didn’t look like a blockbuster week for stocks on the surface, it was actually a pretty solid performance. The averages were sitting on a string of quick and easy gains, closing each of the first three weeks of the year in the green. That meant a lot of big and small players would be looking to hit the sell button and lock in some profit going into the end of the month.
So regardless of the data, stocks were going to be under pressure. But as it turned out, the economic data actually continues to be pretty solid.
Earnings Still Solid
On the earnings front, Apple, Inc. (AAPL) chimed in with a monster quarter on Monday to tell the market that consumers will find a way to spend on things they don’t need. Fellow consumer stock Netflix, Inc. (NFLX) also scored big while Caterpillar, Inc.’s (CAT) solid quarter gave the market hope the global economy is stronger than thought.
There was also some respectable economic data on hand, with consumer confidence jumping to a 12-month high and Q4 GDP coming in at 2.8%. That was actually below expectations of 3.0%, but in the big picture, that is still solid GDP growth in a very tepid environment.
But the biggest news came from the Fed, extending its low interest rate policy into 2014. As has been the case for the last three years, that long-term trend is in play, where the Fed will do everything in its power to support employment and growth. That’s your weak-dollar policy supporting stocks and commodities, particularly gold.
But as always, in spite of mostly upbeat earnings and economic data, there is always the lingering threat that the Euro zone is going to implode and bring the whole thing down.
That is exactly how the market feels right now and why companies and investors just can’t seem to regain the swagger to spend and invest on stable ground. There is a huge cloud of uncertainty hanging over everything; politically, professionally and financially.
So as it stands, the averages are trading at an 8-month high and have rebounded close to 20% from the late September plunge. Overall, that’s some pretty solid upward momentum. But longer term, expect more polarity, where the market attempts to balance some decent economic news with total uncertainty in the Euro zone.
Let’s go ahead and talk about some updates:
With the Fed reaffirming its commitment to destroying the dollar this week, gold and anything gold related jumped to the top of the charts. Somewhere very high on that list is Market vectors Junior Gold Miners (GDXJ), adding 10% on the week. Even though that’s a nice gain for GDXJ, shares have really struggled and underperformed over the last few months. That means gold stocks look seriously undervalued compared to the S&P500 and gold. So if the gold trade starts to heat up again as the global central banks stimulate and dilute, gold miners should benefit.
Double Gold (DGP) was also strong, tacking on 7% of its own to trade within 16% of the 52-week high at $73. The physical price of gold, represented X2 in DGP, has been much more stable than gold mining stocks. You probably won’t see the long-term gains in gold that you will in the physical, but the ride will also be a lot less bumpy. That’s something to think about when you are investing in gold.
Kansas City Southern (KSU) suffered a bit of a setback this week, falling 8% in spite of another solid quarter. Revenue for the period was up 11% to $530 million while earnings jumped to 87 cents from 50 last year. It’s another great example of how energy and cost efficient shipping is in demand and thriving. In regard to why shares fell on the news, KSU is up more than 40% in the last 4 months, so it looks like the market may have gotten little ahead of itself. But longer-term, this stock is trading like a north-bound train, so it looks like we’ve got a winner on our hands.
Shifting back into the winners, we saw some nice movement from our prosthetics company Stryker Corp (SYK), adding 4% on the week on a strong Q4 results. Longer term, the 52-week high is still 18% away at $65.21, but this week’s 4% was a step in the right direction.
And finally, we have Apple, Inc. (AAPL), which…KILLED IT. Should we expect anything else from this company? I just got done reading Steve Jobs biography and it was incredible. I highly recommend it. It’s not a coincidence that Apple performs like it does. Steve Jobs was a mad man. Ya, he’s gone now, but his legacy lives on, and this company looks as unstoppable as ever. Shares were up 6% on the week for a new all-time high at $454.
That’s all for this week, but until next time, here is a good piece on 10 dividend paying stocks if you’re looking for more stability and yield in your portfolio. Enjoy!
**Vodicka Group is on vacation next week. We’ll be back in two weeks with our next update.**
Your Investment Partner,