Most investors will be glad to put this dismal week in the markets behind them. The S&P 500, which had been hovering around the 2030 mark to begin the week — and even saw an upward push for a time on Tuesday — has now slipped to levels just under 2000.
As it is the beginning of earnings season, one might be obliged to think disappointing returns from big banks like JPMorgan (JPM) and Citigroup (C) have had a lot to do with this, but the surprise Swiss National Bank (SNB) decision to remove the Swiss franc from the euro, as well as a continually precipitous fall in oil prices, are having a larger effect.
Expect the drumbeats to get louder regarding the need of the European Central Bank (ECB) to install its version of QE policy next week. Expect next week's World Economic Forum in Davos, Switzerland to be rife with speculation regarding currency policy that investors hope will sop up all this uncertainty surrounding the markets, especially in light of the SNB decision yesterday.
This morning, the Consumer Price Index (CPI) report came out for December, with results coming in line at -0.4 percent. The core CPI number — minus food and energy — was +0.1 percent, unchanged from a month ago. Year over year, headline CPI reached +0.8 percent while core was at +1.6 percent. There have been no revisions to these previous numbers.
What do these numbers indicate? According to some analysts, they are more arrows in the quiver for the argument that the Fed will delay raising interest rates until sometime in 2016, rather than the mid-2015 timeline that was earlier expected. Without growth — and a December number nearly half a point to the negative would solidify a lack of growth — the Fed has no recourse for ratcheting up rates in the foreseeable future.
After the bell Thursday, Intel (INTC) posted even better earnings numbers than they had been in previous quarters — and Intel was one of the true success stories of 2014. The major chip-maker’s earnings beat reached 12 percent for Q4, indicating strength in its PC business during holiday season. Will this translate to other big-tech companies expected to report next week? Time will tell.
The market will enjoy a three-day weekend with Martin Luther King Day on Monday. However, we here at Zacks will remain on the clock, providing stock recommendations and industry analyses like any other work day. So keep informed with our up-to-date picks and outlooks, especially as Q4 earnings season accelerates into high gear.
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