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New year hangover for stocks: trading begins on a down note

Thursday, 2 Jan 2014 | 9:35 AM ET
Traders on the floor of the New York Stock Exchange.
Getty Images
Traders on the floor of the New York Stock Exchange.

We start with stocks on the downside—and some of this may be tax related. Several traders told me that many were reluctant to book any profits for taxes: after all, why pay taxes now when you can pay them a year and a half from now? Also, nobody has losses to pair them off on.

Chinese manufacturing data was weaker than expected, but here in the U.S most indicators are well into bullish territory: major indices are at or near historic highs, while the Investors Intelligence newsletter shows sentiment is relatively high (62 percent bullish, highest since October 2007).

Perhaps most importantly, Washington is far less a worry it was a year ago, as a budget deal is now in the offing. Incoming Federal Reserve chair Janet Yellen is continuing Ben Bernanke's policies, and there are lower deficit projections. All these are tailwinds for stocks.

Bottom line: the domestic economy is clearly improving...employment and discretionary spending are slowly getting better.

But we are going to need help...from Europe and Asia. In Europe, the euro zone was in recession for six straight quarters, but it began growing again (a modest 0.3 percent) in the second quarter of last year. That's why we saw strong growth in the stock markets in Europe in the second half.

Figuring out the rest of the world is a tougher call, the toughest of all being emerging markets. Last year, not many anticipated that the biggest event would be Japan's efforts to dramatically weaken its currency to increase exports.

Emerging markets were pressured by tapering talk in the U.S. The new Chinese, premier, Xi Jinping, made a big thing of an anti-corruption campaign and efforts to rein in excesses in the banking system. That put a break on growth there.

Elsewhere

1) As 2013 came to a close, Congress did not extend emergency unemployment benefits, with about 1.3 million people losing those payments. There is talk of extending those benefits retroactively to December 28th once Congress returns from recess, but the House has been saying they want any extension offset by spending cuts.

By CNBC's Bob Pisani

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  • A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

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