New Year Brings New Money, Fresh Upgrades
S&P futures up 10 points pre-open...recently, the markets aren't a stranger to getting a jolt on the first trading day of the year. Since 2000, the S&P 500 has moved up or down 1 percent on the first day of the year six times. Each time that has happened, that day's gain or loss has had a perfect positive correlation to the market's direction that year. (When the S&P 500 has been up more than 1 percent on the first day of January, the index finished the year in positive territory, and vice versa.)
Start of the new year brings new money and...fresh upgrades:
Alcoa upgraded to buy at Deutsche Bank...Airgras upgraded to outperform at William Blair...Boeing upgraded to overweight at JP Morgan...Dahlman Rose increased the price target on rare earth proxy Molycorp to $85 (from $49)....Office Depot raised to buy at Janney...Deutsche Bank and Goldman Sachs initiated buy on General Motors ...
...and downgrades as well:
Intel cut to neutral at Piper Jaffray, and retailers getting downgraded at Jeffries: Aeropostale (ARO), Talbots (TLB), Tiffany (TIF), rue21 (RUE), Urban Outfitters (URBN) and Coach (COH).
Jeffries noted retail fundamentals will continue to improve, "However, we expect early year difficulties for specialty retail stocks driven by: 1) lapping more difficult compares, 2) the headline risk associated with rising sourcing costs and oil prices, and 3) less compelling valuations," Jeffries said.
1) Bank of America up 5 percent pre-open, settling disputes with Fannie Mae and Freddie Mac to buy back bad loans that were issued by Countrywide. It will cost BAC about $3 billion in provisions, but the perception that they are moving to clean up the Countrywide mess...on the first trading day of the year...is being greeted as good news. Still an overhang is the whole issue of the put-back of private mortgages...is that next?
2) Clorox falls 2.5 percent after the consumer goods company warned the earnings for its current second quarter would be between $0.57 and $0.63 - far below the Street's consensus of $0.73. Sales are expected to drop 3 percent to 4 percent thanks to slowing consumption impacting shipments throughout the first half. While the U.S. economy remains challenging, CEO Don Knauss does expect that sales will improve during the second half of the company's fiscal year.
3) Boeing is up fractionally after being upgraded to overweight at JPMorgan. Despite the continuation of 787 Dreamliner delays and defense spending cuts, JPMorgan believes Boeing's "core commercial aircraft business continues to improve" as production of the aircraft maker's 777 and 737 models increases due to stronger global demand.
4) The Santa Claus rally still working...barely. The rally calls for modest gains in the last five trading days of the year and the first two of the New Year...going into the new year, we are basically flat.
January has two barometers:
a) the first five trading days serves as an "early warning system." The Stock Trader's Almanac notes that years where the first five days were net up were followed by full-year gains 32 times or an 86 percent accuracy ratio.
b) the January barometer, which states that as goes January, so goes fthe year. Also devised by Yale Hirsch in 1972, this claims a 90 percent accuracy rate since 1950.
However, it did not work in the last two years, when January was down both years (by 8.6 percent and 3.7 percent, respectively) while both years had double-digit gains.
5) Estonian markets jumped 3 percent after the Baltic nation became the 17th country to adopt the Euro as its currency.
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