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Broadgate: Market News 16/1

16 January 2013

The Dow and S&P 500 edged higher on Tuesday after stronger-than-expected retail data, though tech heavyweight Apple dragged on the market for a third day.

Apple was the biggest weight on both the S&P 500 and Nasdaq100 .NDX after reports on Monday of cuts to orders for iPhone parts. Shares declined 3.2 percent to $485.92 and closed below $500 for the first time since February.

Retail stocks advanced after a government report showing retail sales rose more than expected in December was seen as a favorable sign for fourth-quarter growth. A separate report showed manufacturing activity in New York state contracted for the sixth month in a row in January.

“A little better-than-expected news on retail sales once again reinforces that the consumer remains alive and reasonably well,” said Mark Luschini, chief investment strategist at Janney Montgomery Scott in Philadelphia, which manages about $54 billion in assets.

Among retailers, American Eagle Outfitters Inc gained 4.8 percent to $20.58 and Gap Inc rose 3.4 percent to $32.46. The Morgan Stanley retail index .MVR advanced 1.5 percent.

Express Inc surged 23.8 percent to $17.40 after the apparel retailer raised its fourth-quarter and full year 2012 outlook.

The Dow Jones industrial average was up 27.57 points, or 0.20 percent, at 13,534.89. The Standard & Poor’s 500 Index was up 1.66 points, or 0.11 percent, at 1,472.34. The Nasdaq Composite Index was down 6.72 points, or 0.22 percent, at 3,110.78.

Apple’s stock has lost about 7 percent in the last three sessions and is down 8.7 percent since the start of the year.

“It’s tough to discern exactly what’s putting the pressure on it. But at the end of the day, its influence, considering it’s still 3 1/2 to 4 percent of the S&P 500 index, is being felt,” Luschini said.

“I attribute (it) to just some of the bloom coming off of the rose. They haven’t necessarily done anything wrong, as much as others have caught up.”

Also keeping investors on edge is the looming debt ceiling debate. On Monday, President Barack Obama rejected any negotiations with Republicans over raising the U.S. debt ceiling. The United States could default on its debt if Congress does not increase the borrowing limit.

Resolving the debt ceiling is more a question of how than if. Investors don’t expect a U.S. default, but they are also wary of another eleventh-hour agreement like the one in August 2011.

An expected lackluster earnings season, too, kept investors from taking aggressive bets. Analyst estimates for the quarter have fallen sharply since October. S&P 500 earnings growth is now seen up just 1.8 percent from a year ago, Thomson Reuters data showed.

Homebuilder Lennar reported a sharp rise in quarterly profit, but the stock declined 0.8 percent to $40.68 on worries that growth in orders was slowing.

Dell Inc shares added to Monday’s gains, ending up 7.2 percent to $13.17 after sources said talks to take the computer maker private are in an advanced stage.

On the down side, shares of Facebook dropped 2.7 percent to $30.10. The company unveiled a “graph search” feature that CEO Mark Zuckerberg said would help its billion-plus users sort through content within the social network and its content feeds.

Volume was roughly 5.8 billion shares traded on the New York Stock Exchange, the Nasdaq and the NYSE MKT, compared with the 2012 average daily closing volume of about 6.45 billion.

Advancers outpaced decliners on the NYSE by about 17 to 12 and on the Nasdaq by about 13 to 11.

Currencies

The yen extended its gain for the second day on Wednesday after a warning about its excessive weakness by a Japanese cabinet minister while the euro also slipped after a top European official complained about its recent gains.

Traders unwound bearish positions in the Japanese currency after Japan’s Economics Minister Akira Amari cautioned on Tuesday that excessive yen weakness could boost import prices, hurting people’s livelihood.

“The yen’s fall has been quite fast so far. If its fall is too fast, its reversal could be fast as well. It seems to me that Amari’s comments were intentional efforts to curb overheating in the market,” said Kimihiko Tomita, head of forex at State Street in Tokyo.

The dollar fell to as low as 88.06 yen, breaking below a key support at 88.25, the 50 percent retracement of its January 9-14 rally from 86.825 to a 2-1/2-year high of 89.67, as well as tenkan line on the Ichimoku charts.

It last traded at 88.33 yen, down 0.5 percent from late U.S. levels.

Many market players think the yen’s latest rebound is a small correction in a long-term downtrend, which started late last year on expectations that the Bank of Japan will be forced to take bold action to reflate a sluggish economy.

New Prime Minister Shinzo Abe has been very vocal about getting the BOJ to tackle deflation once and for all, calling for a two percent inflation target. The BOJ is widely expected to do just that at its policy meeting on Jan 21-22.

But some traders say there could be buy-on-rumor-sell-on-fact type of selling in dollar/yen after that meeting.

“I haven’t come across anyone who seriously thinks that the BOJ can boost inflation to two percent,” said Takako Masai, head of forex at Shinsei Bank, adding that the BOJ meeting could offer a good chance to exit bearish bets on the yen.

The euro also slipped 0.6 percent against the yen to 117.28 yen, as the single currency lost momentum after Jean-Claude Juncker, the chairman of the euro zone finance ministers said the euro was “dangerously high”.

The single currency also eased against the dollar, trading at $1.3289, down 0.1 percent on the day and pulling back from an 11-month high of $1.3404 set on Monday.

Traders said Juncker’s comments simply gave investors an excuse to cash in on recent gains and did not necessarily represent a reversal in its uptrend.

The euro had rallied some 3 percent against the dollar in the past few sessions after the European Central Bank (ECB) sounded more upbeat about the region’s recovery.

With most of the attention focused on the yen as well as the euro, the dollar shuffled sideways against other currencies. The Australian dollar, for instance, was little changed at $1.0561, still within striking distance of a 4-month peak near $1.0600 set last week.

Source:  Reuters.com

The information set out herein has been obtained from various public sources and is by way of information only. Broadgate Financial can accept no liability of any sort in relation thereto and readers should obtain their own verification of any statement before making any decision which may have any financial or other impact.

Neither the information nor the opinions herein constitute, or are they to be construed as, an offer or a solicitation of an offer to buy or sell investments.

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