EmailAccording to the Stock Trader's Almanac, February has been the second worst-performing month for the S&P 500 since 1950 with an average change of -0.1%. This February, however, couldn't have gotten off to a much better start.
The S&P 500 rallied 1.0% on Friday, bolstered by the unspoken message in the January employment report that the Fed isn't going to be pulling back on its accommodation anytime soon.
The rally on Friday pushed the Dow Jones Industrial Average above 14,000 and nudged the S&P 500 a little closer to the all-time high it reached in October 2007.
There is going to be some backpedalling at the start of today's session, though, as the S&P futures are trading 0.6% below fair value.
Brokerage downgrades of Wal-Mart (WMT) and Merck (MRK), combined with a resurgence of eurozone worries linked to political uncertainty in Spain and Italy, have contributed to the negative bias in the early going.
An underlying sense that the market is overbought on a short-term basis, and is due for a pullback, is another factor weighing on sentiment.
The deterioration of the futures trade has tracked the weak showing of the European markets. Italy and Spain lead losses there with declines of 2.9% and 2.4%, respectively. Major bourses in Germany, France, and the UK are all down at least 1.00%.
Allegations of corruption involving Spain's prime minister, along with a banking scandal and election uncertainty in Italy, have served as catalysts for the selling action that has also crossed over into sovereign bond markets. The yield on Italy's 10-year debt is up 12 bps to 4.41% while the yield on Spain's 10-year debt has climbed 20 bps to 5.39%.
This week's ECB meeting (Thursday) just got a little more interesting.
In turn, we have seen the US Treasury market battle back from overnight losses as the equity indication has worsened. The 10-year note yield, which pinged 2.06%, has fallen back to 1.99% in some risk-aversion buying.
Today's earnings news is somewhat mixed.
Sysco (SYY) missed the Capital IQ consensus estimate by a penny; Clorox (CLX) beat by $0.10 and boosted its FY13 guidance in-line with expectations; Royal Caribbean (RCL) beat by five cents, but issued FY13 guidance below the consensus estimate; and Humana (HUM) beat by $0.12 and issued Q1 EPS guidance above the consensus estimate.
Fourth quarter earnings overall have checked in better than expected. According to FactSet, the blended earnings growth rate (includes estimates for company's that haven't reported yet) is up to 4.0% versus 2.4% before Alcoa (AA) kicked things off on January 8.
--Patrick J. O'Hare, Briefing.com
