It would be hard to imagine a week with more major storylines than this past one, both market-related and otherwise.
CNN might have been even busier than CNBC and Bloomberg, scrambling correspondents to the Northeast “Nemo” snow recovery, the Grammys in Los Angeles, Washington for the SOTU, the Vatican, the Big Bear area of California, the Gulf Coast for the Carnival story, the tragic alleged murder case in South Africa, and the meteor incident in Russia.
But then again, the financial media also had a hectic week, with deep interest itself in the SOTU, along with “Merger Thursday,” the complicated “currency wars,” Ackman vs. Icahn (Herbalife), some disappointing GDP numbers out of Europe, the continued earnings parade, and the ongoing saga of David Einhorn and Apple management.
On this latter point, Apple’s CEO caught headlines at a Goldman Sachs conference in San Francisco. According to CNET, Cook refuted Einhorn’s claims that Apple “has a Depression-era mindset” and called the lawsuit filed by Einhorn’s Greenlight hedge fund (over preferred stock) a waste of time and money. Cook’s direct comments:
"I don’t know how a company with a Depression-era mindset would have done all those things (make ‘bold and ambitious’ product investments). It’s an incredible privilege for us to be in a position where we can seriously consider returning additional cash to our shareholders.
Frankly, I find it bizarre that we would find ourselves being sued for doing something that’s good for shareholders. I think it’s a silly sideshow, honestly. And my preference would be that everyone on both sides of the issue would take the money they’re spending on this and donate it to a worthy cause. That would be a lot better use of funds.”
Apple stock teased investors with a pop on Monday off Topeka Capital’s call for a “cheaper” iPhone being released by “mid-year,” the buzz around a rumored “iWatch,” and perhaps the reports that Apple management was “willing to listen to the concerns of shareholders” (i.e., Einhorn). That optimism faded after the Cook remarks, and shares bounced around before finishing the week with a -3.1% loss (reports of 4th Qtr. large fund sales of AAPL did not help, as cited by Reuters and others).
The broad market indices fared better, with the major indices having a very tight range week and ending around the flat line. For the week, the S&P put in its seventh consecutive week of gains at a very modest +0.1%. The Dow had its second weekly decline, but barely, falling -0.1%, and the Nasdaq Comp remained near 12-year highs, although notching a fractional weekly loss.
Gold had a particularly difficult week, falling -3.5%, with China’s New Year celebration given some of the blame, along with some technical selling, reports of some hedge funds cutting holdings, currency gyrations, and perhaps diminished hopes for further global QE.
Despite the daily calls for a somewhat significant market pullback and “overbought” signals being touted on a daily basis, a column in Saturday’s Barron’s had some comforting data from Ned Davis Research:
"Each time stocks have reached new highs the last dozen or so times, there has been roughly a 417-day period before a new peak is reached and an additional +18.4% median market gain.”
And the earnings season continues to perform on the “better than lowered expectations” side, with StreetAccount/FactSet reporting:
"Of 395 S&P 500 companies reporting, 72% have beat on EPS and 67% on revenue. But the EPS growth rate now of +3.6% trails the four-quarter trailing average of +6.4%. Revenue growth at +3.9% is better, surpassing the four-quarter trailing average of +3.4%. The cautious optimism that companies have highlighted has also been reflected in expectations for a notable acceleration in 2H growth.”
And in even better news, MarketWatch featured comments by Bespoke Research, touting the “Sports Illustrated Swimsuit Issue Indicator,” which documents the generally favorable annual market performance “in years in which an American is featured as the SI cover model (in this case Kate Upton for the second straight year).”
The week started with buzz about Sunday night’s Grammys and its diverse winners in 81 categories, as chronicled by Forbes. However, there inevitably had to be a bit of a letdown after the excitement over Adele’s dominance and very popular hits feted in the 2012 ceremony.
Maybe the biggest two items drawing attention at the event were Taylor Swift’s over-the-top opening performance and a much-mocked “memo” to attendees, which according to the New Yorker, was “theoretically intended to prevent wardrobe malfunctions and flashes of skin that might upset a theoretical audience of roughly nobody.”
“Together, we have cleared away the rubble of crisis, and can say with renewed confidence that the state of our union is stronger.” –President Obama in the SOTU address. Obama fans and critics on both sides had strong opinions about the quality of the address and its messaging. But the fact is that few prominent Dems gave it rave reviews and few in the GOP seemed truly outraged, basically confirming that the speech was fairly “middle of the road” and a continuation of recent election season themes with few real surprises (with perhaps the minimum wage increase the biggest “news” and certainly the gun control theme the most emotional).
The LA Times said:
"Obama has recalibrated his ambitions to match the moment. A soaring speech full of ambitious new goals wouldn’t make sense in the Washington of 2013. A president who once promised to transform American politics and stop the oceans’ rise has downsized his goals, not because he wanted to but because circumstance has made it necessary.”
Florida Senator Mark Rubio’s delivery of the GOP response might have gotten more media play that the SOTU itself, with Politico saying:
"Twitter exploded during Sen. Marco Rubio’s Republican response to the State of the Union, as the Florida senator appeared a little sweaty and dry-mouthed at mid-speech, taking an awkward swig from a bottle of water that had been placed off-camera. Rubio handled the hullabaloo with some humor, later tweeting a picture of the water bottle.”
But beyond Apple, the Grammys and the SOTU, what else was being said this week?
“For the first time in almost 600 years a sitting Pope has resigned.” –Forbes, adding, “Citing his failing health, Pope Benedict XVI, announced to Cardinals that he was no longer able to lead the world’s 1.2 billion Catholics and would step down on Feb. 28.” In what seemed like not very charitable commentary, Pope John Paul’s former secretary had some thinly veiled critical remarks on the resignation, according to the NY Post, saying, “John Paul led the church to the end…”
“The euro-area recession deepened more than economists forecast with the worst performance in almost four years as the region’s three biggest economies suffered slumping output.” –Bloomberg, on the Euro area GDP data this week which showed a regional slump
"in the SOTU, along with “Merger Thursday,” the complicated “currency wars,” Ackman vs. Icahn (Herbalife), some disappointing GDP numbers out of Europe, the continued earnings parade, and the ongoing saga of David Einhorn and Apple management." I count seven different topics-and then the author refers to "this latter point". For his better edification, point 1-the former, point 2-the latter. If more than two points, use of the latter is incorrect.