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Wednesday, January 7, 2015

STOCKS RALLY: Here's What You Need To Know

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January 07, 2015

Stocks surged to post their first gains of the year on Wednesday as each of the major stock indexes rose more than 1% and the S&P 500 snapped its streak of three straight losing days to kick off 2015.

First, the scoreboard:

Dow: 17,584.5, +212.9, (+1.2%)
S&P 500: 2,025.9, +23.3, (+1.1%)
Nasdaq: 4,650.5, +57.7, (+1.2%)

And now, the top stories on Wednesday:

1. The biggest event on Wednesday was the release of the Minutes from the December FOMC Meeting, which showed that the Fed expects it won't raise rates until at least the April FOMC meeting. The Minutes also showed that FOMC members expect they will be able to begin raising rates if core inflation, which excludes the cost of food and gas, is near current levels. The declining price of oil is expected to pressure headline inflation over the near term, and the Fed added that it wouldn't want to move rates higher until it was "reasonably confident" that inflation would move back towards its 2% target over time.

2. Ahead of Friday's big December jobs report, we got another employment data point Wednesday morning from private payroll firm ADP, which showed private companies added 241,000 workers in December, more than the 225,000 expected by economists. Some economists were skeptical that this report shows us where Friday's number will be, with Ian Shepherdson writing that ADP tends to be a lagging, rather than leading, employment indicator. Either way, Shepherdson expects a big payrolls number on Friday of +275,000.

3. The price of crude oil was of course in focus today, as West Texas Intermediate crude fell below $47 briefly overnight and then spent much of the day bouncing between $48 and $49 a barrel. Overnight, Brent crude oil, the international benchmark, briefly peaked below $50 for the first time since the spring of 2009.

4. Amid the decline in the price of oil, US consumers have enjoyed cheaper gas, but in an interview with The Detroit News, President Obama warned that consumers keep in mind that these low prices won't last forever. "I would strongly advise American consumers to continue to think about how you save money at the pump," Obama said. Wells Fargo estimates that at current levels, gas prices could save the bottom 20% of income earners $250 a year.

5. Wednesday snapped the S&P 500's losing streak to start the year, but after starting 2015 with three straight losses, some in the market may have gotten worried about what kind of year the benchmark index could be looking at. Jonathan Krinsky at MKM Partners put perhaps some of that anxiety to rest, noting that in the 8 years since 1928 that the S&P 500 has started the year with three straight losing days, the index has finished the year lower just once.

6. A big individual winner on Wednesday was Dick's Sporting Goods, which saw shares gain more than 11% after a report from Reuters, citing people familiar with the matter, said the company was holding "early-stage conversations" with firms about potentially going private. Dick's shares have underperformed peers, with the company coming under particular pressure in golf sales.

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