STTG Market Recap February 4, 2013

After weeks of bliss, stocks took their first direct hit of 2013 with the worst losses since November.  Our old friend Europe was the catalyst as the S&P 500 fell 1.15% and the NASDAQ 1.5%.   Spain and Italy were the culprits again as they were in summer 2012.

Spanish Premier Mariano Rajoy is facing opposition calls to resign amid contested reports about illegal payments, while Deutsche Bank AG said this year’s rally in Italian, as well as Spanish, bonds may falter as Italy’s Silvio Berlusconi narrowed the front-runner’s lead before elections this month.

We shall see in the days ahead if this was just an excuse to find a reason to correct a rally which was reaching the stratosphere with little support, or the start of something more dark.   Until proof surfaces otherwise, one assumes the former.

The S&P 500 fell back and broke its 10 day moving average for the first time this year.  That said it is still within a well defined uptrend; one will want to watch its behavior if it continues downward to see where it bounces.  The 20 day moving average is near the bottom of this upward channel so seems an ideal area to bounce.

The NASDAQ continues to be the laggard and unlike the S&P 500 has never reached fall 2012 highs.  After a one day respite it is back to the range it has been stuck in for a few weeks, and has already fallen back to its respective 20 day moving average.

Outside of some refining stocks, some REITs, and some defensive type sectors there was not much in terms of area to hide today - the damage was quite widespread.

We've been noting a potential rally by oil but it has been sporadic, and did not close at the highs Friday when the equities market was strong.  Today we saw it fall back into its previous range - not a leadership commodity right now.

There were failed breakouts galore today - no surprise given the sharp rally Friday followed by steep descent today.  One name we highlighted Friday was investment bank Morgan Stanley (MS) which had broken out of a tight flag.  Today it fell right back in.

One name that has not reacted well post earnings is Facebook (FB); if you recall it originally fell sharply in the after hours last week on its announcement, then tried to rally - which it did briefly - before rolling right back over.   Today's losses take it down some 13% from its peak last week, in very short order.

Speaking of refining there was a story out today saying the cost of gasoline is a record % of people incomes.  That may come as a surprise to those who were around in the 1970s but consider for a great many people in this country their incomes have not advanced much, especially adjusted for inflation, in the past few decades while inflation continues to eat away at purchasing power.

The U.S. Energy Information Administration reported Monday that gasoline expenditures in 2012 for the average U.S. household reached $2,912, or just under 4 percent of income before taxes. This was the highest estimated percentage of household income spent on gasoline in nearly three decades, with the exception of 2008, when the average household spent a similar amount. Gasoline prices averaged $3.63 a gallon in 2012, according to EIA.