The wonders of the January effect get discussed extensively this time of year, and rightly so given the track record. Since 1945, a positive performance for the S&P 500 in January has translated to a full-year gain a whopping 86% of the time, according to S&P Capital IQ, with the average advance coming in at a more than respectable 15.7%.
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The predictive powers of a positive first month are even stronger when the United States heads to the polls to determine who gets to spend the next four years in the Oval Office. "During presidential election years, the January Barometer has been even more helpful in identifying up years, as the S&P 500 rose in price during the entire year eight of eight times following positive performances in January, gaining an average 16%," wrote Sam Stovall, chief equity strategist at S&P Capital IQ, in commentary on Tuesday. "Yet whenever the S&P 500 fell in January of this fourth year, the market fell an average 4.5% and declined in price 50% of the time."Overall, the S&P 500 has risen in 75% of all presidential election years since 1945, so history indicates the coming showdown in November stacks the odds a bit in favor of a positive year. The next question, of course, is how positive? And after essentially coming in flat for 2011, Wall Street is expecting a decent bounce this year, for what that's worth though, as market strategists are notoriously bullish about the broad market. According to Birinyi Associates, the 2012 S&P 500 forecasts of 13 of the major firms, including Bank of America, Citigroup, and Goldman Sachs, average out to 1335, which would be a 6% gain from 2011's close at 1258. The biggest bull on the list is Deutsche Bank at 1500, while only HSBC and Goldman see declines down to 1190 and 1250, respectively. For its part, UBS, whose target is at 1325, stressed timing in its U.S. equity strategy commentary on Tuesday, recommending investors take a bit of a wait-and-see approach to the customary boost that January brings.
1 2 3 Next › Last »"While we project the market to rise in 2012, we would not be buyers at current levels and anticipate more attractive entry points in the future," the firm said prior to Tuesday's surge. "2012 should again be a struggle between stronger domestic fundamentals and macro risks. Despite continued action on the part of policy makers, we believe that equities will struggle in the face of a recession in Europe."
As for Wednesday, the earnings news is sparse, led by potash provider Mosaic(MOS), which is due to deliver its fiscal second-quarter results after the closing bell. The average estimate of analysts polled by Thomson Reuters is for earnings of $1.30 a share in the November-ended quarter on revenue of $3.2 billion.
Mosaic shares endured a tough 2011, falling more than 30%. The company missed the consensus profit view last quarter, breaking a streak of three straight upside surprises of 10% or more, and the stock has also been hit by the impact of secondary offerings related to its split-off from privately held Cargill in late May and its inclusion in the S&P 500 in late September. Last week, Mosaic announced plans to cut back on its finished phosphate production by up to 250,000 tons through the end of March, saying that spot prices "have become disconnected with the underlying agricultural fundamentals." At the time, the company also said volumes and pricing for both phosphate and potash are still within prior forecasts. On Sept. 28, when it reported its first-quarter results, Mosaic forecast total sales volumes of 1.7 to 2.1 million tons for potash with prices projected between $440 and $465 per ton; as well as total sales volumes of 3.1 to 3.5 million tons for phosphates with prices projected between $600 and $625 per ton. Wall Street is generally bullish ahead of the report with 13 of the 22 analysts covering the stock at either strong buy (2) or buy (11), and the median 12-month price target at $65, implying potential upside of more than 20% from Tuesday's close at $52.59. Since hitting a 52-week low of $44.86 on Oct. 4, the stock has risen nearly 18%, although it's still well off a peak of $89.24 reached last February.
« First ‹ Previous 1 2 3 Next › Last »Other companies slated to open the books tomorrow include Resources Connection(RECN), Sonic Corp.(SONC), Texas Industries(TXI) and Unifirst(UNF).
Wednesday's economic calendar is light with the Mortgage Bankers Association's weekly index of application activity at 7 a.m. ET, the weekly Redbook chain-store sales at 9 a.m. ET, and factory orders for November at 10 a.m. ET.
The market is expecting a pretty big improvement in the orders data with the consensus projected a 2.1% year-over-year rise vs. a 0.4% decline in October Briefing.com itself is even more optimistic, forecasting a 2.6% jump. Another factor in Wednesday's action could be auto and truck sales for December, which will hit the wires from Ford(F), General Motors(GM), and others throughout the day. Ford shares lost more than 35% in 2011, but they've bounced a bit since hitting a 52-week low of $9.05 in early October, closing Tuesday at $11.13. GM is in a similar boat, forfeiting nearly half of its value since hitting a high of $39.48 last January. The shares closed Tuesday at $21.05, bouncing 11% since hitting a low of $19 on Dec. 19. Both stocks have forward price-to-earnings multiples that trade at discounts to the broad market -- 7X and 5.5X respectively vs. less than 13X for the S&P 500 -- but Ford has a bit more zip right now, having recently reinstated its dividend. Sterne Agee designated Ford its top pick in the auto sector on Dec. 21 with a buy rating and $18 price target, saying the company is positioned "to be a prime beneficiary of improving vehicle demand on a global basis." GM's got its share of bulls as well though with 17 of the 20 analysts covering the stock at either strong buy (6) or buy (11), but the 12-month median price target of $32 points to further downside ahead. Last month, Ford reported total retail sales rose 13% year-over-year to 166,865 vehicles in November, while GM delivered a 7% increase to 180,402 vehicles.And finally, Acme Packet(APKT) was a big loser in after-hours action on Tuesday after lowering its financial outlook. What was interesting about the warning was that the company, which makes hardware and software to manage data networks, pointed to weakness in North American service provider market, saying that its Europe and Latin America businesses held up well. One red flag for stocks has been the number of negative warnings ahead of fourth-quarter reporting season. According to Thomson Reuters data, 143 of the S&P 500 companies have pre-announced for the quarter, and 94 of those pre-announcements have been negative vs. 40 positive ones and 9 in-line. The current estimated earnings growth rate is 8.3% for the quarter, down from an expectation of 15% in early October and the 18% growth seen in the third quarter. TiVo(TIVO) will also be in focus after successfully settling a patent dispute with AT&T(T), securing more than $250 million in payments. -->To submit a news tip, send an email to: tips@thestreet.com
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