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Saturday, 14 January 2012 | 00:00
DJ30 PointChange: -48.96 Level: 12422.06 NASDAQ PointChange: -14.03 Level: 2710.67 SP500 PointChange: -6.41 Level: 1289.09 NASDAQ-Adv:796 Dec: 1676 NYSE-Adv:1062 Dec: 1972

[BRIEFING.COM] Concerns about sovereign debt downgrades stirred sellers on Friday, but stocks were able to cut losses. That ensured the broad market a modest weekly gain of about 1%. Stocks slid to a loss in excess of 1% this morning. The descent came in response to headlines that downgrades could be in store for several eurozone countries. France actually confirmed that analysts at S&P made a single-notch downgrade to the country's credit rating. That decision contradicted word earlier this week that analysts at Fitch expect France to keep its top-notch credit rating in 2012.

Banking bellwether and Dow component JPMorgan Chase (JPM 35.84, -0.98) reported disappointing quarterly results this morning. It made for a lackluster follow-up to the unceremonious start that earnings season made earlier this week when fellow blue chip Alcoa (AA 9.80, -0.13) posted a mixed report. The financial sector suffered all session as most other diversified banks and financial services stocks traded lower in sympathy.

Not a single sector scored a gain on Friday, but shares of many retailers were helped higher by the latest Consumer Sentiment Survey from the University of Michigan. It improved from 69.9 in December to 74.0 in the preliminary reading for January. Not only did that best the consensus call for a reading of 71.2, but it marked the highest reading since May 2011.

The euro had a volatile week before it suffered a sharp slide on Friday. The currency ended the day at $1.2681, which makes for a -1.1% loss.

Prior to Friday participants were dealt a sizable dose of data after being deprived from such catalysts for a few days. Retail sales during December increased 0.1%, while sales less autos fell 0.2%. Both came short of what had been expected, but prior month sales were revised upward. Economists noted that sales weakened while aggregate earnings increased, likely since consumer debt remains a hindrance for current consumption.

Initial weekly jobless claims made an unexpected jump to 399,000 from 375,000, which is where many had expected them to remain. Initial claims have steadily increased over the past few weeks, but the latest increase is likely due to disappointing December retail sales resulting in staffing cuts.

After the European Central Bank (ECB) and Bank of England opted to keep interest rate targets at 1.00% and 0.5%, respectively, ECB President Draghi offered a reminder of the substantial downside risks to regional economic activity. Although the nature of the comments was unsurprising, Draghi's words cast a pall over news that recent debt offerings from both Spain and Italy were successful.

Midweek trade was mostly listless and lackluster, a consequence of little news flow. The only economic item was the Fed's Beige Book. Once again it made mention of a modest increase in economic activity, but did nothing to assuage concerns about the pace of the economic recovery.

Tuesday saw stocks jump in response to robust gains staged by many of the major averages abroad. Investors gained confidence from word that analysts at Fitch believe both France and Germany will maintain their top-notch credit ratings in 2012. Meanwhile, some believe that China might ease monetary policy so as to hedge against disruptions to the country's economy.

Trade on Monday was generally uneventful as market participants prepared for the unofficial start of earnings season. It got going when Alcoa (AA) announced quarterly results after the close. The Dow component posted a strong top line, but its earnings came short of what Wall Street had expected.

The pace of earnings announcements will pick up next week, but traders will have to wait an extra day since U.S. markets will be closed on Monday in observance of Martin Luther King, Jr. Day.

Treasury Auction recap: Results from an auction of 3-year Notes featured a bid-to-cover of 3.73, dollar demand of $119.4 billion, and an indirect bidder rate of 38.5%. For comparison, the prior auction featured a bid-to-cover of 3.62, dollar demand of $115.8 billion, and an indirect bidder rate of 39.1%. An average of the past six auctions results in a bid-to-cover of 3.33, dollar demand of $106.6 billion, and an indirect bidder rate of 38.9%. An auction of 10-year Notes drew a bid-to-cover ratio of 3.29, dollar demand of $69.1 billion, and an indirect bidder rate of 38.3%. For comparison, an average of the past six auctions results in a bid-to-cover of 3.08, dollar demand of $66.2 billion, and an indirect bidder rate of 44.0%. An auction of 30-year Bonds drew a bid-to-cover of 2.60, dollar demand of $33.8 billion, and an indirect bidder participation rate of 31.9%. For comparison, an average of the previous six auctions results in a bid-to-cover of 2.69, dollar demand of $37.2 billion, and an indirect bidder rate of 29.8%.

Source: Briefing

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