Market Wrap-Up for Jan.3 (FDO, MA, V, HRL, F, more)

Market Wrap-Up for Jan.3 (FDO, MA, V, HRL, F, more)


The markets were a bit quieter today following yesterday’s euphoric rise on the back of the fiscal cliff resolution. As I’ve said before, celebrating higher taxes and no spending cuts is quite peculiar, but we’ll not bemoan the market gains. Plus, the tax raises on dividends were much lower than many had feared.

Looking at today’s movers, Family Dollar Stores (FDO) got hit hard after a disappointing earnings report. Hormel Foods (HRL) ended higher after the company announced it would purchase the Skippy Peanut Butter brand from Unilever. Visa (V) and Mastercard (MA) ended well off earlier highs after jumping out to a food start following an analyst boost. Ford (F) added some gains following the company’s monthly sales report. On the downside, Aflac (AFL) and Wellpoint (WLP) lagged following cautious analyst commentary.

Emotion and Reality

We saw quite a rally yesterday (market averages surged 3%), as the mere fact we avoided a fiscal cliff crisis was enough to inspire plenty of new money into the markets. Never mind the fact that payroll taxes are going back up, which will directly reduce the amount of money consumers can spend. Here’s the cold hard reality: instead of paying 4.2% of your paycheck to fund social security’s deepening money hole, you’ll now pay 6.2%. With the economy basically built on consumer spending, this news fundamentally can not be any good.

This development brings us to the dangers of investors and traders instantly reacting to the constant sound bytes coming out of today’s business media. Those who have the bulk of viewer eyeballs are running on an ad-driven model. The way to drum up more viewers is to bring in the element of shock and awe. It’s a daily variety of bullish forecasts, the occasional bear who they bring on only when the market is getting hit, predictions on just about every data point, earnings reports, and now unfortunately, political vantage points that have taken an ever-so growing grip of affecting market movements. Notice how the debt ceiling cliff is now being talked up, mere seconds after one crisis (fiscal cliff) gets resolved.

Economic data points continue to contradict each other on a daily basis. Most retail numbers from the holiday shopping season appeared to be considerably below forecasts, yet this morning we saw monthly retail sales for December come in better than expected for companies such as Ross Stores (ROST), TJX Companies (TJX), and Nordstrom Inc. (JWN), just to name a few. Here at, we have to try and parse through what is the actual reality of the reported data. We get the fact that “green on the screen” is all that matters for investors, but letting emotion dictate how we approach making money is a dangerous game. We are cognizant of the fact margin debt is at 5-year highs and exactly how well this bodes for the market is certainly arguable. Investing alongside individuals who are leveraging up to their eyeballs can make for quite a treacherous climate the minute the celebratory music stops.

At the end of the day, we need to carefully consider how to navigate through all these facts and plenty more. Patting yourself on the back of a one day spurt has little bearing on what the eventual goal is to building long-term wealth. Plenty of fortunes are lost when emotions run high. Pace yourself and keep your expectations reasonable. With today’s manic business coverage we know it’s hard, but try your best anyway!

Thanks for reading, and I’ll see you tomorrow!

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