The Week Ahead 1/4/10

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The final week of 2009 was characterized by light volumes and year end positioning, resulting in a flat week for equity and treasury markets. The unusual scheduling of three treasury auctions (2-, 5-, and 7-year) in the closing week of the year did not seem to upset the markets, even though the two shorter dated auctions were lackluster. Despite the US dollar maintaining its stronger tone, crude oil futures gained all week, retesting the $80/barrel mark. The data highlight for the week was a better than expected December Chicago Purchasing Managers Index, hitting its highest mark since May of 2007. The day after the release, however, the December PMI reading was revised down from 60 to 58.7 in an annual recalculation based on seasonal factors (but still the best reading in two years). US equity markets slipped fractionally for the week, thanks to a late day sell off on Thursday, leaving the DJIA down 0.9%, the Nasdaq off 0.7%, and the S&P500 lower by 1.1%. For 2009, major European bourses were up better than 20%, while the DJIA gained 19%, the Nasdaq rocketed up 44%, and the S&P500 added more than 30%.

Some tech stocks gained ground ahead of the Consumer Electronics Show (CES) in Las Vegas next week. Apple stock rose as several analysts raised their price targets for the stock as speculative buzz over the “iTablet” computer continued to grow. Google also traded higher ahead of the CES, as the software giant is expected to make more inroads in the smart phone market with its upcoming Android based Nexus One device.

The dollar was poised to post its first monthly gain against the Euro currency since June as it looked to build upon its recently found momentum that has been aided by rising US yields. The shifting outlook for US interest rates had pushed the dollar to a two-month high against the yen.