EmailGreece... blah... is reportedly close... blah... to a deal... blah... with private creditors on a debt swap agreement. Add it all up and you have the same blah, blah, blah reports about this issue with no definitive declaration of resolution.
There is no deal -- not that the announcement of one won't be a good thing -- yet the back and forth (there is a deal... there is not a deal) is getting a little ridiculous when it comes to considering any headline on the matter as a swing factor for the market.
What is more relevant is that companies like UPS (UPS), Pfizer (PFE), Eli Lilly (LLY), Exxon Mobil (XOM), Mattel (MAT), Paccar (PCAR), McGraw-Hill (MHP), and Danaher (DHR) all topped consensus earnings estimates when reporting their December quarter results.
What is also relevant is that the U.S. market continues to show good resilience to selling efforts. Yesterday, the Dow was down as many as 131 points, yet ended the session with a negligible 6-point loss.
The recovery effort was broad-based, too. The S&P 500 ended the day down just 0.3%, leaving it up 4.4% for the month.
That last statistic has some added relevance today -- the last day of January -- as plenty of participants are cognizant that January has served as a pretty good signpost for how the rest of the year unfolds.
To that end, the Stock Trader's Almanac notes the "January Barometer" has registered only seven major errors since 1950, translating to an 88.5% accuracy ratio.
History, of course, is just that -- history -- and since it is impossible to predict the future, it cannot be taken for granted that this year's history will follow form with the illustrious history of the January Barometer.
Nonetheless, the January Barometer will act as a supportive talking point and is a nice anecdote to pair with the more fundamentally-worthy rationale for buying stocks, which is that there is good relative value in the equity market. At yesterday's close, the forward earnings yield on the S&P 500 stood at 8.1% versus a yield of 1.85% on the 10-year Treasury note.
That value has not been fully tapped, however, as macro headlines have kept investors' fear high and the confidence in the achievability of earnings growth estimates low.
Reports today that the unemployment rate in the eurozone is at its highest level (10.4%) since June 1998, or before the introduction of the euro; that Portugal's credit default swaps are suggesting another bailout may be needed; and a warning from S&P that G20 countries could face downgrades starting in 2015 if they do not get health care spending in check are examples of headline markers that continue to rattle investors' confidence in the relative value argument for stocks.
We continue to make the relative value case, though, and offered our latest thoughts yesterday in The Big Picture, which touched on the slowdown in the momentum of earnings growth.
Separately, it was reported this morning that employment costs increased 0.4% in Q4 2011, up from 0.3% in the third quarter and in-line with the Briefing.com consensus forecast. Benefits spending rebounded and increased 0.6% in the fourth quarter after increasing by only 0.1% in Q3 2011. This report had little influence on the market, which is turning a more eager eye to the Chicago PMI and Consumer Confidence reports for January at 9:45 a.m ET and 10:00 a.m. ET, respectively.
The S&P futures are currently 0.4% above fair value and are setting the stage for a positive start for the cash market on the last day of what has been a positive month for investors in the U.S. equity market.
--Patrick J. O'Hare, Briefing.com
Patrick J. O'Hare is Chief Market Analyst for Briefing Research, Briefing.com's institutional research service. To request a free trial, please email researchsales@briefing.com.
