Stocks Finish First Week of 2012 in Mixed Fashion, Though Higher for Week

Yesterday, a commenter on a popular blog site made the bold statement that we may have already seen the highs for the year - meaning 2012, just three trading days into the new year.

While this prognosis has already been proven wrong vis-a-vis the NASDAQ, which was the only major US index to finish with a gain today, he may actually have a point.

Holiday sales figures continue to trickle in, and, as expected, the optimistic gains predicted by the National Federation of Retailers (talk about having an agenda!) have been somewhat diminished. The International Council of Shopping Centers reported that November-December sales were up just 3.3%, as opposed to last year's 3.8% gain and less than the NFR's rosy 4.5% prediction.

While companies such as Limited Brands, Macy's and Nordstrom showed solid gains over last year, their revenue figures may have exacted a serious toll on their profit margins and earnings. Target, Kohl's, Best Buy and J.C. Penney have already slashed their 4th quarter estimates, citing warmer-than-usual weather and a tough economy (duh!) as the main factors contributing to a slowdown in holiday sales.

Wal-Mart, the nation's largest retailer by number of stores and gross sales volume does not report figures on a month-by-month basis, but was expected to have had a good, though not stellar, holiday sales season.

Bloomingdale's and Macy's have already announced planned store closures as America's appetite for non-stop spending on non-essentials seems to have fallen victim to real economic pain.

Today's release of the BLS' December non-farm payroll data put credence to the idea that Thursday's ADP announcement of 325,000 net new private sector jobs in the month was - as usual - coming from a separate reality, as the Labor Department reported 200,000 (a nice round number) new American jobs in December.

However, a number of analysts - notably those from Morgan Stanley - contend that the BLS figures, which are supposedly seasonally-adjusted, may not, in fact, have been adequately adjusted, citing the huge gains in transportation, particularly in the subset of couriers and messengers (+42,000), and retail (+28,000). Also, the construction industry gains of 20,000 were due to mild weather across most of the country, so the real figure, which will be eventually revised lower, though probably not down to its actual level, is likely somewhere in the neighborhood of 120,000.

Wall Street certainly wasn't buying any of it, as Thursday was mostly flat after the ADP report and Friday was a loser overall. Traders - those few remaining in the worst trading market in years - seemed more concerned about the weakening Euro and the prospects of an EU breakup prompted by any of a number of characters, from Greece to Italy, Spain, Hungary or Portugal.

So, could 2012 be a real downer for stocks? It's probably too early to tell, though there are signs from europe that nothing is fixed, which is similar to what happened in the US in the aftermath of the 2008 financial crisis. The banks were bailed out and business went on for many, almost as usual. The core issues plaguing both the US and Europe are still government-related. Huge bureaucracies spend too much money they don't have, tax rates can't get any higher and unfunded liabilities - primarily pensions and health care - continue to contribute to a growing mountain of debt.

It is too soon to tell, for sure, but no catalyst for positive gains is present or on the horizon. Earnings reports will start to trickle in beginning Monday and will become a deluge by mid-month, and that will provide some direction. Corporate profits have been solid, but 4th quarter results will be a key element moving forward.

There's a sense that solid 4th quarter results have already been priced in and any misses or near-misses will be dealt with severely. The remainder of January and early February may be a period in which companies are punished even for just meeting expectations as investors may view this time as the end of a virtuous profit cycle.

And, of course, there's always Iran, and China, and the ongoing continental problems in the European Union. Any gains will be indeed climbing a wall of real worry.

The first week of 2012 was positive, but marginally so. The Dow Industrials sported a gain of just 142 points, the S&P 500 was up 20 points, the NASDAQ gained 69 points and the NYSE Composite added 80. Volume remained at disinterested levels.

Dow 12,359.92, -55.78 (0.45%)
NASDAQ 2,674.22, +4.36 (0.16%)
S&P 500 1,277.81, -3.25 (0.25%)
NYSE Composite 7,557.68, -42.29 (0.56%)
NASDAQ Volume 1,706,200,875
NYSE Volume 3,544,665,750
Combined NYSE & NASDAQ Advance - Decline: 2524-3040
Combined NYSE & NASDAQ New highs - New lows: 138-47
WTI crude oil: 101.56, -0.25
Gold: 1,616.80, -3.30
Silver: 28.68, -0.61