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Retail Sales Tick Up Slightly, Apple Continues to Sell Off


Today's financial recap and tomorrow's financial outlook.

In a report this morning, Fitch said that the US, UK, and France were at risk of losing their AAA credit ratings as debt-to-GDP ratios continued to accelerate. Specifically for the US, Fitch was optimistic that Congress would be able to successfully pass a hike of the debt ceiling and the odds of a sovereign default remained extremely low. However, Fitch pointed out that Congressional positions had become more entrenched with the recent fiscal negotiations.

There were more rumblings from Japan as the economy minister mentioned that an excessively weak yen would negatively affect imports and households, a departure from the more dovish commentary from the Bank of Japan and Prime Minister Shinzo Abe over the past week. In Europe, Luxembourg's Finance Minster, Jean-Claude Juncker, stated that the euro had become overvalued, but didn't offer anything else. Accordingly, the EURJPY cross fell dramatically.

The US economic data released today showed a slight increase in December retail sales on a seasonally adjusted monthly basis. Retail sales less autos rose 0.3% month-to-month, a bit better than the 0.2% estimate and up from -0.1% in November. However, Empire State manufacturing figures showed a sharp drop in business activity. In particular, new orders, shipments, and capital expenditures fell sharply. The takeaway is that while consumers continued to spend, businesses have pulled back sharply from their spending during the fourth quarter.

Apple (NASDAQ:AAPL) continued to struggle after Nomura downgraded the stock to a "hold" and lowered its price target to $530 from $660, citing weak near-term catalysts from contracting iPhone margins and decreased demand for new models of the iPhone and iPad mini.

Lennar (NYSE:LEN) released earnings in the morning and beat estimates, reporting EPS of $0.56 versus estimates of $0.46. Revenues also beat at $1.35 billion versus estimates of $1.31 billion. Noting the high prices and demand for apartment rentals, Lennar announced that it would build up to $1 billion in apartments by 2014.

Tomorrow's Financial Outlook

Tomorrow's market action will be heavily influenced by earnings from the bigger banks in the country. Before the open, JPMorgan (NYSE:JPM), Goldman Sachs (NYSE:GS), Charles Schwab (NYSE:SCHW), US Bancorp (NYSE:USB), and Bank of New York Mellon (NYSE:BK) will report earnings. Financial stocks have risen nearly 50% off their lows six months ago; to continue this rally, strong earning reports are a necessity.

In US economic data, the NAHB will release its housing market index, a diffusion index of builder and real estate agent expectations for home sales. The index is expected to continue to rise to six-year highs at 48 from last month's 47. Industrial production, manufacturing production, and CPI will also be reported in the morning.

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