Commentary

George Chamberlin

GEORGE CHAMBERLIN has been associated with The Daily Transcript at SDDT.com since 1998 and became Executive Editor in 2006. He is responsible for the development of editorial strategies for the newspaper and website. He has introduced video and audio into the editorial products and is the public face of the company at many community events. George regularly chairs industry roundtables and conducts video interviews of participants for use on the San Diego Source. He writes two daily columns, "Money in the Morning" and a daily stock market wrap-up.

George, a long time resident of North County, lives in Vista with his wife Terry.

From the Executive Editor

Wall Street is putting the wraps on January today and, despite media reports, it hasn't been a really bad month. The key word for January is "volatile," as we have seen a majority of sessions finish with the Dow industrials posting gains or losses of 100 points or more. Yesterday, the seesaw was up 225 points and today things have opened slightly lower. So far in January, the Dow is down 2.4 percent this month while the S&P 500 is off 2.1 percent and the Nasdaq has slipped 1.1 percent.

It won't take very long for April 15 to roll around, and with it the annual rush to get state and federal tax returns filed on time. And as each year passes, it seems the process becomes more and more complicated.

Like the highways in Boston, the stock market just doesn’t seem to have any traction. Several times lately, the markets have opened with decent gains -- only to drift lower as the session progressed. Yesterday was another example. After an initial rally following the boffo Q4 report from Apple, the markets did a U-turn and the Dow industrials finished the session with a loss of 196 points. The index is now down 3.5 percent with just two trading sessions left in January. It is often said, "As goes January, so goes the year." The markets were down in the first month of 2014 and still posted gains for the entire year, proving old adages are not always accurate.

Bad news, good news. Yesterday the stock market reacted to some terrible Q4 earnings reports, especially from Microsoft. The stock declined by nearly 10 percent and wiped out $34.7 billion in market value. The Dow industrials fell more than 400 points in early trading but bounced back a bit to finish down 291 points.

Investors own more than $3.5 trillion in municipal bonds, either directly or through mutual funds. The incentive is obvious: The income from these investments is exempt from federal and, in most cases, state income taxes.

The big storm is about to hit the Big Apple. No, not weather, but some serious selling on Wall Street this morning. A litany of disappointing corporate earnings reports involving companies in the Dow industrials will likely cause havoc in early trading. The companies include Microsoft, 3M, Caterpillar, Procter & Gamble, and Pfizer. Investors will also be reacting to several economic reports out today. For instance, the Department of Commerce reported orders for durable goods -- things such as cars, airplanes, and kitchen appliances -- fell 3.4 percent in December, more than expected.

The markets finally put together a winning week on Wall Street. Stocks were up last week for the first time in 2015. Sure, the gains were limited thanks to the 141-point drop in the Dow industrials on Friday, but were able to hold on to the benefits of the 320-point rally on Thursday. Most of the economic news was good last week, including evidence of growing consumer confidence. This week will be dominated by the two-day meeting of the Fed starting tomorrow and Wednesday. At 11 a.m. Pacific, the Fed will issue an official statement on the economy, interest rates and inflation. It will be most interesting to see how the Yellen gang will react to the deep decline in oil and gas prices. The focus will likely be on the "core" rate of inflation, minus food and energy. Terms such as "transitory" are often used by the Fed in commenting on big changes up or down in energy prices.

It’s a good news and bad news story. A new report shows technology salaries and bonuses are rising in San Diego and other regions as the population of skilled workers continues to shrink.

The news of a massive stimulus program by the European Central Bank led to a big rally on Wall Street yesterday. Just as many people credit the Fed's quantitative easing efforts over the past few years for the recording-setting rally in stocks, the same logic is being applied to the move by the ECB. By cutting interest rates it enhances the attractiveness of stocks. Whether this is a one-day rally or if it sticks around for a while, only time will tell. The Dow industrials gained 260 points and, based on the Thursday rally across the major indexes, the markets are now flat for the first three weeks of 2015.

No big bump for stocks from the ECB. As expected, the European Central Bank this morning announced a massive economic stimulus program patterned after the quantitative easing by the U.S. Federal Reserve Board. It will launch a large bond-buying program and drive down interest rates in order to avoid a Great Recession in the region. Investors seemed unfazed by the move but could see some eventual benefits. "U.S. securities are expected to be the ultimate winners as lower European interest rates push additional foreign investors toward our shores in search of higher yielding fixed income and increased economic growth expectations," said Sam Stovall of S&P Capital IQ.

The state of the stock market. To be sure, the last few years have treated stock investors extremely well. The Dow industrials have been up for six years in a row but entered 2015 with increased volatility. Is that bad news? "A pickup in the frequency of seismic activity may help scientists, but not investors, possibly reconfirming that market timing is still more an art than a science. However, if the recent past is any indication of the future, extremely low volatility is a better predictor of future market declines than an increase in volatility. What's more, extreme spikes in intraday volatility are more likely to signal that investors get prepared to buy rather than bail," said Sam Stovall of S&P Capital IQ.

Back to work. The markets reopen today following yesterday's observance of the Martin Luther King Jr. holiday. We went into the weekend with a solid gain of 190 points for the Dow industrials, snapping a five-session losing streak. It is a bit unusual for the markets to rally on a Friday going into a holiday because of the global uncertainties influencing the markets, especially the recent terrorist tensions.

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