The Books Close on 2003
by James Brown
It's not every day that the floor traders at the NYSE serenade
the TV audience with "Wait till the Sun Shines Nellie" so that
must mean one thing. Happy New Year! Wow! It's hard to believe
2003 has come and gone so quickly. The last session of the year
was a mild one with low volume and a negative advance-decline
line but the Dow managed yet another gain and the NASDAQ managed
to close above the 2000 mark. For those market conspiracy
traders out there it was no coincidence that the NASDAQ ended the
year 2003 by closing at 2003 with a truly last minute spike
higher.
Today ends the best year for the markets since 1999. The Dow
Jones Industrial Average climbed 25% in 2003. The S&P 500 added
26% and the NASDAQ composite soared a massive 50%. Gains like
these have certainly re-ignited interest in stocks but 2004 will
have a hard time keeping up with a pace that strong and most
analysts are looking for a slow down in the gains. Fortunately,
the outlook for 2004 is generally positive.
Market internals were actually mixed. The advance-decline
numbers were negative with almost 16 losers for every 12 winners
on the NYSE and 18 losers for every 12 winners on the NASDAQ. Up
volume did manage to outpace down volume on both exchanges.
Total volume was light with just 1.19 billion on the NYSE and 1.5
billion on the NASDAQ.
Chart of the DJIA:
Chart of the NASDAQ:
The big news today was the initial jobless claims report,
released early due to the market holiday tomorrow. Economists
had been expecting a number close to 350,000 but the markets were
surprised with a much-improved figure at 339,000. This is a drop
of 15,000 claims from last week's figure (354K). This is the
lowest level in jobless claims since January 20th, 2001. More
importantly the four-week moving average, which tends to even out
any seasonal fluctuations, fell to 355,750, which is the lowest
level for the four-week moving average since February 2001.
Obviously, this is great news for Wall Street and Main Street as
the biggest concern next year is job growth and these declining
numbers show a steady improvement in the labor market.
Unfortunately, most investors had already packed up for the year
and there was no one to respond to the good news.
The decline in the U.S. dollar has been a constant headline for
the markets here and abroad and today was no different. The euro
rose to an intraday high (and all-time high) of $1.2647 before
settling closer to 1.2605. The dollar dropped 20% against the
euro in 2003 making it the worst year for the dollar since the
euro began trading in 1999. It also happens to be the worst
decline in five years for the dollar against the Japanese yen.
The dropping dollar continues to prop up gold prices although
gold futures slipped more than $1 to $416 an ounce in Wednesday's
session. A declining dollar and geopolitical unrest have pushed
gold to a 20% gain in 2003. Some of the more enthusiastic gold
bugs are speculating that gold will reach the $500 level by the
end of 2004. While that may sound like a wild claim not many
would have predicted gold at $415 a year ago. Whatever your
stance on the shiny metal it will be a sector to watch next year.
One of today's big news stories was the drop in AmerisourceBergen
(ABC). Shares were actually halted midday but not before the
stock plummeted below the $60 level and its 200-dma. ABC,
America's biggest drug wholesaler, just got a little bit smaller
after announcing the loss of a major contract. The $3 billion a
year contract with the Department of Veteran Affairs will end
this coming March and ABC lowered its earnings guidance for the
year. ABC lost the contract to rival distributor McKesson (MCK),
who just announced a two-year deal the government agency.
It will be interesting to see where the markets take us on Friday
and next week. As Jim has pointed out the historical trends are
bullish. Funds usually begin putting their fresh 401K/IRA money
to work. The wild card is always a terrorist event. It's become
rather surreal to think of the millions of New Year's Eve and New
Year's Day partiers celebrating while government helicopters and
F16's circle the major events to protect the no-fly zones.
From everyone at our family at OptionInvestor.com to yours we
wish you a happy New Year! We're looking forward to a great
2004.
