Earnings Season Could Increase Market Volatility

For the first few days after New Year's vacation, leading stock markets showed weak activity. Even publications of significant macroeconomic indicators cannot push indices to start forming trends in one way or another, neither in the US, Europe, nor in emerging markets. Important indicators, which will be able to have an influence on the market, will be the statistics on industrial production of the Eurozone on Tuesday, and new data from the real estate market in the US on Friday. Besides that, American companies already begun the reporting period for the fourth quarter of the previous year, which could lead to an emergence of volatility in the markets.

On Friday, the statistics of the US labor market recorded a minimum level of unemployment in the country for the last five years. The coefficient fell from 7% last month to 6.7% in December, which increases the probability of further reduction of the stimulus program at the next Fed meeting at the end of January. At the same time, the jobs report was much lower than expectated, and made only 74 thousand, which was the minimum level for 2013.

For the last three years, the US economy created about 2 million jobs, but at the same time, the unemployment rate remains quite high. It is worth remembering that the desirable unemployment rate, at which the Fed could go for a rate increase, is about 6.5%. The second indicator for the Fed is the inflation, data which is going to be published on Wednesday and Thursday.

As a result, the last trading day of the week finished with the Dow Jones industrial average index decreasing by 0.05% to 16437.05 points, a 0.2% retreat in a week. The Standard & Poor's 500 index went up 0.23%, having closed at the level of 1842.37 points, a 0.6% increase in a week. The Nasdaq Composite index went up by 0.44% to the value of 4174.66 points, having added 1% within the week.

The price of gold futures went up by 1.4% to 1246.90$ per troy ounce, traded this morning at the level of 1249.20$. Gold rose, owing to the dollar weakening, and the dominating confidence of investors that weak data on growth of employment, will not allow the Fed to continue further reduction of QE3. In total, gold lost 0.7% in a week.

Oil increased in price as a result of the retreat of the dollar, and against growth of the Chinese import in December. The price of futures of WTI raised by 1.2% to level of 92.72$ per barrel, traded this morning at 92.57$. Brent is down by 0.13%, at 106.47$ per barrel. Last week was the second unprofitable week in a row for oil prices.