The Federal Reserve decided to scale back or taper its assets purchases by another $10 billion per month. I had expected the possibility of a pause but apparently, the December economic data was good enough to convince them that less stimulus was necessary.
As expected, the market opened weak, rebounded a bit and then went on a volatile roller coaster ride after the FOMC announcement. When the dust settled, the S&P 500 (SPX) closed off by just over one percent but off of its lows. That broad based index has now continued it correction and has retreated 4.14%. When that index breached the four percent decline level, I put a little cash to work. Should we back off another two percent I will do the same. Then once again I will spend some cash another two percent below that level. By the time the market is off ten percent, the most I would expect, I will be back to full investment levels, having averaged in on the way down.
On tap for earnings is Google (GOOG), which surged after yesterday’s market closed on the news that the company was dumping the Motorola Mobility business that it purchased three years ago for $12.5 billion. Lenovo will apparently pay $2.9 billion for the business from Google. Google is expected to earn $12.26 per share on revenues of $16.75 billion when it reports results after the market closes today. As usual, expect a large move in either direction after the earnings announcement.
I am heading to Philadelphia after the market closes. It is our daughter’s 21st birthday and my wife and I, both University of Pennsylvania graduates, Class of 1982, plan on celebrating by buying her first legal drink at Smokey Joe’s, the Pennstitution known as Smokes. We frequented the watering hole during our days at Penn. It will be a Facebook moment. Speaking of Facebook (FB), that stock surged after the company reported better than expected earnings yesterday.
We will get home late Thursday night or early Friday morning, so I will pass on penning My Gut Feeling for Friday and will be back when we begin trading for February on Monday.
It was another great night for hockey at Yankee Stadium last evening with the Rangers defeating the Islanders 2-1 under the stars. As for Super Bowl Sunday; take the Broncos and lay the 2 ½ points and take under 47. Final score: Broncos 24 Seahawks 17
Disclosure: At the time of this commentary Scott Rothbort, his family and/or clients of LakeView AssetManagement, LLC was long GOOG — although positions can change at any time.
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