Equity Indexes Retreat, But Notch Strong January; Europe Edges Lower

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[Chart courtesy of MarketWatch.com]

Equity ETFs finished lower Thursday, ending a blockbuster month on a soft note after a government report showed jobless claims rose, but the Dow Jones Industrial Average still managed to produce the best January rally since 1994.

First time claims for unemployment benefits climbed 38,000 to 368,000 last week, the first rise in two weeks, a Labor Department report showed. The weekly data comes ahead of tomorrow’s all-important nonfarm-payrolls number for January.

Separately, a Commerce Department report showed consumer spending rose by 0.2 percent while personal income jumped 2.6 percent in January, boosted by early dividend payments. The Chicago-area Purchasing Manager’s Index rose to 55.6 in January, the highest level since April 2012, from an upwardly revised 50 level.

The Dow Jones Industrial Average (DJIA) shed 49 points, still up 5.8 percent for the month and posting its biggest gain since October 2011. Breadth was positive with winners outnumbering losers 20 to 10 within the blue-chip index.

The S&P 500 Index (SPX) fell 4 points to 1498, up five percent for the month and posting its best January performance since 1997. Consumer goods and energy were the biggest decliners while utilities, technology and telecommunications advanced within its 10 business groups.

Treasury prices changed little Thursday with the 10-year yields trading near nine-month highs after the US Senate passed a measure to suspend the country’s debt limit for three months, temporarily eliminating the risk of a government default.

Yields fluctuated earlier as US manufacturing expanded more than expected even though weekly jobless claims rose unexpectedly in January.

The US dollar meanwhile fell against the euro after the 17-member shared currency found some support from Germany’s labor market. A report by the Federal Labor Office showed seasonally-adjusted unemployment fell to 6.8 percent in January, equaling its post unification low and reinforcing the view the widely-suspected downturn in the fourth-quarter has bottomed.

European stocks fell for a second day, trimming their biggest monthly gains since July and ending the last trading day of January on a downbeat note after European companies reported disappointing quarterly earnings.

In the ETF-space, bond funds mostly finished higher after weekly jobless claims came in higher than anticipated. The Barclays 20+ Year Treasury Bond Fund (TLT) added 0.49 percent for the day.

The Market Vectors Vietnam ETF (VNM) was among the biggest decliners, slipping 4.38 percent on the day, but still managing a jaw-dropping 24.3 percent gain for the month.

Our Trend Tracking Indexes (TTIs) barely changed on the day with the Domestic TTI now sporting +2.87% and the International TTI hovering at +11.44%.

For more details, charts and updated momentum numbers, please see the latest StatSheet, which I will post shortly.

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