Welcome to CrushTheStreet.com’s Weekly Market Wrap Up!
As we ring in the start of a new year, the sentiment towards the U.S. equities sector continues to rise in optimism and bullishness in what has been a generally volatile year in global financial markets. The Dow Jones Industrial Average was up seven-and-a-half percent for 2014, while the broader S&P 500 closed out its third straight year of double-digit gains, with the latest annual performance up 11.4-percent. Of the major benchmarks, the NASDAQ 100 was 2014’s biggest winner, with the technology-focused index closing out the year with a 13.4-percent gain.
Winners and Losers
The allocation between winners and losers within the indices was somewhat mixed, with Intel leading the Dow Jones by moving up nearly 40-percent for the year, while technology partner Microsoft was also amongst the Dow’s top performers, giving investors a 24-percent return in 2014. Based on these two statistics, it could logically be inferred that the underlying economy is improving and that corporate capital resources is being invested towards growth and innovation, as opposed to merely surviving a recessionary phase. However, the Dow’s laggard by a fairly wide margin was IBM, a key competitor of Intel’s dominance towards digital cloud computing.
While companies such as AMD and Qualcomm are attempting to take back Intel’s market share in the cloud, they are still in the early phases of their alternative technologies solutions. IBM, on the other hand, is the only competitor with a viable shot at unseating Intel, yet the company suffers from strategic mismanagement as it attempts to pursue an extremely high earnings per share ratio while remaining competitive in research and development expenditures. As a confirming indicator of the inefficient strategy, IBM’s 2014 performance is worse than that of Exxon Mobil and Chevron, two companies that have suffered massively under the sudden oil market deflation. However, some contrarian investors are bullish on IBM for 2015 due to a possible cyclical reversal.
The S&P 500 was far easier to decipher, with Southwest Airlines leading the benchmark index with its strong and memorable marketing campaigns emphasizing low fares and convenient services. It was also aided by the aforementioned decline in crude oil prices, as speculation money shifted into the airline industry with the theory that individual companies will be able to hedge future oil needs at lower cost. The laggard of the S&P index was, unsurprisingly, Transocean Limited, which veritably collapsed, losing nearly 63-percent of valuation for the year. However, don’t be surprised to see the Switzerland-based offshore oil drilling company become one of the top movers later in 2015, whose shares have an extremely attractive yield of 17.30-percent.
In financial news, the U.S. markets on the final trading day of 2014 ended on a downbeat after a midday trend reversal, with the Dow Jones giving up 160 points to close the session beneath the 18,000 mark. The S&P 500 was the biggest loser on a percentage basis, finishing out the year at 2,058 points. The precious metals complex endured another lackluster year, with gold dropping nearly a percent-and-a-half of valuation on New Year’s Eve, while silver took a body-blow, dropping over three-and-a-half percent to finish at 15.79 on the ask. Palladium also had a soft day, losing nearly a percent of valuation but remains the only profitable precious metal for a second year running. Finally, digital currencies did not receive much love in 2014, with bitcoin sliding to 310 dollars at last count.
And that will do it for this edition. Thanks for watching and we’ll see you next week!