Weekly Market Wrap: Investors Weigh Federal Budget Decisions

Includes: DIA, IVV, SPY, VOO
by: Julie Young

The Dow Jones Industrial Average gained 0.4 percent during the week ending January 11 bringing the index's year-to-date return to 2.93 percent. State Street Global Advisors' Dow Jones Industrial Average ETF (DJITR) replicates the returns of the Dow Jones Industrial Average for retail investors seeking to track the performance of the Dow Jones Industrial Average. The ETF returned 0.45 percent during the January 11 week.

Significant U.S. reports influencing returns for the Dow 30 during the week included the U.S. federal budget, wholesale inventories, trade deficit data and fourth quarter earnings for Alcoa.

The U.S. government reported a December federal budget deficit of $260 million this week in its December Monthly Treasury Statement. The December Monthly Treasury Statement also showed a fiscal year-to-date budget deficit of $292 billion. The year-to-date budget deficit is 9 percent lower than the same period last year, according to MarketWatch. Despite the improvements, further spending cuts and debt ceiling discussions still remain ahead for the U.S. government.

U.S. merchant wholesale inventories were 0.6 percent higher in November 2012, according to this week's Commerce Department Wholesale Inventories release. Inventories for U.S. merchant wholesalers were $498.9 billion for the month. At $498.9 billion, inventories were 7.0 percent higher than November 2011. Durable and non-durable goods both showed improvement in November, increasing 0.4 percent and 0.8 percent, respectively, from the previous month.

The Commerce Department also reported a slightly higher November trade deficit for the U.S. economy this week. According to the U.S. International Trade report, imports were $231.3 billion while exports were $182.6 billion, resulting in a trade deficit of $48.7 billion. At $48.7 billion the trade deficit was $6.6 billion higher than the previous month.

Specifically in China where GDP growth has been expanding recently, the U.S. reported a November trade deficit of $29.0 billion. Year-to-date, the U.S. has exported $100.2 billion and imported $390.8 billion, resulting in a trade deficit with China of $290.6 billion.

During the week, Alcoa also kicked off the fourth quarter earnings season with an on-target earnings report of $0.06 per share. Despite the positive earnings report the stock lost 0.22 percent in the day following the release and ended the week with a five-day return of -3.66 percent.

Relatively positive market reports during the week helped push the Dow Jones Industrial Average slightly higher, however markets appear to be teetering over the U.S.'s federal budget decisions which could potentially lower future earnings expectations in the weeks ahead.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.