Predictions of12/31/12 Dow, Stephen Hawking, and the markets

Quote of the Week:
"Remember to look up at the stars and not down at your feet." - Stephen Hawking, PhD.

Among the many improbable events and achievements in Stephen Hawking's remarkable life, his 70th birthday was celebrated this past week. Remarkable, because nearly 50 years ago, he was given only a short time to live, having been diagnosed with Lou Gehrig's disease (ALS, or Amyotrophic Lateral Sclerosis), a crippling and terminal neurological disorder.

At the celebration in his honor, notables from around the world were present, including British billionaire Sir Richard Branson. Dr. Hawking was too ill to attend, unfortunately. But he had pre-recorded an inspiring message. As many know, he's unable to speak normally, but is able to communicate via a computer synthesizer he controls from his wheelchair using the muscles of his face. His comments, like his life, were nothing short of amazing.

For example, he says of life after his diagnosis, "After my expectations had been reduced to zero, every new day became a bonus and I began to appreciate everything I did have." And how; after the onset of his illness, Hawking somehow went on not just to complete his PhD. at Cambridge, but to become the preeminent scientist in the world. His theories on black holes and the origin of the universe form much of the basis for how we understand our galactic surroundings. He has published innumerable papers on cosmology, and written several books.

His best seller, "A Brief History of Time", sold over 10 million copies. Hawking's seminal work on the origins of the Universe, as carefully distilled for the rest of us, has rested on my bookshelf since reading it over 20 years ago. The simple explanations he provided of the stunningly complex field of cosmology and planetary science were fascinating. The dry wit between the lines made the book fun. The intellect he displayed left me in awe.

But Stephen Hawking's most remarkable accomplishment, in my opinion, is the example he has set for overcoming devastating obstacles while contributing mightily to humankind. As to how he's done it, perhaps he says it best himself; "Be curious. And however difficult life may seem, there is always something you can do to succeed at. It matters that you just don't give up."

Thank you, Stephen.

As for the markets, as you'll see below, they are overcoming their own set of obstacles at present.....**

The Markets

So far, so good: The new year got off to a moderately encouraging start, beginning with solid reports on manufacturing and construction and ending with a fourth month of improved employment data. The Nasdaq took the lead; it was the first week since early October in which its gains outpaced those of the other three domestic indices. Not surprisingly, the Global Dow continued to be sluggish.

Last Week's Headlines
• Unemployment fell in December for the fourth straight month, hitting 8.5%; that's almost a full percentage point from last December's 9.4%. The Bureau of Labor Statistics said employers added 200,000 net new jobs, with the biggest gains occurring in transportation/warehousing, retail, and manufacturing. The measure of unemployment that includes underemployed workers also fell; it's down from 15.6% to 15.2%.
• U.S. manufacturing growth accelerated in December, according to the Institute for Supply Management. The ISM's index hit 53.9%, its highest level since June; it was the 29th straight month of expansion. Meanwhile, the Commerce Department said new durable goods orders also rose by 3.8%. The growth, driven primarily by new orders for aircraft and other transportation equipment, represented the fourth increase in the last five months.
• The Federal Reserve will start spelling out its expectations for the direction of short-term interest rates, including when it might start to raise rates. The forecasts will be made quarterly beginning with the January 25 release of other Fed economic forecasts, which will include projections for the end of this year.
• Expansion in the U.S. services sector picked up at a faster pace in December as the Institute for Supply Management's index rose 0.6% to 52.6%. It was the 26th consecutive month of growth, with 11 of the index's 18 industries reporting improvement.
• The average interest rate on 30-year fixed mortgages fell to 3.91% during the first week of 2012. According to mortgage giant Freddie Mac, that's as low as it's ever been. It also was the fifth straight week of rates under 4%.

Eye on the Week Ahead
Bond auctions are scheduled in Italy and Spain; with Italian 10-year yields over 7%, the results will be watched. Also, Monday's Alcoa earnings announcement represents the informal kickoff for the fourth-quarter earnings season.
Key dates and data releases: Fed "beige book" report (1/11); weekly new jobless claims, retail sales, business inventories (1/12); international trade, import/export prices, consumer sentiment (1/13).





Data sources: Includes data provided by Brounes & Associates. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results.
The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indexes listed are unmanaged and are not available for direct investment.

Prepared by Lee Davis** and Broadridge Investor Communication Solutions, Inc. Copyright 2012