What I’m Watching This Week – 1 December 2014

The Markets

The Nasdaq had a good week, but other equity indices saw little change, though the Dow and S&P 500 remained in record territory. The biggest news came from falling oil prices in the wake of a decision by the Organization of the Petroleum Exporting Countries (OPEC) to keep its oil supplies at current levels, which cut the price of oil to roughly $66 a barrel.

Market/Index 2013 Close Prior Week As of 11/28 Weekly Change YTD Change
DJIA 16576.66 17810.06 17828.24 .10% 7.55%
Nasdaq 4176.59 4712.97 4791.63 1.67% 14.73%
S&P 500 1848.36 2063.50 2067.56 .20% 11.86%
Russell 2000 1163.64 1172.42 1173.23 .07% .82%
Global Dow 2484.10 2559.75 2571.40 .46% 3.51%
Fed. Funds .25% .25% .25% 0% 0%
10-year Treasuries 3.04% 2.31% 2.18% -13 bps -86 bps

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

Last Week’s Headlines

  • U.S. gross domestic product grew during the third quarter at a slightly faster rate than the Bureau of Economic Analysis had previously estimated. However, the 3.9% increase in GDP was less than Q2’s 4.6%.
  • Led by Saudi Arabia, the Organization of the Petroleum Exporting Countries (OPEC) decided to maintain current production levels to try to maintain market share in the face of U.S. competition. The decision hurt not only oil prices around the world but the currencies of countries that depend on oil exports. It also raised concerns about whether falling prices would lead oil companies to curtail investments in future exploration and development.
  • Home prices in cities measured by the S&P/Case-Shiller 20-City Composite Index were flat in September. Though there was a 4.9% year-over-year increase, that figure continued to show an overall downward trend; that 4.9% gain was lower than the 5.6% annual increase seen a month earlier.
  • S. manufacturers saw a 0.4% increase in orders for durable goods in October, according to the Commerce Department. However, a 3.4% gain in the typically volatile aircraft sector was responsible for most of that; excluding transportation, new orders were down 0.9%.
  • Sales of new homes were up 0.7% in October; according to the Commerce Department, that put them 1.8% higher than a year earlier.
  • Both personal income and personal consumption were up 0.2% in October, according to the Commerce Department.

Eye on the Week Ahead

With traders back at their desks and the end of 2015 on the horizon, reports from last week’s retail battlefields will be of special interest for what they suggest about how the U.S. economy might fare through the end of the year. Given the freefall in oil prices last week, investors will be assessing the implications for the global economy and the energy sector. And as always, Friday’s unemployment figures will be of interest for what they might mean for Fed action in 2015.