What I’m Watching This Week – 26 October 2015

The Markets (as of market close October 23, 2015)

Equities finished last week on a high note following a strong finish in the technology sector, while China cut interest rates once again in an attempt to spur its waning economy. The European Central Bank hinted that it could scale up its bond-buying stimulus program, further boosting stock markets around the globe. Each of the indexes listed here improved by last week’s end with the large cap-Dow rising over 430 points for an increase of 2.50%, while the S&P 500 improved over 40 points, gaining a little over 2%. Bond prices fell as the 10-year Treasury yield rose about 5 basis points.

The price of gold (COMEX) decreased, selling at $1,164.00 by late Friday afternoon compared to $1,177.30 a week earlier. Crude oil (WTI) prices fell back further, selling at $44.73 per barrel by week’s end. The national average retail regular gasoline price decreased to $2.277 per gallon on October 19, 2015, $0.060 under the previous week’s price of $2.337 per gallon, and $0.852 below a year ago.

Market/Index 2014 Close Prior Week As of 10/23 Weekly Change YTD Change
DJIA 17823.07 17215.97 17646.70 2.50% -0.99%
Nasdaq 4736.05 4886.69 5031.86 2.97% 6.25%
S&P 500 2058.90 2033.11 2075.15 2.07% 0.79%
Russell 2000 1204.70 1162.31 1166.06 0.32% -3.21%
Global Dow 2501.66 2421.58 2458.13 1.51% -1.74%
Fed. Funds 0.25% 0.25% 0.25% 0% 0%
10-year Treasuries 2.17% 2.03% 2.08% 5 bps -9 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

  • The National Association of Home Builders Housing Market Index attempts to gauge home builders’ perception of the general economy and housing market conditions based on a survey of its members. According to its most recent report, builders gained confidence in the market for newly constructed single-family homes in October as the index rose 3 points to 64. The index for current sales also gained 3 points to 70 in anticipation of favorable new home sales. Expected sales over the next six months increased 7 points to an index reading of 75–all indications of continuing strength in the housing sector.
  • New residential construction picked up in September, according to the U.S. Census Bureau’s latest figures. Privately owned housing starts (beginning of the construction phase) were at an annual rate of 1,206,000, or 6.5% above the revised August estimate, and 17.5% over the September 2014 rate. Looking forward, residential building permits fell off by 5% in September compared to August, indicative of a possible slowdown in residential construction in the months ahead.
  • Following last month’s decline in existing home sales, the National Association of Realtors® reports that existing home sales increased 4.7% for September to a seasonally adjusted annual rate of 5.55 million. Total existing home sales are 8.8% above a year ago (5.10 million). However, the median existing home price for all housing types fell in September to $221,900, which is down from August’s median price of $228,500. Nevertheless, the housing market, in general, continues to be a positive economic sector.
  • Manufacturing, which has been a relatively weak sector this year, may be showing signs of an uptick. October’s Purchasing Managers’ Manufacturing Index increased to 54, up from 53.1 in September. The companies surveyed for the index indicated that improving demand from domestic markets and competitive pricing strategies have led to accelerated production levels. While this is a preliminary report, any favorable news on the manufacturing front is welcome.
  • Initial claims for unemployment insurance increased by 3,000 for the week ended October 17, to close at 259,000, up from the previous week’s revised level of 256,000. The advance seasonally adjusted insured unemployment rate was unchanged at 1.6% for the week ended October 10, while the advance number for continuing unemployment insurance claims increased 6,000 to 2,170,000.

Eye on the Week Ahead

Much of next week’s focus will be on the Federal Reserve’s meeting, which again will raise the question of whether, or when, interest rates will be raised. The first preliminary report on the gross domestic product for the third quarter is also scheduled for next week.