What I’m Watching This Week – 16 November 2015

The Markets (as of market close November 13, 2015)

Stocks fell sharply this week, possibly in anticipation of the Federal Reserve’s impending interest rate hike, maybe as soon as next month. The Dow lost a little over 665 points, or 3.71%, closing the week at 17245.24. The S&P 500 fell 3.63%, and the Nasdaq, which had been a consistent gainer, dropped over 4%. Last week’s declines follow an October during which equities climbed out of a summer slump to register positive gains year-to-date. Those gains have dissipated for the most part, with only the Nasdaq ahead of last year.

The price of gold (COMEX) decreased, selling at $1,083.20 by late Friday afternoon compared to $1,088.90 a week earlier. Crude oil (WTI) prices fell, selling at $40.73 per barrel by week’s end. The national average retail regular gasoline price increased to $2.235 per gallon on November 9, 2015, $0.011 over the previous week’s price of $2.224 per gallon, but still $0.706 below a year ago.

Market/Index 2014 Close Prior Week As of 11/13 Weekly Change YTD Change
DJIA 17823.07 17910.33 17245.24 -3.71% -3.24%
Nasdaq 4736.05 5147.12 4927.88 -4.26% 4.05%
S&P 500 2058.90 2099.20 2023.04 -3.63% -1.74%
Russell 2000 1204.70 1199.75 1146.55 -4.43% -4.83%
Global Dow 2501.66 2433.65 2358.29 -3.10% -5.73%
Fed. Funds 0.25% 0.25% 0.25% 0% 0%
10-year Treasuries 2.17% 2.32% 2.26% -6 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 latest report from the Bureau of Labor Statistics reveals that the Producer Price Index (PPI) decreased 0.4% in October. The PPI measures the average change over time in the prices domestic producers receive for goods and services. Final demand prices moved down 0.5% in September and were unchanged in August. On an unadjusted basis, the final demand index fell 1.6% for the 12 months ended in October, a record 12-month decline for this index, which was introduced in November 2009.
  • Retail sales and services, on the other hand, increased 0.1% from the previous month to $447.3 billion in October, according to the latest report from the Department of Commerce. This also marks an increase of 1.7% from October 2014.
  • Business inventories for September increased 0.3% from the prior month, according to the latest figures from the Census Bureau. The inventories-to-sales ratio was 1.38 for September–up 0.01 from August and 0.07 ahead of September 2014. Rising inventories may reflect business optimism that sales will be growing in the coming months.
  • U.S. import prices fell 0.5% in October, after falling 0.6% in September, according to the latest figures from the Bureau of Labor Statistics. Lower prices for both fuel and nonfuel imports contributed to the October decrease. Prices for U.S. exports fell 0.2% in October, following a 0.6% drop the previous month.
  • The U.S. budget deficit increased to $137 billion in October–the first month of the government’s 2016 fiscal year. Total receipts for the month were $211 billion, while outlays reached $348 billion. The deficit for October 2015 is 12.2% higher than October 2014. Part of the recently passed Bipartisan Budget Act of 2015 includes increases in the federal debt limit and discretionary spending levels. As such, the deficit could continue to expand as government spending increases.
  • The number of job openings was little changed at 5.5 million on the last business day of September, according to the Job Openings and Labor Turnover (JOLTS) report from the U.S. Bureau of Labor Statistics. Hires and separations were little changed at 5.0 million and 4.8 million, respectively. Within separations, the quits rate was 1.9% for the sixth consecutive month, and the layoffs and discharges rate remained unchanged at 1.2%. So while the number of job openings increased, the rate of hires didn’t, possibly indicating a lack of interest on the part of those unemployed, or a potential cutback on employer hires.
  • According to the latest report on consumer sentiment from the University of Michigan, consumer confidence rose in early November, coming in with an index reading of 93.1 compared to 90.0 in October. Consumers showed growing confidence in the overall economy, as evidenced by the Current Economic Conditions index, which rose to 104.8 in November from 102.3 in October.
  • Initial claims for unemployment insurance were unchanged from the prior week, closing at 276,000 for the week ended November 7. The advance seasonally adjusted insured unemployment rate was unchanged at 1.6% for the week ended October 31, while the advance number for continuing unemployment insurance claims increased 5,000 to 2,174,000.

Eye on the Week Ahead

A few important economic indicators are highlighted in reports this week. The Consumer Price Index, a monthly indicator of inflation, has not shown signs of significant upward movement, but October’s report may reveal increasing consumer prices, further bolstering the likelihood of an interest rate hike by the Fed. Reports on industrial production and housing starts are also on tap.