What I’m Watching This Week – 23 November 2015

The Markets (as of market close November 20, 2015)

Despite the terrorist attacks in Paris and Mali, stocks climbed higher by the close of last week. Investors may have been influenced by favorable earnings reports from some large companies and the feeling that the impending Fed interest rate hike may be a sign the government believes the economy is on a definite upswing. The S&P 500 and the Dow saw significant gains, rising 3.27% and 3.35%, respectively. Nasdaq continues to be a consistent performer, closing last week up almost 8% year-to-date.

The price of gold (COMEX) decreased, selling at $1,077.30 by late Friday afternoon compared to $1,083.20 a week earlier. Crude oil (WTI) prices gained, selling at $41.46 per barrel by week’s end. The national average retail regular gasoline price decreased to $2.178 per gallon on November 16, 2015, $0.057 below the previous week’s price of $2.235 per gallon, and $0.716 below a year ago.

Market/Index 2014 Close Prior Week As of 11/20 Weekly Change YTD Change
DJIA 17823.07 17245.24 17823.81 3.35% 0.00%
Nasdaq 4736.05 4927.88 5104.92 3.59% 7.79%
S&P 500 2058.90 2023.04 2089.17 3.27% 1.47%
Russell 2000 1204.70 1146.55 1175.15 2.49% -2.45%
Global Dow 2501.66 2358.29 2418.66 2.56% -3.32%
Fed. Funds 0.25% 0.25% 0.25% 0% 0%
10-year Treasuries 2.17% 2.26% 2.26% 0 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 Consumer Price Index (CPI) experienced a modest monthly gain in October, increasing 0.2%. This follows two consecutive months of decline. According to the Bureau of Labor Statistics report, the index has increased 0.2% over the last 12 months. The core CPI, less the volatile food and energy segment, sits at 1.9%–right at the Fed’s general 2% inflation target. Stronger inflationary trends could be a sign of economic strength sufficient enough to absorb an interest rate hike.
  • The Federal Reserve puts out a monthly index of industrial production covering manufacturing, mining, and electric and gas utilities. The latest figures show that industrial production fell once again, declining 0.2% in October. Indexes for utilities (-2.5%) and mining (-1.5%) decreased, while the index for manufacturing actually moved up 0.4% for the month. Also on the plus side, at 107.2% of its 2012 average, total industrial production in October was 0.3% above its year-earlier level.
  • The Housing Market Index, which is based on a survey of National Association of Home Builders members, seeks to rate the single-family housing market. The preliminary report for November shows the index dipped to 62 compared to October’s revised reading of 65. A reading over 50 denotes general builder confidence. While enthusiasm in the market for single-family home sales may have softened a bit, November’s preliminary reading reveals continuing optimism in the market.
  • Housing starts–marked by the actual start of new residential construction–fell 11% in October compared to September’s revised figures. According to the latest Census Bureau report, there were about 1,060,000 housing starts in October–131,000 fewer than the prior month’s total. Builders cut back on construction of apartments and condominiums to the tune of 25.1%, while starts of single-family residences fell 2.4%. On the other hand, builders showed confidence in future residential sales, as applications for building permits rose 4.1%.
  • In the week ended November 14, there were 271,000 initial claims for unemployment insurance, a decrease of 5,000 from the prior week. The advance seasonally adjusted insured unemployment rate was unchanged at 1.6% for the week ended November 7, while the advance number for continuing unemployment insurance claims was 2,175,000, a decrease of 2,000 from the previous week’s revised level.

Eye on the Week Ahead

Several important economic indicators are highlighted in reports during the week of November 23. Reports on existing home sales and new home sales may reveal the direction of the housing market heading to the end of the year. Imports and exports have generally been lagging for much of this year, and the latest figures are expected to reveal more of the same. The report on gross domestic product is the final take on overall economic activity available to the FOMC before its December meeting.