What I’m Watching This Week – 30 November 2015

The Markets (as of market close November 27, 2015)

The major benchmark indexes listed here remained relatively stable for the holiday-shortened week. Mixed economic data, the Thanksgiving holiday, plus heavy consumer shopping may have slowed trading. The Dow lost about 25 points, while the S&P 500 gained almost 23 points. The Nasdaq and Russell 2000 posted gains week-on-week, while the Global Dow dropped a little over 18 points.

The price of gold (COMEX) continued to fall, selling at $1,056.10 by late Friday afternoon compared to $1,077.30 a week earlier. Crude oil (WTI) prices remained virtually the same, selling at $41.77 per barrel by week’s end. The national average retail regular gasoline price decreased to $2.094 per gallon on November 23, 2015, $0.084 below the previous week’s price of $2.178 per gallon, and $0.727 below a year ago.

Market/Index 2014 Close Prior Week As of 11/27 Weekly Change YTD Change
DJIA 17823.07 17823.81 17798.49 -0.14% -0.14%
Nasdaq 4736.05 5104.92 5127.52 0.44% 8.27%
S&P 500 2058.90 2089.17 2090.11 0.04% 1.52%
Russell 2000 1204.70 1175.15 1202.38 2.32% -0.19%
Global Dow 2501.66 2418.66 2400.37 -0.76% -4.05%
Fed. Funds 0.25% 0.25% 0.25% 0% 0%
10-year Treasuries 2.17% 2.26% 2.22% -4 bps 5 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 “second” estimate of the gross domestic product showed the U.S. economy advanced 2.1% in the third quarter of 2015, up from an initial estimate of 1.5%. The second quarter GDP increased 3.9%. According to the Bureau of Economic Analysis, the revised gain in the third quarter is reflective of increases in personal consumption expenditures, nonresidential fixed investment, state and local government spending, residential fixed investment, and exports. Imports, which are a subtraction in the calculation of GDP, increased.
  • On the heels of the GDP report came another important inflation indicator relied upon by the Fed–the core personal consumption expenditures (PCE) reading. And the latest figures from the Bureau of Economic Analysis show very little upward inflationary movement, as the PCE increased $15.2 billion, or 0.1%, in October. This follows a 0.1% PCE increase in September. Overall, personal income increased $68.1 billion, or 0.4%, while disposable personal income also increased 0.4% at $56.8 billion. Despite increases in disposable income, consumers aren’t spending commensurate with the added income, keeping inflationary trends stagnant. Unless November’s numbers reflect otherwise, October’s results do not readily support an interest rate hike in December.
  • New orders for durable goods placed with U.S. manufacturers are an indication of how busy factories will be in the coming months. According to the latest advance report from the Census Bureau, new orders for manufactured durable goods in October increased $6.9 billion, or 3.0%, to $239.0 billion. This increase follows a 0.8% revised September decrease.
  • However, manufacturing growth in November is slowing, according to the Markit Flash U.S. Manufacturing Purchasing Managers’ Index™ (PMI™). At 52.6, the index is still above 50, indicating monthly growth, but at a much slower pace, as the index for October was 54.1. Survey respondents indicated that growth in new orders is the slowest it’s been in over two years, citing cyclical slowdown in demand patterns and ongoing weakness in export sales.
  • Home prices for September were up, according to the latest S&P/Case-Shiller Home Price Indices. The National Home Price Index, covering the entire nation, recorded a year-over-year gain with a 4.9% annual increase in September compared to a 4.6% increase in August. Before seasonal adjustment, the National Index posted a gain of 0.2% in September over August.
  • The inventory of existing homes for sale is down, resulting in a drop in the sale of single-family homes, townhomes, condominiums, and co-ops for October, according to the latest figures from the National Association of Realtors®. Total existing home sales fell 3.4% to a seasonally adjusted annual rate of 5.36 million in October from 5.55 million in September. Total housing inventory at the end of October decreased 2.3% to 2.14 million existing homes available for sale, and is now 4.5% lower than a year ago (2.24 million).
  • According to the Census Bureau, sales of new single-family homes in October were at a seasonally adjusted annual rate of 495,000–10.7% above the revised September rate of 447,000, and 4.9% above October 2014. The median sales price of new houses sold in October was $281,500; the average sales price was $366,000 with an estimated 226,000 new homes for sale at the end of October (a supply of about 5.5 months).
  • The Conference Board Consumer Confidence Index®, which had decreased moderately in October, declined further in November. The index now stands at 90.4, down from 99.1 in October. The decline was attributable to consumers’ less favorable view of the job market and business conditions.
  • Another indicator of consumer sentiment in the economy, the University of Michigan’s Surveys of Consumers Index of Consumer Sentiment, came in at 91.3 for November, somewhat ahead of October’s 90.0 reading. Consumer sentiment waned toward the latter part of November however, possibly reflective of the Paris attacks and further terrorist threats.
  • In the week ended November 21, there were 260,000 initial claims for unemployment insurance, a decrease of 12,000 from the prior week’s revised level. The advance seasonally adjusted insured unemployment rate was unchanged at 1.6% for the week ended November 14, while the advance number for continuing unemployment insurance claims was 2,207,000, an increase of 34,000 from the previous week’s revised level.

Eye on the Week Ahead

This week brings reports from the manufacturing and non-manufacturing sectors. November’s employment data is highlighted at the end of the week, as is the latest report on international trade.