What I’m Watching This Week – 28 December 2015

The Markets (as of market close December 25, 2015)

U.S. stocks posted their biggest weekly gains in several weeks. The close of Christmas week saw each of the indexes listed here record positive gains, with the Russell 2000 moving up 3% to lead the way.

The price of gold (COMEX) reversed course, selling at $1,075.80 by late Thursday afternoon, up from $1,065.60 a week earlier. Crude oil (WTI) prices increased, selling at $38.12 per barrel by week’s end. The national average retail regular gasoline price decreased for the sixth week in a row to $2.026 per gallon on December 21, 2015, $0.011 below the previous week’s price and $0.377 under a year ago.

Market/Index 2014 Close Prior Week As of 12/25 Weekly Change YTD Change
DJIA 17823.07 17128.55 17552.17 2.47% -1.52%
Nasdaq 4736.05 4923.08 5048.49 2.55% 6.60%
S&P 500 2058.90 2005.55 2060.99 2.76% 0.10%
Russell 2000 1204.70 1121.02 1154.76 3.01% -4.15%
Global Dow 2501.66 2299.02 2357.18 2.53% -5.78%
Fed. Funds 0.25% 0.50% 0.50% 0 bps 25 bps
10-year Treasuries 2.17% 2.21% 2.24% 3 bps 7 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 gross domestic product was revised down to an annual rate of 2.0% in the third quarter of 2015, according to the third estimate released by the Bureau of Economic Analysis. The second estimate issued last month approximated GDP growth at 2.1% in the third quarter. Comparatively, the GDP increased by 3.9% in the second quarter. The deceleration in the GDP in the third quarter reflected a downturn in private inventory growth and business spending, as well as decelerations in exports, consumer spending, nonresidential fixed investment, and state and local government spending.
  • At an annualized rate of 4.76 million, sales of existing residential real estate fell 10.5% in November–the largest percentage decline since July 2010 (22.5%). November’s figures follow October’s numbers, which were downwardly revised to 5.32 million. The sales rate is 3.8% below a year ago–the first such decrease since September 2014. National Association of Realtors® chief economist Lawrence Yun says the dropoff isn’t necessarily due to a lack of demand, but is more likely attributable to the “Know Before You Owe” initiative, which is lengthening closing times and may have pushed some transactions scheduled for November into December. On a positive note, the median existing-home price for all residential housing types in November was $220,300, which is 6.3% above November 2014 ($207,200). November’s price increase marks the 45th consecutive month of year-over-year gains.
  • Unlike sales of existing homes, new home sales in November increased, both in total number of sales and in price. According to the latest report from the Census Bureau, sales of new single-family homes in November were at an annual rate of 490,000–4.3% above the revised October rate of 470,000 and 9.1% higher than November 2014. The median sales price of new homes sold in November 2015 was $305,000 ($286,900 in October), while the average sales price was $374,900 ($358,100 in October).
  • According to the advance report from the Census Bureau, new orders for manufactured durable goods (expected to last at least three years) in November increased $0.1 billion to $238.8 billion, which effectively is unchanged from October. However, excluding the volatile transportation segment, new orders actually decreased 0.1%; excluding defense, new orders decreased 1.5%. Overall gains in durable goods for November, in large part, were attributable to increases in transportation equipment and military spending.
  • Compared to October, both disposable personal income and personal consumption expenditures (consumer spending) increased 0.3% in November, according to the latest figures from the Bureau of Economic Analysis. November’s figures should be encouraging news for retailers during the holiday season.
  • The Index of Consumer Sentiment grew in December, coming in at 92.6 compared to 91.3 the prior month. According to the University of Michigan’s Surveys of Consumers, consumer confidence rose to its highest level since July, with the December reading nearly equal to the 2015 average of 92.9.
  • For the week ended December 19, there were 267,000 initial claims for unemployment insurance, a decrease of 5,000 from the prior week’s revised total. For the week ended December 12, the advance number for continuing unemployment insurance claims was 2,195,000, a decrease of 47,000 from the previous week’s revised level. The advance seasonally adjusted insured unemployment rate was 1.6% for the week ended December 12.

Eye on the Week Ahead

The week is a relatively slow one for economic news and reports. Of significance is the Census Bureau’s latest report on imports and exports for November, which revealed a negative trade balance of almost $60 billion in October.