What I’m Watching This Week – 25 January 2016

The Markets (as of market close January 22, 2016)

Boosted by a jump in oil prices and a rally in the European markets, U.S. stocks enjoyed their first week of gains in a month. Global stocks responded favorably to news from the European Central Bank that more stimulus could be forthcoming. Colder weather may have led to an increase in demand for oil, shooting prices above $30, closing at $32.13 (WTI) a barrel. On the whole, each of the indexes listed here showed gains week-on-week, although each index remains in negative territory year-to-date. Bond yields for 10-year Treasuries, which had dropped below 2.0% earlier in the week, climbed to a little over 2% as prices dipped toward the end of the week.

The price of gold (COMEX) fell from last week’s close, selling at $1,098.50 by late Friday afternoon, down from the prior week’s closing price of $1,104.10. The national average retail regular gasoline price decreased to $1.914 per gallon on January 18, 2016, $0.082 below the prior week’s price and $0.152 under a year ago.

Market/Index 2015 Close Prior Week As of 1/22 Weekly Change YTD Change
DJIA 17425.03 15988.08 16093.51 0.66% -7.64%
Nasdaq 5007.41 4488.42 4591.18 2.29% -8.31%
S&P 500 2043.94 1880.33 1906.90 1.41% -6.70%
Russell 2000 1135.89 1007.72 1020.77 1.30% -10.13%
Global Dow 2336.45 2127.02 2135.79 0.41% -8.59%
Fed. Funds 0.50% 0.50% 0.50% 0 bps 0 bps
10-year Treasuries 2.26% 2.03% 2.05% 2 bps -21 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

  • Home builders maintained confidence in the new home market, according to January’s preliminary Housing Market Index from the National Association of Home Builders. The index for January, at 60, is unchanged from December’s downwardly revised reading. An index reading above 50 represents improvement, and a reading in the low 60s is indicative of gradual improvement.
  • Both housing starts and building permits for privately owned housing units dipped in December following November’s surge, according to the latest report from the Census Bureau. Housing starts (marked by the actual beginning of construction) fell 2.5% below November’s figure, while the number of building permits issued dropped 3.9%. Nevertheless, both housing starts (6.4%) and permits (14.4%) are ahead of their respective numbers for December 2014. And housing completions in December were 5.6% above the revised November estimate and 7.9% ahead of December 2014.
  • Existing home sales rebounded in December, according to the latest information from the National Association of Realtors®, which saw the index jump to a seasonally adjusted annual rate of 5.46 million–an increase of 700,000 over November. Lawrence Yun, chief economist for the NAR notes that December’s sales figures close the best year of existing home sales since 2006. The median existing-home price for all housing types in December was $224,100, up 7.6% from December 2014 ($208,200). Last month’s price increase marks the 46th consecutive month of year-over-year gains.
  • Falling prices in energy (-2.4%) and food (-0.2%) led to an overall decline in the Consumer Price Index, which fell 0.1% in December. The index for all items less food and energy rose 0.1% in December, its smallest increase since August. The all items index rose 0.7% over the last 12 months, compared to the 0.5% 12-month increase for the period ending November. The latest figures highlight the continuing lack of inflationary pressure–something the FOMC may consider when it meets later this month.
  • S. manufacturers started the year with a rebound in output and new business growth from the lows seen during December, resulting in Purchasing Managers’ Index™ (PMI) of 52.7 in January–up from December’s PMI of 51.2. While the latest index signals moderate improvement in overall business conditions, it is still the second-lowest index since October 2013.
  • For the week ended January 16, there were 293,000 initial claims for unemployment insurance, an increase of 10,000 from the prior week’s revised total. For the week ended January 9, the advance number for continuing unemployment insurance claims was 2,208,000, a decrease of 56,000 from the previous week’s revised level. The advance seasonally adjusted insured unemployment rate remained at 1.6% for the week ended January 9.

Eye on the Week Ahead

So far, 2016 has been anything but kind to market investors. This week’s reports on new home sales, durable goods, and the GDP, as well as updates from the latest FOMC meeting, could offer some indication as to the direction of the economy in general, and equities markets in particular for the weeks ahead.

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What I’m Watching This Week – 19 January 2016

The Markets (as of market close January 15, 2016)

Last week was a perfect storm of bad news for investors, as China’s continuing economic and stock market woes and the ongoing plunge in oil prices–combined with a stream of disappointing news about the U.S. economy–sparked yet another sharp selloff. Markets took a beating, with the Russell 2000 index leading the way (-3.68%). Both the Russell 2000 and the Nasdaq are down more than 10% for the first two weeks of 2016.

Crude oil closed below $30 a barrel, settling at $29.42. Concerns about sanctions being lifted in Iran, which observers worry will exacerbate the current oversupply situation, helped fuel the price plunge. The national average regular retail gas price dropped to $1.996 on January 11, $0.032 less than the previous week and $0.143 lower than a year ago.

Gold prices rose and Treasury yields dropped toward week’s end, as investors sought relative safety. Gold closed at $1,088.60 an ounce, while the benchmark 10-year Treasury lost 8 basis points from a week prior.

Market/Index 2015 Close Prior Week As of 1/15 Weekly Change YTD Change
DJIA 17425.03 16346.45 15988.08 -2.19% -8.25%
Nasdaq 5007.41 4643.63 4488.42 -3.34% -10.36%
S&P 500 2043.94 1922.03 1880.33 -2.17% -8.00%
Russell 2000 1135.89 1046.20 1007.72 -3.68% -11.28%
Global Dow 2336.45 2189.48 2127.02 -2.85% -8.96%
Fed. Funds 0.50% 0.50% 0.50% 0 bps 0 bps
10-year Treasuries 2.26% 2.11% 2.03% -8 bps -23 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

  • According to the Bureau of Labor Statistics (BLS), job openings changed minimally in November, rising to 5.43 million from October’s reading of 5.35 million. Hires and separations were also little changed. Within separations, the quits rate was 2.0% and the layoffs and discharges rate was 1.2%. Over the 12 months ended in November, job openings rose 11%, with the largest increases in health care and social assistance and accommodation and food services.
  • The Federal Reserve “beige book” reported modest growth in 9 of its 12 districts for the latter part of 2015 into 2016. New York and Kansas City reported growth as “essentially flat,” and contacts from Boston were “upbeat.” Expectations for future growth were positive in Boston, Philadelphia, Chicago, Atlanta, Dallas, and Kansas City.
  • The U.S. Treasury reported that the budget deficit was $14.4 billion in December, down from $64.6 billion in November. Fiscal year to date, the deficit totals $216 billion, compared to $177 billion for the same period last year.
  • Import prices fell 1.2% in December, the largest monthly drop since August 2015, reported the BLS. The decline was driven mainly by fuel import prices, which fell a precipitous 9.5% in December following a 3.5% drop in November. (Fuel import prices fell 40.5% in 2015, following a 29.1% drop in 2014.) Imports excluding fuel fell 3.4% in 2015, the largest drop since the index was first published in 2001. Exports fell 1.1% in December, also the largest monthly decline since last August. Both agricultural and nonagricultural exports fell 1.0% during the month. Export prices dropped 6.5% in 2015, the largest annual decline since the index was first published in 1983.
  • The BLS also reported a decline of 0.2% in the Producer Price Index for final demand in December, compared to an increase of 0.3% in November. The December dip was attributed to a 0.7% decline in the prices of goods, largely resulting from falling gas prices. Services rose 0.1%. For the year, the index fell 1.0%, compared to an increase of 0.9% in 2014.
  • S. retail and food services sales posted a monthly drop of 0.1% during the all-important shopping month of December, recording a total of $448.1 billion, reported the Department of Commerce. Total sales for 2015 were up just 2.1%, which was the smallest annual increase since 2009. The biggest annual gainers were sporting goods, hobby, book and music stores (7.6%); nonstore retailers (7.1%); food and drink establishments (6.7%); and motor vehicles (6.3%).
  • The Federal Reserve reported that industrial production declined 0.4% in December, primarily due to cutbacks in utilities and mining. This was the third consecutive monthly decline. November figures were also revised downward, to a drop of 0.9% from a previously estimated 0.6%. Year-over-year, production was down 1.8%. Capacity utilization for manufacturing was 76.0% in December 2015, 2.5% lower than its long-term average.
  • A bright note last week came from the University of Michigan’s Surveys of Consumers, which said that the preliminary reading for the Index of Consumer Sentiment was 93.3 for January, compared to 92.6 for December. This is the fourth month in a row that consumer sentiment rose. Chief Economist Richard Curtin attributed the growth to continuing levels of low inflation.
  • According to the Department of Commerce, business inventories fell 0.2% in November from October, but were up 1.6% over the previous 12 months. Sales also fell 0.2% from October and were down 2.8% year-over-year. The inventories/sales ratio in November was 1.38, compared to 1.32 a year prior.
  • Unemployment benefit applications totaled 284,000 for the week ended January 9, a rise of 7,000 from the previous week. This is the second-highest level since July. The advance number for seasonally adjusted insured unemployment during the week ended January 2 was 2,263,000, which was 29,000 higher than the previous week.

Eye on the Week Ahead

Investors will continue to monitor the China-and-oil drumbeat, as well the continuing flow of corporate earnings reports. This week’s economic releases include key reports on housing, inflation, and manufacturing.

What I’m Watching This Week – 11 january 2016

The Markets (as of market close January 8, 2016)

Last week began with both domestic and global markets hitting the skids amid concerns over China’s stock market plunge, North Korea’s apparent nuclear testing, and falling oil prices. A favorable employment report at the end of the week may have helped stem the downward tide, but not nearly enough to prevent the market from registering one of its worst weeks in memory. The Dow lost over 1,000 points from last week’s December 31 close, while the S&P 500 dropped almost 6%. The Nasdaq and Russell 2000 also fell by more than 7%.

New information on China’s receding economy sent its stock market spiraling as the government closed trading twice last week. The price of oil has fallen to its lowest level since 2004, further softening energy stocks, which negatively impacted the large-cap indexes.

The price of gold (COMEX) increased, selling at $1,104.10 by late Friday afternoon, up from $1,060.50 a week earlier. Crude oil (WTI) prices also dropped, selling at $32.88 per barrel by week’s end. The national average retail regular gasoline price decreased to $2.028 per gallon on January 4, 2016, $0.006 below the previous week’s price and $0.186 under a year ago.

Market/Index 2015 Close Prior Week As of 1/8 Weekly Change YTD Change
DJIA 17425.03 17425.03 16346.45 -6.19% -6.19%
Nasdaq 5007.41 5007.41 4643.63 -7.26% -7.26%
S&P 500 2043.94 2043.94 1922.03 -5.96% -5.96%
Russell 2000 1135.89 1135.89 1046.20 -7.90% -7.90%
Global Dow 2336.45 2336.45 2189.48 -6.29% -6.29%
Fed. Funds 0.50% 0.50% 0.50% 0 bps 0 bps
10-year Treasuries 2.26% 2.26% 2.11% -15 bps -15 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 final U.S. labor figures for 2015 revealed that the employment sector enjoyed one of its best years in the last decade as nonfarm payrolls increased by 292,000 in December, while the unemployment rate remained at 5% for the third month in a row. According to the Bureau of Labor Statistics, gains in the job market occurred in several industries, led by professional and business services, construction, health care, and food services and drinking places. Mining employment continued to decline. The number of unemployed persons, at 7.9 million, was essentially unchanged in December, and for the past 12 months, the unemployment rate and the number of unemployed persons were down by 0.6 percentage point and 800,000, respectively. Adding to the favorable employment situation, revisions to October and November added more jobs for each month than previously estimated. While the average hourly earnings for all private-sector employees fell by a cent to $25.24 in December, over the past year, average hourly earnings actually rose 2.5%.
  • The manufacturing sector closed 2015 on a sour note. The Census Bureau’s latest report showed that new orders for manufactured goods in November decreased $1.1 billion, or 0.2%, from October. The news wasn’t much better for December, as the Institute for Supply Management® composite Purchasing Managers’ Index® contracted for the second consecutive month registering 48.2%, a decrease of 0.4 percentage point from November’s reading of 48.6%. And, according to the final seasonally adjusted Markit U.S. Manufacturing Purchasing Managers’ Index™, U.S. manufacturers ended the year by recording the weakest improvement in overall business conditions since October 2012, as the index fell to 51.2 in December, down from 52.8 in November. Chris Williamson, chief economist at Markit said, “The manufacturing sector saw a disappointing end to 2015, and its plight looks set to continue into the New Year as headwinds show no sign of abating any time soon.”
  • While the manufacturing sector may be showing signs of weakness, the non-manufacturing area (services, construction, mining, agriculture, forestry, fishing and hunting) grew in December, according to the latest Non-Manufacturing ISM® Report On Business®, which saw its non-manufacturing index register 55.3%. Any index reading of 50% or higher indicates growth. Nevertheless, while there was continued growth in December, it moved at a slightly slower rate than the prior month, which had a higher reading of 55.9%.
  • Spending on construction, estimated at a seasonally adjusted annual rate of $1,122.5 billion, decreased during November 2015, according to the latest figures from the Census Bureau. Spending in November was 0.4% below the revised October estimate of $1,127.0 billion. Spending in November on private construction (-0.2%) and public construction (-1.0%) were below their respective estimates for October 2015. Nevertheless, construction spending in November 2015 was 10.5% above the November 2014 estimate of $1,016.1 billion.
  • The international trade deficit narrowed by $2.2 billion in November compared to October, according to the Census Bureau’s latest report. The goods and services deficit for November was $42.4 billion, as exports were $182.2 billion ($1.6 billion less than October) and imports were $224.6 billion ($3.8 billion less than October). Year-to-date, the goods and services deficit increased $25.2 billion, or 5.5%, from the same period in 2014. Exports decreased $99.0 billion, or 4.6%, while imports decreased $73.7 billion, or 2.8%. The continued strength of the dollar has driven up prices for foreign buyers, further curtailing exports, while slumping oil prices have contributed to declining imports. Overall, these figures point to slowing global trade.
  • For the week ended January 2, there were 277,000 initial claims for unemployment insurance, a decrease of 10,000 from the prior week’s unrevised total. For the week ended December 26, the advance number for continuing unemployment insurance claims was 2,230,000, an increase of 25,000 from the previous week’s revised level. The advance seasonally adjusted insured unemployment rate was 1.6% for the week ended December 26.

Eye on the Week Ahead

Several important economic indicators are highlighted this week. Of particular interest are the latest reports on job openings, producer prices, retail sales, and industrial production.

What I’m Watching This Week – 4 January 2016

The Markets (as of market close January 1, 2016)

As the year came to a close, the final week of 2015 saw each of the indexes listed here finish in negative territory compared to the prior week. Since the week closed on a holiday, the closing values for 2015 are in fact the closing values for the week ending January 1, 2016, so there is no year-to-date change.

The price of gold (COMEX) fell, selling at $1,060.50 by late Thursday afternoon, down from $1,075.80 a week earlier. Crude oil (WTI) prices also dropped, selling at $37.07 per barrel by week’s end. The national average retail regular gasoline price increased for the first time in several weeks to $2.034 per gallon on December 28, 2015, $0.008 above the previous week’s price but $0.265 under a year ago.

Market/Index 2015 Close Prior Week As of 1/1 Weekly Change YTD Change
DJIA 17425.03 17552.17 17425.03 -0.72% 0.0%
Nasdaq 5007.41 5048.49 5007.41 -0.81% 0.0%
S&P 500 2043.94 2060.99 2043.94 -0.83% 0.0%
Russell 2000 1135.89 1154.76 1135.89 -1.63% 0.0%
Global Dow 2336.45 2357.18 2336.45 -0.88% 0.0%
Fed. Funds 0.50% 0.50% 0.50% 0 bps 0 bps
10-year Treasuries 2.26% 2.24% 2.26% 2 bps 0 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 Census Bureau’s advance report on U.S. international trade in goods for November revealed that the seasonally adjusted deficit decreased from $61.3 billion in October to $60.5 billion in November. Compared to October, the advance numbers showed exports of goods were down about 2.0%, while imports of goods fell roughly 1.8%.
  • Consumer confidence bounced back in December following November’s moderate decline. The Conference Board Consumer Confidence Index® stands at 96.5, up from 92.6 in November. The Present Situation Index increased from 110.9 last month to 115.3 in December, while the Expectations Index improved to 83.9 from 80.4 in November. Survey respondents expressed optimism about the labor market, although consumers’ expectations about their financial outlook were mixed.
  • Rising prices and limited inventory continued to slow pending home sales (those under contract for sale) in November, according to the latest Pending Home Sales Index from the National Association of Realtors®. The index for November fell 0.9% from October–the third time in four months the index has declined. However, the index is 2.7% ahead of November 2014.
  • For the week ended December 26, there were 287,000 initial claims for unemployment insurance, an increase of 20,000 from the prior week’s revised total. For the week ended December 19, the advance number for continuing unemployment insurance claims was 2,198,000, an increase of 3,000 from the previous week’s unrevised level. The advance seasonally adjusted insured unemployment rate was 1.6% for the week ended December 19.

Eye on the Week Ahead

The first full week of the new year will reveal how last year ended in the manufacturing sector. Also of note will be the latest Bureau of Economic Analysis report on international trade for November.