Tag: Investment plan

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.

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.

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.

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.

The Markets (as of market close December 18, 2015)

Not entirely unexpected, the Federal Open Market Committee announced the first interest-rate increase since 2006. In support of its decision, the committee expressed cautious optimism that economic conditions will continue to strengthen. However, the committee’s sentiments weren’t enough to keep the markets from ending a volatile week on the downside. The Dow dropped over 136 points to its lowest close since October, while the S&P 500 fell 0.34%, falling further behind its 2014 year-end close. Both the Nasdaq and Russell 2000 also posted losses, sliding 0.21% and 0.23% respectively. The only positive mover of the indexes listed here was the Global Dow, which closed 0.06% ahead of the prior week.

The price of gold (COMEX) fell once again, selling at $1,065.60 by late Friday afternoon compared to $1,073.70 a week earlier. Crude oil (WTI) prices fell again, selling at $34.55 per barrel by week’s end. The national average retail regular gasoline price decreased for the fifth week in a row to $2.037 per gallon on December 14, 2015, $0.016 below the previous week’s price and $0.517 under a year ago.

Market/Index	2014 Close	Prior Week	As of 12/18	Weekly Change	YTD Change
DJIA	17823.07	17265.21	17128.55	-0.79%	-3.90%
Nasdaq	4736.05	4933.47	4923.08	-0.21%	3.95%
S&P 500	2058.90	2012.37	2005.55	-0.34%	-2.59%
Russell 2000	1204.70	1123.61	1121.02	-0.23%	-6.95%
Global Dow	2501.66	2297.74	2299.02	0.06%	-8.10%
Fed. Funds	0.25%	0.25%	0.50%	0.25%	0.25%
10-year Treasuries	2.17%	2.12%	2.21%	9 bps	4 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

• Citing its statutory mandate of seeking to foster maximum employment and price stability, the Federal Reserve decided to raise the target range for the federal funds rate by 0.25%, bringing it from 0.25% to 0.5%. Future increases will be gradual and dependent on the economic outlook. In support of its decision, the Fed noted that economic activity generally has been expanding at a moderate pace, and it’s confident that the economy will continue to strengthen. Despite inflation continuing to run below the committee’s target 2.0% rate, soft exports, and declines in energy and import prices, the committee expects these sectors to strengthen over time, promoting further economic growth.
• Consumer price inflation remained low as the Consumer Price Index for November was unchanged from the prior month. Keeping prices down were energy prices, where the index fell 1.3% due in part to a decline in gasoline prices, and the food index, which dropped 0.1%. Nevertheless, over the last 12 months, the all items index increased 0.5%, while the core index (excluding energy and food) rose 0.2% in Novmeber–the same increases as in the previous 2 months.
• The National Association of Home Builders preliminary housing market index for December showed a slight fall in builder confidence compared to November. The index, which is based on a survey of association members, fell from 62 in November to 61 for December. However, a reading of 50 or better indicates respondents consider the single-family housing market to be favorable. In any case, enthusiasm is beginning to wane a bit as the index has fallen from 65 in October, which was the high mark for the year.
• While builder confidence may be down, it isn’t reflected in the new home market. The Census Bureau reported that building permits for privately owned housing units increased 11.0% in November compared to October, which is 19.5% above the November 2014 figure for permits. Privately owned housing starts (marked by the beginning of construction) in November were 10.5% above the revised October estimate and 16.5% above the November 2014 rate. The only negative in the housing market is in housing completions, which were down 3.2% compared to October, largely due to a slowdown in completion of structures with five units or more, which fell 10.0%. Completion of single-family units was actually up 0.3% in November.
• Industrial production continues to lag. According to the Federal Reserve, industrial production declined 0.6% in November after decreasing 0.4% in October. In November, manufacturing production was unchanged from October. At 106.5% of its 2012 average, total industrial production in November was 1.2% below its year-earlier level. Capacity utilization for the industrial sector declined 0.5 percentage points in November to 77.0%–a rate that is 3.1 percentage points below its long-run (1972-2014) average.
• In line with the Federal Reserve’s industrial production report, the Markit Flash U.S. Manufacturing Purchasing Managers’ Index™ for December fell to 51.3 from November’s 52.8. Although still above the neutral 50.0 threshold indicating growth, the latest reading pointed to the slowest improvement in manufacturing business conditions since October 2012.
• For the week ended December 12, there were 271,000 initial claims for unemployment insurance, a decrease of 11,000 from the prior week’s total. For the week ended December 5, the advance number for continuing unemployment insurance claims was 2,238,000, a decrease of 7,000 from the previous week’s revised level. The advance seasonally adjusted insured unemployment rate remained at 1.7% for the week ended December 5.

Eye on the Week Ahead

Following the Fed’s decision to raise interest rates based on the expectation of continued economic growth, several key economic reports during the Christmas week may shed some light on the direction of the economy moving forward.

The Markets (as of market close December 11, 2015)

Investors appeared to be in a selling mood this past week as each of the indexes listed here fell by more than 3.0%. The S&P 500 dropped over 79 points, closing down 3.79%, while the Dow lost over 580 points, finishing 3.26% below the prior week’s close. The Nasdaq closed down 4.06%, while the Russell 2000 suffered the largest decline for the week, finishing a little over 5.0% behind its December 4 closing value. Plunging oil prices and the expectation of a possible interest rate hike were key factors in last week’s volatility. Of the major indexes listed here, only the Nasdaq remains in positive territory year-to-date, as each of the other indexes are below their respective 2014 closing values.

The price of gold (COMEX) rebounded after several weeks of trending downward, selling at $1,073.70 by late Friday afternoon compared to $1,085.80 a week earlier. Crude oil (WTI) prices fell again, selling at $35.36 per barrel by week’s end. The national average retail regular gasoline price decreased for the fourth week in a row to $2.053 per gallon on December 7, 2015, $0.006 below last week’s price and $0.626 under a year ago.

Market/Index	2014 Close	Prior Week	As of 12/11	Weekly Change	YTD Change
DJIA	17823.07	17847.63	17265.21	-3.26%	-3.13%
Nasdaq	4736.05	5142.27	4933.47	-4.06%	4.17%
S&P 500	2058.90	2091.69	2012.37	-3.79%	-2.26%
Russell 2000	1204.70	1183.40	1123.61	-5.05%	-6.73%
Global Dow	2501.66	2381.23	2297.74	-3.51%	-8.15%
Fed. Funds	0.25%	0.25%	0.25%	0%	0%
10-year Treasuries	2.17%	2.27%	2.12%	-15 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 latest report from the Bureau of Labor Statistics shows the Producer Price Index for final demand increased 0.3% in November. This increase follows decreases of 0.4% in October and 0.5% in September. The November rise in the final demand index can be traced to prices for final demand services, which advanced 0.5%. In contrast, the index for final demand goods moved down 0.1%.
• Retail food and services sales in November were up 0.2% from October 2015, but 1.4% above November 2014, according to the Census Bureau’s latest figures. Showing marked growth were nonstore retailers, up 7.3% from November 2014, and food services and drinking places, which were up 6.5% from last year.
• While the combined value of distributive trade sales and manufacturers’ shipments for October fell 0.2% from September, manufacturers’ and trade inventories were virtually unchanged from September, but were up 2.0% from October 2014. The total business inventories/sales ratio based on seasonally adjusted data at the end of October was 1.38. The October 2014 ratio was 1.31.
• According to the Labor Department’s Job Openings and Labor Turnover Survey (JOLTS), the number of job openings was little changed at 5.4 million on the last business day of October (5.5 million in September). Hires and separations were little changed at 5.1 million and 4.9 million, respectively. Employment rises when the number of hires exceeds the number of separations. Over the 12 months ended in October 2015, hires totaled 61.0 million and separations totaled 58.3 million, yielding a net employment gain of 2.7 million.
• Heading into the second month of the U.S. government’s 2016 fiscal year, the deficit for November came in at $64.5 billion. This follows October’s deficit of $136.5 billion. The deficit is 12.6% higher than this time last year. Spending for Medicare and Social Security is up, as is defense spending, adding to the increased deficit.
• Prices for U.S. imports fell 0.4% in November following a 0.3% decline in October, the Bureau of Labor Statistics reported last week. A decrease in import fuel prices drove the November decline in the price index for overall imports. U.S. export prices declined 0.6% in November, after a 0.2% decrease the previous month. Lower prices for both agricultural and nonagricultural exports contributed to the November decline in overall export prices.
• Consumer sentiment was up slightly in December (91.8) from November (91.3), according to the preliminary report from the University of Michigan’s Surveys of Consumers.
• Claims for unemployment insurance jumped during the past few weeks. For the week ended December 5, there were 282,000 initial claims for unemployment insurance, an increase of 13,000 from the prior week’s level. For the week ended November 28, the advance number for continuing unemployment insurance claims was 2,243,000, an increase of 82,000 from the previous week’s revised level of 2,161,000. The advance seasonally adjusted insured unemployment rate increased from 1.6% for the week ended November 21 to 1.7% for the following week.

Eye on the Week Ahead

When the Federal Open Market Committee meets this week, the hot topic will certainly be whether to raise interest rates, and if so, by how much and when. If the committee announces a rate hike, how will the equities markets respond?

The Markets (as of market close December 4, 2015)

The first week of December proved quite volatile, with some of the major indexes listed here rallying on Friday to close ahead of the week before. Some of the upward movement from investors may have come in response to another good jobs report and the fact that the economy is stable enough to warrant a likely interest rate increase when the Fed meets later this month. The S&P 500, Dow, and Nasdaq registered marginal gains week-on-week, while the Russell 2000 and the Global Dow lost value. With additional stimulus measures announced by the European Central Bank, it will be interesting to see the effect they have on European stocks in the coming weeks.

The price of gold (COMEX) rebounded after several weeks of trending downward, selling at $1,085.80 by late Friday afternoon compared to $1,056.10 a week earlier. Crude oil (WTI) prices fell, selling at $40.14 per barrel by week’s end. The national average retail regular gasoline price decreased to $2.059 per gallon on November 30, 2015, $0.035 below the previous week’s price of $2.094 per gallon, and $0.719 below a year ago.

Market/Index	2014 Close	Prior Week	As of 12/4	Weekly Change	YTD Change
DJIA	17823.07	17798.49	17847.63	0.28%	0.14%
Nasdaq	4736.05	5127.52	5142.27	0.29%	8.58%
S&P 500	2058.90	2090.11	2091.69	0.08%	1.59%
Russell 2000	1204.70	1202.38	1183.40	-1.58%	-1.77%
Global Dow	2501.66	2400.37	2381.23	-0.80%	-4.81%
Fed. Funds	0.25%	0.25%	0.25%	0%	0%
10-year Treasuries	2.17%	2.22%	2.27%	5 bps	10 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 employment situation improved again in November, clearing the way for the Fed to possibly increase interest rates at its next meeting in a few weeks. According to the latest figures from Bureau of Labor Statistics, total nonfarm payroll employment increased by 211,000 in November, the unemployment rate was unchanged at 5.0%, and the number of unemployed persons, at 7.9 million, was essentially unchanged. Over the past 12 months, the unemployment rate and the number of unemployed persons are down by 0.8% and 1.1 million, respectively. In November, average hourly earnings for all employees on private nonfarm payrolls rose by $0.04 to $25.25, following a $0.09 gain in October. Over the year, average hourly earnings have risen by 2.3%.
• The Bureau of Labor Statistics releases a quarterly report on productivity and labor costs, which is essentially a measure of the output of goods and services per hour worked. According to the latest report, nonfarm business sector labor productivity increased at a 2.2% annual rate during the third quarter of 2015, as output increased 1.8% and hours worked decreased 0.3%. The decline in hours worked was the first since 2009. From the third quarter 2014 to the third quarter 2015, productivity increased 0.6%, reflecting increases in output and hours worked of 2.5% and 1.9%, respectively. However, the third quarter rate is down from the second quarter productivity rate of 3.5%. Also of significance, inflation-adjusted hourly wages in the nonfarm business sector grew 4.0% in the third quarter. An important indicator used by the Fed in determining economic activity, upward trends in productivity for the second and third quarters may lend support for an interest rate hike.
• Once again, sagging oil prices and a strong dollar have led to a widening of the trade deficit in October. The latest Census Bureau report indicates that the goods and services deficit was $43.9 billion in October, up $1.4 billion from $42.5 billion in September, revised. October exports were $184.1 billion (a three-year low), $2.7 billion less than September exports. October imports were $228.0 billion, $1.3 billion less than September imports. The demand for U.S.-made goods continues to decline, primarily due to the strength of the dollar abroad. Compared to the first 10 months of 2014, the U.S. trade deficit has increased by 5.3% over the same 10-month period in 2015.
• According to the latest report from the National Association of Realtors®, pending home sales were relatively unchanged in October. The Pending Home Sales Index, which projects home sales based on contract signings, registered 107.7 in October–0.2% ahead of September but 3.9% above October 2014. There is evidence of a slowdown in home sales, which may be attributable to a lack of available homes on the market and rising asking prices.
• Construction has been a consistently performing economic sector, and the latest report from the Census Bureau further supports that trend. For October, construction spending was estimated at an annual rate of $1,107.4 billion–1.0% above the revised September estimate of $1,096.6 billion. The October figure is 13% above October 2014. Compared to the prior month, October saw increases in residential construction (1.0%), nonresidential construction (0.6%), and public construction (1.4%).
• Two organizations have reported a slowdown in manufacturing. The Institute for Supply Management® (ISM®) Manufacturing Index fell below 50%, coming in at 48.9% for November–the first time manufacturing contracted since November 2012. A reading at or above 50% indicates growth. The index decreased 1.5 percentage points from the October reading of 50.1%. New orders dropped 4 percentage points to 48.6% and production also saw a dip, registering 49.2%–3.7 percentage points below October’s reading. Only 5 of the 18 industries covered by the index reported growth in November.
• Similar to the ISM report, the Markit U.S. Manufacturing Purchasing Managers’ Index™ (PMI™) noted that U.S. manufacturers reported slower rates of growth in November, with business conditions improving at the slowest pace since October 2013. This was highlighted by a fall in the final seasonally adjusted index from 54.1 in October to 52.8 during November. Softness in new orders and contraction of export orders have contributed to the manufacturing slowdown. This report, coupled with the ISM information, reveals definite sluggishness in the manufacturing sector, a fact that may influence the Fed at its meeting later this month.
• ISM also produces a monthly Non-Manufacturing Index based on a survey of firms covering services, construction, mining, agriculture, forestry, and fishing and hunting. November’s Non-Manufacturing Index came in at 55.9%–3.2 percentage points lower than October’s index reading. Since any reading above 50% indicates growth, the non-manufacturing sector continued to grow in November, but at a slower pace than prior months. Of the 18 non-manufacturing industries covered, 12 reported growth, including real estate rental and leasing, retail trade, health care and social assistance, and accommodation and food services. Industries reporting contraction include mining, entertainment and recreation, wholesale trade, and utilities.
• Factory orders in October were solid, according to the Census Bureau report on Manufacturers’ Shipments, Inventories, and Orders. New orders for manufactured goods in October, up following two consecutive monthly decreases, increased $6.8 billion, or 1.5%, to $473.9 billion following a 0.8% decease in September. New orders for manufactured durable goods (expected to last at least three years) increased $6.8 billion, or 2.9%, to $238.8 billion after a 0.8% September decrease. Considering that the non-manufacturing sector generally has been in decline, this encouraging report may offset the negative reports from the manufacturing sector.
• In the week ended November 28, there were 269,000 initial claims for unemployment insurance, an increase of 9,000 from the prior week’s level. The advance seasonally adjusted insured unemployment rate was unchanged at 1.6% for the week ended November 21, while the advance number for continuing unemployment insurance claims was 2,161,000, an increase of 6,000 from the previous week’s revised level.

Eye on the Week Ahead

With traders back at their desks and the end of 2015 on the horizon, reports from this week’s retail battlefields will be of special interest for what they suggest about how the U.S. economy might fare through the end of the year.

The Markets (as of market close November 30, 2015)

November saw equities markets follow October’s gains, although not nearly at the same pace. Amid favorable jobs reports, moderate GDP growth, and increased consumer income, coupled with an apparent easing of economic concerns in China, conditions appeared ripe for a strong November in equities trading. However, the major indexes listed here saw gains that can be described as pedestrian at best. Possibly shaken by the terrorist attacks in Europe, investors socked money away at a pace not seen since 2012. Nevertheless, positive gains were achieved in both the Dow and S&P 500. The Nasdaq advanced almost 55 points, while the Russell 2000 jumped a little over 3.0%. Of the indexes listed, only the Global Dow lost value by the end of November.

At the close of November, the price of gold (COMEX) was $1,064.00, more than $77 lower than October’s end-of-month price of $1,141.70. Crude oil (WTI) prices remained below $45 a barrel, selling at $41.68 a barrel by month’s end.

Market/Index	2014 Close	Prior Month	As of 11/30	Month Change	YTD Change
DJIA	17823.07	17663.54	17719.92	0.32%	-0.58%
Nasdaq	4736.05	5053.75	5108.67	1.09%	7.87%
S&P 500	2058.90	2079.36	2080.41	0.05%	1.04%
Russell 2000	1204.70	1161.86	1198.11	3.12%	-0.55%
Global Dow	2501.66	2436.23	2391.96	-1.82%	-4.39%
Fed. Funds	0.25%	0.25%	0.25%	0%	0%
10-year Treasuries	2.17%	2.14%	2.20%	6 bps	3 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.

The Month in Review

• Terrorism dominated the news in November following the bombing of a Russian passenger plane, and attacks in Paris and Mali. The economic impact of these terrorist attacks may not be realized for some time, as the United States and foreign nations work to protect their people while confronting threats of further violence.
• The Federal Open Market Committee (FOMC) does not meet in November, but at its next meeting in December, FOMC members will assess whether economic indicators show sufficient upward movement to warrant an interest rate increase. November has proven to be a “mixed bag” of economic information, with some sectors showing clear improvement, while others are stagnant or regressing.
• The second estimate of the third-quarter GDP showed continued expansion, but at a much slower pace compared to the second quarter. The second “advance estimate” of gross domestic product showed economic growth increasing at an annual rate of 2.1% compared to the second quarter’s growth rate of 3.9%. While source data used as the basis for this report may change over time, it provides evidence that the economic growth of the first and second quarters may be fizzling. The latest GDP figures may support FOMC members who think it’s best to keep interest rates at their current level.
• The FOMC relies on the personal consumption expenditures (PCE) index as a source for determining inflationary trends. The PCE index for October reveals inflation is relatively stagnant–gaining $15.6 billion, or 0.1%–the same marginal gain as the prior month. Overall, personal income increased $68.1 billion, or 0.4%, and disposable personal income increased $56.8 billion, or 0.4%, in October, according to the Bureau of Economic Analysis. Wages and salaries increased $45.0 billion in October, compared to an increase of $2.5 billion in September. While consumers apparently have more disposable income, instead of spending it, they’re saving it at a rate of 5.6%–the highest level since December 2012. This trend may be a sign that consumers aren’t sure about the strength of the economy going forward.
• As another indication of inflationary trends, the overall Consumer Price Index increased 0.2% in October, according to the Bureau of Labor Statistics. Over the last 12 months, the all items index increased 0.2% before seasonal adjustment. The index for all items less the more volatile food and energy components (the “core” rate) rose 0.2% in October, the same increase as in September. The 12-month core rate sits at 1.9%–close to the 2% target inflation rate sought by the Fed.
• The U.S. Treasury report for October revealed a budget deficit of $136.5 billion for the month. This report is the first for the U.S. government’s fiscal year, which runs from October through September. The deficit for October 2015 is 12.2% higher than for October 2014. A significant gain in Medicare spending, up 9.8% from a year ago, contributed to the increased budget deficit. Nevertheless, the 2015 fiscal year ended on a good note as the deficit fell 9.2% compared to last year.
• S. retail and food services sales advance estimates for October were $447.3 billion, an increase of 0.1% from the previous month and 1.7% ahead of October 2014, according to the U.S. Census Bureau. Total sales for the August 2015 through October 2015 period were up 2.0%. However, excluding motor vehicles, retail and food sales were actually up only 0.2% in October from September, and 0.5% ahead of October 2014.
• According to the Bureau of Labor Statistics Producer Price Index, U.S. producer prices for goods and services fell 0.4% in October, with prices for goods falling 0.4% and prices for services declining 0.3%. For the 12-month period ended October 2015, overall producer prices are down 1.6%–a record 12-month decline for this index.
• Orders for manufactured durable goods (expected to last at least three years) reversed course in October from prior months–increasing $6.9 billion, or 3.0%, to $239.0 billion from a month earlier, according to the Census Bureau. Despite the latest figures, durable goods orders are down 4.2% year-to-date compared to the same period in 2014.
• The Federal Reserve’s monthly index of industrial production fell 0.2% in October from a month earlier, following a 0.2% decline in September. Utilities (-2.5%) and mining (-1.5%) decreased, while manufacturing output actually increased–gaining 0.4% for the month.
• According to the Labor Department’s Job Openings and Labor Turnover Survey (JOLTS), the number of job openings in September was little changed at 5.5 million compared to 5.4 million in August. The number of hires and separations was little changed at 5.0 million and 4.8 million, respectively. The job openings rate for September was 3.7%. While the rate of job openings remains consistent, so too is the quits rate (1.9%), an indication that workers aren’t too sure there’ll be other opportunities in the labor market if they leave their present positions.
• Total nonfarm employment increased by 271,000 in October, up from 142,000 in September, while the unemployment rate fell to 5.0%, according to the Bureau of Labor Statistics. Over the past 12 months, the unemployment rate and the number of unemployed persons were down 0.7% and 1.1 million, respectively. The average workweek for all employees on private nonfarm payrolls remained at 34.5 hours in October, while average hourly earnings for all employees on private nonfarm payrolls rose by 9 cents to $25.20. Hourly earnings have risen by 2.5% over the year.
• The Bureau of Economic Analysis reported that the goods and services deficit was $40.8 billion in September, down $7.2 billion from August. The September decrease in the goods and services deficit reflected a decrease in the goods deficit of $7.3 billion to $60.3 billion and a decrease in the services surplus of $0.1 billion to $19.5 billion.
• Import and export prices continue to feel deflationary pressures. Import prices for goods bought in the United States but produced abroad fell 0.5% in October, after a 0.6% decrease in September, according to the latest report from the Bureau of Labor Statistics. Lower prices for both fuel and nonfuel imports contributed to the October decrease. October’s export prices for goods sold abroad but produced domestically were down 0.2% following a 0.6% drop in September.
• In the housing market, new residential construction (housing starts) fell 11.0% in October to 1.06 million from the previous month, and 1.8% below the October 2014 rate. Sales of new single-family homes increased by 10.7% in October above September, but sales of existing residences dropped 3.4% in October to a seasonally adjusted annual rate of 5.36 million. Despite last month’s decline, sales are still 3.9% above a year ago (5.16 million). The median existing home price for all housing types fell in October to $219,600, a drop of $2,300 from the prior month’s median sales price.
• In other developments, for the week ended November 21, there were 260,000 initial claims for unemployment insurance, and 2,207,000 continuing claims for unemployment insurance for the week ended November 14, yielding an insured unemployment rate of 1.6%.
• The national average retail regular gasoline price dropped from $2.228 per gallon on October 26, 2015, to $2.094 on November 23, 2015–a decrease of $0.134.
• Consumer confidence in the economy, which had decreased moderately in October, declined further in November. The index now stands at 90.4, down from 99.1 in October, according to The Conference Board Consumer Confidence Index®.

Eye on the Month Ahead

The big news for December focuses on the FOMC meeting and whether interest rates will be raised. Economic indicators have been mixed, so there’s no certainty as to how the committee will act.

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.