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Archive for December, 2015

Weekly Market Update – December 18, 2015

A second-consecutive “Red Friday” saw the Dow tumble 367 points as hopes for a Santa Claus rally dimmed heading toward the Christmas holiday.  For the week the Dow was down .6% and for the year the index is now down 3.8%.

Markets rose early in the week in anticipation of the Fed’s interest rate decision and reacted in kind on Wednesday when the body announced a .25% interest rate hike – a move that was widely anticipated.  In the announcement, the Fed reiterated that rates would continue to rise, though at a gradual pace, and hinted that, barring any great change in the US economy, four additional quarter-point increases would most likely occur next year, bringing the federal funds rate to 1.5% by the end of 2016.  The Fed-related rally lasted only a day as markets trended downward both Thursday and Friday, weighed by energy and global growth concerns and softer-than-anticipated US manufacturing and services activity. 

Overseas, the Bank of Japan announced a surprise expansion of its stimulus program on Friday in a continuing effort to bolster the world’s third-largest economy, one that for years has been plagued by low growth and deflation.  The Nikkei briefly surged on the news but reversed course quickly and ended the day down 1.9%. 

Oil fell 22 cents Friday to $34.73 per barrel, its lowest level since February of 2009. Not helping matters was the release of an unfavorable drill rig report which showed an increase in the number of rigs in operation this week (17 rigs came online).  Supply in the US remains at near-record levels while warmer-than-normal weather continues to hold sway over much of the US, reducing demand.  Factor in OPEC’s resolve to continue pumping at normal volumes and the expectation of Iranian oil entering the market in 2016 and the prospect of a recovery in oil prices in the near future remains bleak.

The yield on the 10-year Treasury fell 4 basis points (bps) Friday to 2.20%, up 6 bps for the week and now up 3 bps for the year.  In anticipation of the Fed’s interest rate hike, trust preferred shares declined Monday and Tuesday but recovered as the week progressed.

Next week’s economic calendar highlights include the third estimate of Q3 GDP and November existing home sales on Tuesday, a consumer confidence reading and November new home sales on Wednesday and weekly jobless claims on Thursday.  Expect Q3 GDP to remain at 2.1%, existing and new home sales to increase in volume from October, consumer sentiment to hold steady from the previous reading and weekly jobless claims to again settle in the 270-280,000 range (from 271,000 this week). 

If you would like to review your 2015 gains and losses please let us know posthaste.

Next week, markets and our offices will be open until noon on Christmas Eve (Thursday) and closed the entirety of Christmas Day (Friday). 

Weekly Market Update – December 11, 2015

The Dow stumbled to a 310-point loss Friday as a further decline in oil prices and global growth concerns weighted heavily on market sentiment.  For the week the Dow was down 3.3% and for the year the index is now down 3.2%.

Oil fell 3.1% Friday to close at $35.62 per barrel, down over 10% for the week and near a seven-year low.  A report from the International Energy Agency warning that global oversupply could worsen in 2016 and a warmer-than-normal temperature forecast through Christmas for the US added to the selling pressure.  The price of oil is approaching the financial crisis low of $32.40, experienced in December of 2008.

China tonight will release economic reports detailing November retail sales, factory output and capital spending.  Expectations are for softer-than-normal numbers given the Chinese economy’s recent stumble relative to past years.  China also this week again devalued its currency.  Related, emerging market currencies fell to a record low this week versus the dollar on concerns that an increase in US interest rates next week will trigger capital outflows.  The strong dollar also contributed to the aforementioned weakness in oil.   

In the US, November retail sales were stronger than in October and consumer confidence rose form the prior November reading though the two data points did not provide the market with noticeable momentum.  Heading into next week, attention will turn to the Fed, which meets on Tuesday and Wednesday.  The interest rate announcement will be made on Wednesday afternoon – currently the Fed is expected to raise rates by 25 bps. 

Continued strength in the bond market drove the yield on the 10-year Treasury down 10 basis points (bps) Friday to 2.14%, down 14 bps for the week and now down 3 bps for the year.  Trust preferred shares declined Friday with the overall market, but the fall in the 10-year Treasury could provide support next week.

Next week’s economic calendar highlights include November inflation data on Tuesday, November housing data on Wednesday and weekly jobless claims on Thursday.  Expect the inflation data to show a very slight uptick in prices from October, the issuance of building permits and the pace of housing starts to slow relative to October and weekly jobless claims to settle in the 260-270,000 range (from 282,000 this week).  The Fed’s decision on interest rates will be the week’s biggest news. 

Weekly Market Update – December 4, 2015

After two days of heavy losses the Dow stormed to a 370-point gain Friday on the strength of a solid November jobs report. For the week the Dow was up .2% and for the year the index is up .1%.

Jobs, interest rates, oil and European stimulus measures were the main market protagonists this week.  Jobs and interest rates: the November jobs report released Friday showed the addition of 211,000 jobs in the month, above expectations of 200,000, while the unemployment rate remained unchanged at 5.0%.  The robust number (on the heels of October’s revised 298,000 tally) all but guarantees the Fed will begin to raise interest rates this month (the Fed meets the 15th/16th) as it would have taken a much smaller number (100,000 or so) to give the Fed reason for pause.  The question now is how fast rates will rise.

Oil: OPEC met Friday and hopes were that the body would announce a limit on daily oil production (at 30 million barrels) in an effort to help strengthen oil prices.  This did not happen as OPEC member Iran stated it would not consider any curbs on production until it reaches pre-sanction output.  Iran is set to begin exporting oil in January when the nuclear program-related sanctions are loosened and could add at least 1 million barrels per day of output to OPEC’s current average of approximately 31.5 million barrels per day.  Considering the world is currently producing 2 million barrels a day more than it consumes, analysts are projecting the possibility of oil falling even more before the supply/demand problem is corrected.  OPEC is set to meet again next June but could revisit current policy in January or February.  Oil fell almost 3% Friday to $39.97 on the news.

European stimulus: European Central Bank President Mario Draghi on Thursday announced additional stimulus measure for the Eurozone economy, further lowering interest rates while extending its bond buying program.  The additional measures were deemed adequate in scope and size but markets reacted quite negatively on the news, expecting more.  The Dow fell over 250 points while European bourses were hit harder.  European markets were lower again Friday, capping the Eurozone’s worst week in more than three months.      

Strength in the bond market Friday drove the yield on the 10-year Treasury down 6 basis points (bps) to 2.28%, overall up 5 bps for the week and now up 11 bps for the year.  Trust preferred shares held relatively steady this week amidst the volatility in the equity sector.

Next week’s economic calendar highlights include weekly jobless claims on Thursday and November inflation and retail sales data on Friday.  Expect weekly jobless claims to settle in the 260-270,000 range (from 269,000 this week), inflation to remain in check (still a relative non-issue) and retail sales to show an improvement from October as holiday sales ramp up. 


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