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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. 

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Ulland Investment Advisors

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