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Weekly Market Update – January 9, 2015

After rising over 500 points the prior two days, the Dow fell 171 points Friday on mixed December jobs data and global growth concerns.  For the year the Dow is down .5%. 

The jobs report showed the creation of 252,000 jobs in December, above expectations of approximately 240,000.  The unemployment rate fell to 5.6% from 5.8%.  Average earnings per employee fell by .2%, the biggest drop since 2006.  The continued progress in job creation keeps the Fed on track to raise interest rates, most likely in the second half of the year, though the current low inflation environment will allow the Fed to move gradually once it does so.

The European Central Bank continues to progress toward the enactment of stimulus measures, presenting on Friday a plan to buy $500 billion euros of assets in a move much like the US undertook to boost economic growth.  The ECB next meets on January 22 and a formal implementation of quantitative easing is anticipated in an effort to reverse the current deflationary environment.  

Oil fell $.60 Friday to $48.19 per barrel, its lowest level since April 2009.  One piece of positive data on Friday showed the US oil drilling rig count experienced its largest weekly drop since 1991 as 61 oil rigs went offline.  The number of rigs in operation has fallen in 10 of the past 13 weeks, an indicator of a decrease in future production. 

OPEC meets on June 5.  At this meeting OPEC members may agree to reduce production.  Production only needs to be reduced 2% worldwide to eliminate the surplus of crude and reduce pricing.  OPEC plus Russia is 43% of world production.

Next week’s economic calendar highlights include December retail sales on Wednesday, weekly jobless claims on Thursday and inflation data on Thursday and Friday.  Expect retail sales to fall slightly from November, inflation to remain in check and weekly jobless claims to settle in the 290,000 – 300,000 range (from 294,000 this week).  Fourth quarter corporate earnings reports will begin next week as well.

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