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Weekly Market Update – October 30, 2015

Market volatility was relatively muted this week as Fed announced continued accommodative policy on Wednesday and some of America’s largest companies reported positive quarterly results.  Despite Friday’s negative of -0.52% and -0.48% for the S&P 500 and Dow Jones on Friday, these same indices were up slightly at 0.10% and 0.20% on the week.

Though the Fed continued its zero interest rate policy, it mentioned that a December interest rate hike was on the table.  Unsurprisingly, they clarified that its December decision will be heavily dependent on the economic data announced before then.  Prior to the Federal Open Market Committee statement, economic analysts forecasted a 33% chance of the Fed raising rates in December.  After the statement on Wednesday, the forecasted probability of a rate increase jumped to 47%.  However, a December rate hike is still far from a guarantee as it would be the first increase since 2006.  As we head into the holiday season, employment data and retail sales data will be watched meticulously as a possible precursor to the Fed’s December decision.

There were a number of significant corporate earnings this week.  Apple, the largest public company in the world by market cap, reported its record fourth quarter results, spurred by the annual release of its flagship iPhones.  Not only was it historic from Apple’s own perspective (record Q4 results), but it also set the record for largest annual profit in corporate history, beating out ExxonMobil’s 2008 performance.  The stock was up 4.12% on Wednesday as a result.  Through Wednesday, 171 of the 253 S&P 500 companies that have reported results have beat analyst expectations according to S&P 500 Capital IQ.  This 68% analyst beat rate compares favorably to the historic 66%, suggesting an outperformance from a corporate performance perspective.

Oil prices outperformed this week as US supply continues to contract along with the Baker Hughes rig count.  These two contributors helped propel oil higher by about $1.60 per barrel to $46.38 per barrel as of the time of the report.  However, natural gas prices dipped this week on concerns over weather forecasts for a warm winter because of El Nino and prolific well results due to technological improvements in the fracking process.

Important economic data out next week includes the Initial and Continuing Jobless Claims on Thursday November 5th, and the Non-Farm Payrolls, Unemployment Rate, Hourly Earnings, and Average Workweek numbers for the month of October on Friday.  These data points will be extremely informative for the Fed as they consider the December interest rate decision.

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