Merry Christmas! Market Week News

December 24th, 2015

The Markets

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.

Data sources: News items are based on reports from multiple commonly available international news sources (i.e. wire services) and are independently verified when necessary with secondary sources such as government agencies, corporate press releases, or trade organizations. Market data: Based on data reported in WSJ Market Data Center (indexes); U.S. Treasury (Treasury yields); U.S. Energy Information Administration/Bloomberg.com Market Data (oil spot price, WTI Cushing, OK); www.goldprice.org (spot gold/silver); Oanda/FX Street (currency exchange rates). All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results. All investing involves risk, including the potential loss of principal, and there can be no guarantee that any investing strategy will be successful.

The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2,000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indices listed are unmanaged and are not available for direct investment.

Weelky Markets Update

December 18th, 2015

The Markets

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?

Data sources: News items are based on reports from multiple commonly available international news sources (i.e. wire services) and
are independently verified when necessary with secondary sources such as government agencies, corporate press releases, or trade organizations. Market data: Based on data reported in WSJ Market Data Center (indexes); U.S. Treasury (Treasury yields); U.S. Energy
Information Administration/Bloomberg.com Market Data (oil spot price, WTI Cushing, OK); www.goldprice.org (spot gold/silver); Oanda/FX Street (currency exchange rates). All information is based on sources deemed reliable, but no warranty or guarantee is made
as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future
results. All investing involves risk, including the potential loss of principal, and there can be no guarantee that any investing strategy will be successful.

The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The
S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The
Russell 2000 is a market-cap weighted index composed of 2,000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indices listed are unmanaged and are not available for direct
investment.

Market Week: December 7, 2015

December 7th, 2015

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.

Data sources: News items are based on reports from multiple commonly available international news sources (i.e. wire services) and are independently verified when necessary with secondary sources such as government agencies, corporate press releases, or trade organizations. Market data: Based on data reported in WSJ Market Data Center (indexes); U.S. Treasury (Treasury yields); U.S. Energy Information Administration/Bloomberg.com Market Data (oil spot price, WTI Cushing, OK); www.goldprice.org (spot gold/silver); Oanda/FX Street (currency exchange rates). All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results. All investing involves risk, including the potential loss of principal, and there can be no guarantee that any investing strategy will be successful.

The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2,000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indices listed are unmanaged and are not available for direct investment.