Market Week: December 14, 2015

The Markets (as of market close December 11, 2015)

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.

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.

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