For the week ending November 27, 2015, the markets remained flat. For this past week, the Dow was fractionally lower; the S&P 500 was fractionally higher as investors took a break after the prior week’s major rally. In other news: Thanksgiving and Black Friday sales were a big disappointment; jobless claims fall more than expected; and, one economist believes the Fed will not raise interest rates in December. Below is a recap of the markets for each day of the week.
The markets were little changed on Monday as home prices were soft and existing home sales were weak. Oil remains just below $42. The Dow dropped fractionally to 17,793; the S&P 500 dropped -0.12 percent to 2,087.
On Tuesday, the markets were little changed with mixed economic news: consumer confidence dropped; GDP came in as expected at 2.1 percent; the trade gap came in better than expected; and, Case-Shiller home prices soared. Oil rose $1 to nearly $43. The Dow rose fractionally to 17,812; the S&P 500 rose 0.12 percent to 2,089.
The markets remained flat on Wednesday after a flood of economic data left little impact on investor expectation of a December rate hike. Oil remained flat at $43. The Dow rose fractionally to 17,813; the S&P 500 remained flat at 2,089.
The markets were closed on Thursday for Thanksgiving Day.
On Friday, the markets were mixed on a shortened session. Oil dropped $1 to under $42. The Dow dropped fractionally to 17,798; the S&P 500 rose fractionally to 2,090.
Volume was very low for this holiday-shortened week and despite a plethora of economic news the markets ended the week little changed. The Dow ended the week down -0.14 percent (-25 points); the S&P 500 ended up 0.04 percent (1 point). There remains a high probability that the Fed will raise rates in December; however, there is little consensus as to the path the Fed will take in raising rates. Globally, stocks in Europe ended slightly lower while Asian stocks ended strongly lower: the Shanghai composite plunged 5.48 percent on news that the China Securities Regulatory Commission launched investigations to crack down on short-selling and speculation by local brokerages. The focus will be on China to see if there is any unexpectedly greater slowdown in its economy.
Holiday shopping on Thanksgiving and Black Friday was lower than expected, totaling an estimated $12.1 billion (below 2014 levels). Analysts at SunTrust called the holiday shopping a “bust”. This is the second straight year that in-store sales dropped, says ShopperTrak. Consumers spent online an estimated $4.45 billion on the two days, and they were largely focusing on “doorbuster” deals (40%). The top sellers were Samsung 4k TVs, Apple iPad Air 2, Microsoft Xbox One, Lego Dimensions, Barbie Dream House, and Lego Creative Box.
Weekly jobless claims fell an unexpected 12,000 to a seasonally adjusted 260,000 (270,000 expected), said the Labor Department. This is the 38th consecutive week that initial jobless claims remained under the 300,000 threshold. The four-week moving average of initial claims remained unchanged at 271,000. However, the number of people still receiving benefits after the first week of aid increased 34,000 to 2.21 million; the four-week moving average of continuing claims rose 15,250 to 2.18 million.
Does the Fed want to surprise the markets and delay a rate hike till 2016? Economist Steven Ricchiuto believes Fed Chair Janet Yellen actually wants to surprise the markets by not having a rate hike this December. Ricchiuto thinks Yellen is trying to inject uncertainty to increase the risk of investing in the markets. If a rate hike is delayed, it is more likely due to a lack of inflationary pressure here and disinflation abroad. With investors already anticipating a rate hike next month, any delay could spook the investors into thinking that the economy may falter.
The bottom line: excluding problems in the global economy and a disastrous employment report next week, the Fed is likely to raise rates in December beginning at the release of the FOMC minutes. Globally, the focus will also be on any news related to the December rate hike. The ECB is pressuring the Fed to delay a rate hike as they plan for further stimulus next week.
The focus next week in the U.S. will be on housing (pending home sales), manufacturing (Chicago PMI, PMI manufacturing index, Dallas Fed manufacturing survey, ISM manufacturing index, factory orders), employment (ADP employment, jobless claims, employment situation), and construction (construction spending), and international trade. Globally, in focus next week will PMIs. In addition, the focus will be on the following: UK (CIPS/PMI Manufacturing Index, Construction PMI, Markit/CIPS Services PMI); Eurozone (PMI, Unemployment Rate, HICP Flash, ECB Announcement, GDP); Germany (Retail Sales, CPI, PMI); China (CFLP Manufacturing PMI); and Japan (PMI Manufacturing).
Year-to-date the markets are mixed: Dow 0.0%; S&P500 +1.5%; Nasdaq +7.8%.
The Markets for the past week were: DJIA down -0.14%; S&P500 up 0.04%; Nasdaq COMP up 0.44%.
Commodities (ETFs) for the past week were: Gold (GLD) down -1.78%; Silver (SLV) down -0.30%; Oil (OIH) up 2.20%; Dollar (UUP) up 0.31%; 30-year Bonds (TYX) dropped 2 basis points to 3.00%.
The VIX this past week (a measure of market sentiment and volatility) dropped slightly to 15.12%.
To see what’s on the calendar for next week, go to the Econoday calendar.
The economic calendar for next week is full:
o Monday – Chicago PMI, Pending Home Sales Index, Dallas Fed Mfg Survey
o Tuesday – Motor Vehicle Sales, PMI Manufacturing Index, ISM Mfg Index, Construction Spending
o Wednesday – ADP Employment Report, Productivity and Costs, EIA Petroleum Status Report, Beige Book
o Thursday – Weekly Jobless Claims, Factory Orders, ISM Non-Mfg Index
o Friday – Employment Situation, International Trade
If you’re trading options, it is suggested trading Put Credit spreads for next week at 2.0 standard deviations or greater. Expect the price of the SPX to fall within 2004 and 2179 (2 standard deviations).
For more information about options, see the ‘Suggested Links’ below.