Weekly Economic Update
|Maggie Roche Presents: |
|MONTHLY ECONOMIC UPDATE |
| |
| | |
|MONTHLY QUOTE |December 2014 |
| |THE MONTH IN BRIEF |
|“It is wise to apply the oil of|November brought a dizzying plunge in oil prices, confirmation of a recession in Japan and distinct hints of one |
|refined politeness to the |in the euro area, and declines in the pace of manufacturing activity in America, Europe and China. Even so, the |
|mechanisms of friendship.” |month was remarkably placid on Wall Street – unlike October, we didn’t see a lot of days marked by triple-digit |
| |Dow swings. The Dow, in fact, rose 2.52% on the month; many overseas benchmarks posted nice gains as well. Losses |
|– Colette |plagued the commodities sector. The latest GDP estimates out of Washington suggested our economy was in better |
| |shape than some analysts thought.1 |
| | |
|MONTHLY TIP |DOMESTIC ECONOMIC HEALTH |
| |By the estimate of the federal government, the second and third quarter of 2014 amounted to the best six months |
|Make sure you take your 2014 |for the U.S. economy since 2003. The Commerce Department revised Q3 output up to 3.9%, complementing 4.6% growth |
|RMD in time. The deadline is |for Q2.2 |
|December 31; if you will be | |
|taking your very first RMD, it |Another key economic indicator improved further. The jobless rate had ticked down to 5.8% in October, with the U-6|
|can be delayed until April 1. |rate (encompassing part-time workers, jobseekers and those out of the job hunt) falling 0.3% to 11.5%. Labor |
|Remember that all of your IRAs |Department data showed companies adding 214,000 new hires to their payrolls in that month.3,4 |
|need to be considered when | |
|calculating the RMD. |While economists certainly found this encouraging, households weren’t feeling so upbeat. The Conference Board’s |
| |consumer confidence index fell to 88.7 from its October reading of 94.5; the University of Michigan’s consumer |
| |sentiment index did better, finishing November 1.9 points higher at 88.8.5 |
|MONTHLY RIDDLE | |
| |The Consumer Price Index was flat in October, and up just 1.7% year-over-year. Still, the tenth month of the year |
|You saw me where I never was |brought only modest gains for consumer spending (0.2%) and retail sales (0.3%). Total Black Friday sales were down|
|and where I could not be. And |11% from 2013 levels, according to National Retail Federation estimates; this could have reflected online sales |
|yet within that very place, my |growth and more stores having deep discounts on Thanksgiving Day.5,6 |
|face you often see. What am I? | |
| |Declining gas prices across the month effectively put more money in consumers’ pockets, a factor that may lead to |
| |greater personal spending for November. By December 1, AAA’s Daily Fuel Gauge Report showed regular unleaded |
|Last month’s riddle: |averaging just $2.77 a gallon.7 |
|An elephant manages to drink | |
|water from a puddle 26' away, |U.S. manufacturing activity cooled a bit in November, but our factory sector was still hotter than many others |
|but how does the elephant do |worldwide. The Institute for Supply Management’s November manufacturing PMI came in with a reading of 58.7, down |
|this with an 18' chain around |from 59.0 in October. (ISM’s service sector PMI had slipped 1.5 points to 57.1 in October.) Overall durable goods |
|his left hind leg? |orders rose 0.4% in October, but core durable orders fell 0.9%. The headline Producer Price Index was up 0.2% for |
| |October, but only 1.5% annually.5,8,9 |
| | |
|Last month’s answer: |GLOBAL ECONOMIC HEALTH |
|The chain isn’t attached to |Unexpectedly, Japan fell into a recession in Q3. Analysts surveyed by Reuters thought its economy would expand |
|anything. |2.1%; instead, there was a 1.6% contraction following a 7.3% reversal in Q2. This affirmed and underscored the |
| |Bank of Japan’s decision to ease for the foreseeable future.10 |
| | |
| |The euro area hadn’t slipped back into recession yet, but it was coming perilously close in the eyes of many |
| |economists. Its yearly inflation measured just 0.3% last month and its jobless rate was at 11.5%. European Central|
| |Bank President Mario Draghi said that ECB leaders would consider exceptional moves (such as buying sovereign debt)|
| |to ward off deflation. The Markit manufacturing PMI for the eurozone barely showed expansion for November with a |
| |50.1 mark.10,11,12 |
| | |
| |Word came that China’s economy had grown 7.3% in Q3, putting it on pace for its worst year since 1990. China’s |
| |official factory PMI came in a half-point lower in November at 50.3, and the HSBC/Markit PMI for the PRC showed no|
| |expansion for the sector at all with a reading of 50.0 that represented a 6-month low. Markit manufacturing PMIs |
| |in Indonesia and Japan also fell, but India’s rose to a 21-month high in November.12,13 |
| | |
| |WORLD MARKETS |
| |Generally speaking, November was a good month with many consequential indices advancing. Some of the gains in the |
| |Asia Pacific region: Sensex, 2.97%; KOSPI, 0.83%; Shanghai Composite, 10.85%; Nikkei 225, 6.37%; KSE 100, 2.70%. |
| |The Hang Seng was flat (-0.04% to be precise) while Australia's ASX 200 suffered a 3.86% retreat. Elsewhere in the|
| |Americas, the Bovespa had a flat month (+0.07%) while the TSX Composite rose 0.90% and the IPC All-Share lost |
| |1.86%.1 |
| | |
| |Major European indices saw the following November gains: CAC 40, 3.71%; DAX, 7.01%; IBEX, 2.80%; FTSE MIB, 1.17%; |
| |FTSE 100, 2.69%. Russia's RTS was the big November loser, retreating 10.74%.1 |
| | |
| |As for multinational and regional benchmarks, the Global Dow rose 1.72% in November, the Europe Dow 2.71% and the |
| |Dow Jones Americas 1.91%; the Asia Dow lost 0.53%. Europe’s STOXX 600 bourse advanced 3.10% for the month. The |
| |MSCI World Index gained 1.84%, but MSCI’s Emerging Markets Index lost 1.12%.1,14 |
| | |
| |COMMODITIES MARKETS |
| |On November 28, OPEC ministers made no move to reduce oil output from their respective nations. That cemented an |
| |awful monthly loss for NYMEX crude – prices fell 18.23% for November to a settlement of $66.15 a barrel. Heating |
| |oil (-12.60%) and RBOB gasoline (-12.54%) were also crushed last month. The same couldn’t be said for natural gas;|
| |it rose 5.72% in November. Cold weather was not only a boon to natgas futures, but also an aid to wheat futures: |
| |they rose 8.74% for November, standing out in a field of losses among crops. Corn did advance 0.27%, but coffee |
| |dipped 0.90%, cocoa 0.69%, cotton 5.16%, sugar 2.87% and soybeans 2.59%.15 |
| | |
| |Gold didn’t fare too badly in November, losing only 0.54% and settling at a COMEX price of $1.175.20 an ounce at |
| |month’s end. Copper fell 6.43% on the month, platinum 1.35% and silver 3.24% (it wrapped up the month at $15.49 an|
| |ounce). The U.S. Dollar Index tacked on another 1.43% to its YTD gain and ended November at 88.16.15,16 |
| | |
| |REAL ESTATE |
| |The month’s last Freddie Mac Primary Mortgage Market survey (November 26) found the average interest rate for a |
| |30-year FRM at 3.97%, down 0.01% from the October 30 survey. Rates on other types of home loans moved appreciably |
| |during the month. On November 26, the mean rates for the 15-year FRM, 5/1-year ARM and 1-year ARM were |
| |respectively at 3.17%, 3.01% and 2.44%; compare that with 3.13%, 2.94% and 2.43% on October 30.17 |
| | |
| |Home sales (new and existing) again improved to minor degree. The National Association of Realtors found resales |
| |up 1.5% in October – but most importantly, October brought the first year-over-year gain in sales (2.5%) seen in |
| |12 months. Across a year of data, distressed sales had fallen to 9% of the market from 14%. (Not all the news from|
| |NAR was good; its pending home sales index fell 1.1% for October.) New home purchases increased in October as well|
| |– the Census Bureau measured a 0.7% gain, marking a third straight month of increasing sales volume.5,18 |
| | |
| |NAR stated that the median existing-home price was $208,300 in October, down from $209,700 in September. |
| |September’s S&P/Case-Shiller Home Price Index showed only a 4.9% annualized gain (this was across the full 20-city|
| |index).5,18 |
| | |
| |As for new projects, the Census Bureau also noted a 4.8% gain in building permits in November, with the indicator |
| |reaching a 6-year peak. A drop in multi-family projects sent overall housing starts down 2.8% in October, though |
| |single-family starts rose 4.2%.19 |
| | |
| |LOOKING BACK…LOOKING FORWARD |
| |While the Russell 2000 had a flat month (actually losing 0.02% to 1,173.23), other major U.S. indices fared well |
| |in November, with the S&P 500 rising 2.45% to 2,067.56, the NASDAQ gaining 3.47% to 4,791.63 and the DJIA |
| |advancing 2.52% to 17,828.24. The CBOE VIX ended November at 13.33, sliding 4.99% for the month.1 |
| | |
| |% CHANGE |
| |Y-T-D |
| |1-YR CHG |
| |5-YR AVG |
| |10-YR AVG |
| | |
| |DJIA |
| |+7.55 |
| |+10.83 |
| |+14.58 |
| |+7.02 |
| | |
| |NASDAQ |
| |+14.73 |
| |+18.02 |
| |+24.81 |
| |+12.74 |
| | |
| |S&P 500 |
| |+11.86 |
| |+14.49 |
| |+18.03 |
| |+7.54 |
| | |
| |REAL YIELD |
| |11/28 RATE |
| |1 YR AGO |
| |5 YRS AGO |
| |10 YRS AGO |
| | |
| |10 YR TIPS |
| |0.39% |
| |0.60% |
| |1.15% |
| |1.74% |
| | |
| | |
| | |
| |Sources: online., , - 11/28/141,20,21 |
| |Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly. These returns do not |
| |include dividends. 10-year TIPS real yield = projected return at maturity given expected inflation. |
| | |
| |The fall earnings season, the waning fears about Ebola invading the U.S. and the ease with which Wall Street |
| |accepted the end of QE3 were factors in a very positive November. Will stocks continue to rally in December as |
| |energy investors wait for a point of capitulation? One view says cheap oil is good for the consumer, the broad |
| |economy and the stock market. Another view sees an extended lack of demand not only hurting energy shares, but |
| |also breeding unemployment and deflation. Eyes will also be on the Fed – as we are on the cusp of 2015, its |
| |December policy meeting might be a moment at which some clues emerge about the timing of an interest rate hike. |
| |Still, stocks don’t seem too beset by obstacles as we head toward the New Year, and with any luck, the December 31|
| |close for the S&P 500 just might be a record one. |
| | |
| |UPCOMING ECONOMIC RELEASES: Here is a roll call of the important stateside reports and releases in the year’s |
| |final month: November’s ISM services PMI, a new Federal Reserve Beige Book and the November ADP employment report |
| |(12/3), November’s Challenger job-cut report (12/4), the November jobs report from the Labor Department and |
| |October factory orders (12/5), October wholesale inventories (12/9), November retail sales and October business |
| |inventories (12/11), the preliminary December consumer sentiment index from the University of Michigan plus the |
| |November PPI (12/11), November industrial production (12/15), November housing starts and building permits |
| |(12/16), a Fed policy statement and November’s CPI (12/17), the Conference Board’s leading indicator index for |
| |November (12/18), November existing home sales (12/22), the final estimate of Q3 GDP, the final December consumer |
| |sentiment index from the University of Michigan, and November new home sales, personal spending and hard goods |
| |orders (12/23), October’s Case-Shiller home price index and 2014’s last Conference Board consumer confidence index|
| |(12/30), and then finally NAR’s report on November pending home sales (12/31). |
| |
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|Securities offered through Cetera Advisors LLC, Member FINRA/SIPC. Roche Financial and Cetera Advisors LLC, are not affiliated entities. |
| |
|This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This|
|information has been derived from sources believed to be accurate. MarketingPro, Inc. is not affiliated with any broker or brokerage firm that may|
|be providing this information to you. This information should not be construed as investment, tax or legal advice and may not be relied on for the|
|purpose of avoiding any Federal tax penalty. This is not a solicitation or recommendation to purchase or sell any investment or insurance product |
|or service, and should not be relied upon as such. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip |
|stocks. The NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association|
|of Securities Dealers Automated Quotation System. The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be |
|representative of the stock market in general. It is not possible to invest directly in an index. The Russell 2000 Index measures the performance |
|of the small-cap segment of the U.S. equity universe. The CBOE Volatility Index® (VIX®) is a key measure of market expectations of near-term |
|volatility conveyed by S&P 500 stock index option prices. NYSE Group, Inc. (NYSE:NYX) operates two securities exchanges: the New York Stock |
|Exchange (the “NYSE”) and NYSE Arca (formerly known as the Archipelago Exchange, or ArcaEx®, and the Pacific Exchange). NYSE Group is a leading |
|provider of securities listing, trading and market data products and services. The New York Mercantile Exchange, Inc. (NYMEX) is the world's |
|largest physical commodity futures exchange and the preeminent trading forum for energy and precious metals, with trading conducted through two |
|divisions – the NYMEX Division, home to the energy, platinum, and palladium markets, and the COMEX Division, on which all other metals trade. The |
|BSE SENSEX (Bombay Stock Exchange Sensitive Index), also-called the BSE 30 (BOMBAY STOCK EXCHANGE) or simply the SENSEX, is a free-float market |
|capitalization-weighted stock market index of 30 well-established and financially sound companies listed on the Bombay Stock Exchange (BSE). The |
|Korea Composite Stock Price Index or KOSPI is the major stock market index of South Korea, representing all common stocks traded on the Korea |
|Exchange. The SSE Composite Index is an index of all stocks (A shares and B shares) that are traded at the Shanghai Stock Exchange. Nikkei 225 |
|(Ticker: ^N225) is a stock market index for the Tokyo Stock Exchange (TSE). The Nikkei average is the most watched index of Asian stocks. Karachi |
|Stock Exchange 100 Index (KSE-100 Index) is a stock index acting as a benchmark to compare prices on the Karachi Stock Exchange (KSE) over a |
|period. The Hang Seng Index is a freefloat-adjusted market capitalization-weighted stock market index that is the main indicator of the overall |
|market performance in Hong Kong. The S&P/ASX 200 is Australia's “premier” share market index. The Bovespa Index is a gross total return index |
|weighted by traded volume & is comprised of the most liquid stocks traded on the Sao Paulo Stock Exchange. The S&P/TSX Composite Index is an index|
|of the stock (equity) prices of the largest companies on the Toronto Stock Exchange (TSX) as measured by market capitalization. The Mexican IPC |
|index (Indice de Precios y Cotizaciones) is a major stock market index which tracks the performance of leading companies listed on the Mexican |
|Stock Exchange. The CAC-40 Index is a narrow-based, modified capitalization-weighted index of 40 companies listed on the Paris Bourse. The DAX 30 |
|is a Blue Chip stock market index consisting of the 30 major German companies trading on the Frankfurt Stock Exchange. The IBEX 35 is the |
|benchmark stock market index of the Bolsa de Madrid, Spain's principal stock exchange. The FTSE MIB (Milano Italia Borsa) is the benchmark stock |
|market index for the Borsa Italiana, the Italian national stock exchange. The FTSE 100 Index is a share index of the 100 companies listed on the |
|London Stock Exchange with the highest market capitalization. The RTS Index (abbreviated: RTSI, Russian: Индекс РТС) is a free-float |
|capitalization-weighted index of 50 Russian stocks traded on the Moscow Exchange. The Global Dow is a 150-stock index of corporations from around |
|the world created by Dow Jones & Company. The Europe Dow measures the European equity markets by tracking 30 leading blue-chip companies in the |
|region. The Dow Jones Americas Index measures the Latin American equity markets by tracking 30 leading blue-chip companies in the region. The Asia|
|Dow measures the Asia equity markets by tracking 30 leading blue-chip companies in the region. The STOXX Europe 600 Index is derived from the |
|STOXX Europe Total Market Index (TMI) and is a subset of the STOXX Global 1800 Index. The MSCI World Index is a free-float weighted equity index |
|that includes developed world markets, and does not include emerging markets. The MSCI Emerging Markets Index is a float-adjusted market |
|capitalization index consisting of indices in more than 25 emerging economies. The US Dollar Index measures the performance of the U.S. dollar |
|against a basket of six currencies. Additional risks are associated with international investing, such as currency fluctuations, political and |
|economic instability and differences in accounting standards. This material represents an assessment of the market environment at a specific point|
|in time and is not intended to be a forecast of future events, or a guarantee of future results. Past performance is no guarantee of future |
|results. Investments will fluctuate and when redeemed may be worth more or less than when originally invested. All economic and performance data |
|is historical and not indicative of future results. Market indices discussed are unmanaged. Investors cannot invest in unmanaged indices. The |
|publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage |
|the services of a competent professional. |
| |
|Citations. |
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|2 - article/us-thirdquarter-gdp-revised-up-to-39-advance-20141125-00467 [11/25/14] |
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|20 - bigcharts.historical/default.asp?symb=SPX&closeDate=11%2F29%2F13&x=0&y=0 [11/28/14] |
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