The Markets (as of market close December 2, 2016)Tuesday, December 6th, 2016
Robust gains that marked the last few weeks turned to modest declines last week. Gains in energy shares, following OPEC’s announcement to cap production, weren’t enough to totally offset a regression in small-cap and technology stocks. Both the Russell 2000 and the NASDAQ dropped, while the Dow maintained its value, but little more.
The price of crude oil increased by last week’s end–the increase follows OPEC’s agreement to cap petroleum output. Crude oil prices could reach $60 per barrel in the near term by some estimations. Gold remained volatile as the price of gold fell again last week.
Last Week’s Headlines
There were 178,000 new jobs added in November, with employment gains occurring in professional and business services. The unemployment rate fell to the lowest reading since August 2007. The drop in the unemployment rate can be tied, in part, to a fall in the labor force participation rate.
- The gross domestic product, which measures the net value of goods and services produced by the nation’s economy, increased at an annual rate of 3.2% in the third quarter of 2016, according to the Bureau of Economic Analysis. Recent increases are due to an increase in personal consumption expenditures (consumer spending), exports, private inventory investment, and federal government spending. The GDP growth was offset by several factors, including an increase in imports, which are a subtraction in the calculation of GDP. Another important aspect of the latest estimate of the GDP is the growth in after-tax corporate profits, which increased 3.5% from the second quarter.
- The personal income and outlays report from the Bureau of Economic Analysis provides valuable information on consumers’ household income from all sources, what consumers are buying and how much they’re spending, and inflationary price trends. In October, personal income increased slightly over September. Disposable personal income (income less taxes) jumped a bit, while personal consumption expenditures (value of the goods and services purchased by consumers) gained minimally. About two-thirds of the total economic output in the United States is attributable to consumer spending. As consumer income and spending escalates, so does economic growth, evidenced by the 3.2% gain in the third-quarter GDP.
- Markit U.S. Manufacturing Purchasing Managers’ Index™ (PMI™) registered the strongest improvement in business conditions since March 2015. Improvements in new orders and production led to sustained acceleration in the manufacturing sector, according to the report.
- The Institute for Supply Management’s PMI also increased in November. The New Orders Index increased 0.9 percentage point; the Production Index jumped 1.4 percentage points, while the Employment Index decreased 0.6 percentage point. This report, coupled with the Markit survey, evidence strengthening in the manufacturing sector, which had been lagging for much of the year.
- Consumer confidence improved in November, according to The Conference Board Consumer Confidence Index® – its highest reading since July 2007. “A more favorable assessment of current conditions coupled with a more optimistic short-term outlook helped boost confidence. . . . With the holiday season upon us, a more confident consumer should be welcome news for retailers.”
- In the week ended November 26, the advance figure for seasonally adjusted initial unemployment insurance claims was 268,000, an increase of 17,000 from the previous week’s unrevised level.
Eye on the Week Ahead
Although the stock market has been booming since the presidential election, trading has been relatively light. With the passing of Thanksgiving, the Christmas holiday season is in full swing, which may keep trading volumes down as investors focus on holiday plans and shopping.
During this period, your BWFA advisors can use the time to continue to assess clients’ year end situation to make any final 2017 decisions that are appropriate to each particular client situation.