Following a week of tepid movement in the major stock market indexes, equities picked up the pace last week. Growth in financial company and bank stocks led the way as both the large-cap Dow and S&P 500 rose moderately. Some analysts suggest that financial stocks could climb further if the Fed raises interest rates as anticipated. The small-cap Russell 2000 surged once again last week, jumping up over its prior week’s value. As money pours into equities, long-term bond prices continue to fall. The yield on 10-year Treasuries climbed 8.0 basis points, marking the third consecutive week of rising yields.
Last Week’s Headlines
- The November 2016 Non-Manufacturing ISM® Report On Business® revealed that economic activity in the services sector expanded in November. The Employment Index increase, however, the New Orders Index and the Prices Index fell in November. Some of the non-manufacturing industries included in this survey are Agriculture, Mining, Utilities, Construction, Retail Trade, Transportation & Warehousing, Finance & Insurance, Entertainment & Recreation, Accommodation & Food Services, and Real Estate.
- While it’s a bit dated, the Bureau of Economic Analysis October report on international trade in goods and services was released last week. Year-over-year, the goods and services deficit has decreased $8.8 billion, or 2.1%, from the same period in 2015. Exports decreased $58.7 billion, or 3.1%. Imports decreased $67.5 billion, or 2.9%.
- According to the Job Openings and Labor Turnover (JOLTS) report from the Bureau of Labor Statistics, the number of job openings fell about 1.7% in October from September. Job openings increased in health care and social assistance, but decreased in professional and business services, federal government, and mining and logging. The number of hires and separations also dropped slightly in October.
- The preliminary results from the University of Michigan’s Surveys of Consumers show the Index of Consumer Sentiment up in November. According to the report, the surge is due to consumers’ initial reactions to the results of the presidential election.
- In the week ended December 3, the advance figure for seasonally adjusted initial unemployment insurance claims and the unemployment rate fell.
Eye on the Week Ahead
The Federal Open Market Committee (FOMC), “The Fed”, meets next week and it is expected to raise the federal funds rate for the first time since last December. Reports available in the upcoming week are from three indicators of inflationary trends – the Producer Price Index, retail sales, and the Consumer Price Index. We will see if the inflationary indicators are in line with the FOMC actions on interest rates.
BWFA clients invest using the guidelines of one of our various different investment models. Remember that we do not replicate “the Dow” or any of the major stock market indices, since the BWFA models are diversified across different categories, (including incomes securities which have been down of late in many of the sectors of the income investment world), to attempt to achieve long term planning goals through returns made from investing in this balanced and diversified way.