windows - offHigher Probability of FED Increase… and Markets Rise?

Anyone looking at U.S. stock market performance for the last week might assume it was a pretty quiet week. They would be wrong. It was a very bouncy week. U.S. stock markets moved lower on Monday, rebounded on Tuesday, and then appeared to suffer a one-two punch mid-week that knocked indices lower.

On Wednesday, the benchmark U.S. oil price sank below $40 a barrel as supply continued to exceed demand, according to The Wall Street Journal (WSJ). Analysts had expected stockpiles of crude oil, gasoline, and other fuels to decline. Instead, stores increased to more than 1.3 billion barrels. The glut of fuel drove energy stock values down and energy stocks led the broader market lower, according to WSJ.

Performance did not improve on Thursday. In part, this was because the European Central Bank (ECB) underwhelmed markets when it delivered economic measures that were less stimulative than many had expected. The Financial Times reported the ECB reduced rates and pledged to extend quantitative easing for six additional months, but it did not increase the amount of its bond purchases, which disappointed investors. Stock markets in Europe and the United States lost value on the news.

On Friday, a strong jobs report restored investors’ enthusiasm and markets regained losses suffered earlier in the week, according to ABC News. The Department of Labor announced 211,000 jobs were added in November, which was more than analysts had expected. Strong employment numbers made the possibility of a Federal Reserve rate hike seem more certain and investors welcomed certainty. The ECB jumped into the good-news pool on Friday, too, announcing it would expand stimulus measures, if necessary.

The Standard & Poor’s 500, Dow Jones Industrial, and NASDAQ indices were all up for the week.


Data as of 12/4/15

1-Week

Y-T-D

1-Year

3-Year

5-Year

10-Year

Standard & Poor’s 500 (Domestic Stocks)

0.1%

1.6%

1.0%

14.1%

11.3%

5.2%

Dow Jones Global ex-U.S.

-0.7

-5.4

-7.7

1.4

-0.2

1.0

10-year Treasury Note (Yield Only)

2.3

NA

2.3

1.6

2.9

4.6

Gold (per ounce)

2.1

-10.0

-10.7

-14.0

-5.3

7.9

Bloomberg Commodity Index

0.7

-21.7

-27.2

-16.9

-11.9

-7.3

DJ Equity All REIT Total Return Index

-1.2

1.0

2.2

11.1

11.7

7.1

 S&P 500, Gold, DJ-UBS Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT TR Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods. Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association.

*The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.  You cannot invest directly in this index.

* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.

* Gold represents the London afternoon gold price fix as reported by the London Bullion Market Association.

* The DJ Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.

* The DJ Equity All REIT TR Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.

* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.

* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.

* “Markets… Always Forward, Never Straight”

Sources:

http://finance.yahoo.com/echarts?s=%5EGSPC+Interactive#{“range”:”5d”,”allowChartStacking”:true}

http://www.wsj.com/articles/oil-prices-fall-on-fears-of-increased-u-s-stockpiles-1449050223

http://www.wsj.com/articles/global-stocks-little-changed-ahead-of-ecb-meeting-u-s-jobs-report-1449047610

http://www.ft.com/cms/s/0/b7f719ec-9965-11e5-9228-87e603d47bdc.html#ixzz3tVSPJthW (Click on Markets tab, then “Euro jumps as ECB underwhelms markets”)

http://abcnews.go.com/Business/wireStory/stocks-rise-solid-november-jobs-report-oil-prices-35578641

http://www.barrons.com/mdc/public/page/9_3063-economicCalendar.html (Click on U.S. & Intl Recaps, “Countdown time,” then scroll down to “Markets: The liftoff effect, what if any?”)

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