U.S. equities were rangebound to start another holiday-shortened week, amid light volume, with all markets being closed on Wednesday for the New Year holiday. Treasuries finished higher following lukewarm reads on domestic housing sales and regional manufacturing activity, while the U.S. dollar, crude oil, and gold all traded lower.
The Dow Jones Industrial Average rose 26 points (0.2%) to 16,504
The S&P 500 Index was flat at 1,841
The Nasdaq Composite ticked 2 points (0.1%) lower to 4,154
In light volume, 459 million shares were traded on the NYSE, and 1.3 billion shares changed hands on the Nasdaq. WTI crude oil declined $1.03 to $99.29 per barrel, wholesale gasoline lost $0.02 to $2.79 per gallon, and the Bloomberg gold spot price tumbled $15.23 to $1,198.04 per ounce.
Pending home sales tick higher, while regional manufacturing activity accelerates slightly
Pending home sales rose at a smaller rate than expected in November, increasing 0.2% month-over-month, compared to the 1.0% increase that economists surveyed by Bloomberg had projected, while the 0.6% decline registered in October was revised to a 1.2% decrease. Compared to last year, sales were down 4.0% in November, versus the 0.1% rise that was forecasted, and compared to the 2.7% drop posted in October, revised from an initially-reported 2.2% decline. Pending home sales reflect contract signings and are used as a gauge of the pipeline of existing home sales, which declined for the third-straight month in November.
In regional manufacturing news, the Dallas Fed Manufacturing Index showed activity for the region accelerated at a smaller rate than expected, improving from November’s unrevised level of 1.9 to 3.1 in December compared to the 4.0 figure that was forecasted. However, a reading above zero denotes expansion in activity. The report showed new orders fell into negative territory and production output decelerated but continued to expand, while employment, prices paid, and wage growth accelerated.
Treasuries were higher, as the yield on the 2-year note was nearly unchanged at 0.38%, while the yield on the 10-year note declined 3 basis points to 2.98%, and the 30-year bond rate was 4 bps lower at 3.90%.
The U.S. economic front will remain somewhat slow to start 2014, with the typical first Friday jobs report coming instead on the second Friday in January and all U.S. markets closed on Wednesday in observance of the New Year holiday.
After a great year for equity markets in 2013, investors are looking to next year and wondering whether there will be a “payback” coming. Many experts expect the US market to experience a decent pullback at some point during 2014, but still believe stocks will end the year higher. Despite the strong returns in 2013, according to ISI Research, there have been 11 years since 1950 that the S&P 500 has posted 25% plus gains, and with the exception of two recession years, the S&P posted positive results in the following year.
Europe pulls back from multi-year highs, Asia mixed
The European equity markets finished mostly to the downside, pulling back somewhat from more than five-year highs, with volume remaining lighter than usual with the New Year holiday on the week’s horizon. In economic news, Spain’s retail sales rebounded in November, while reports showed Italian economic sentiment and business confidence improved slightly this month.
Stocks in Asia finished mixed, while Japan’s Nikkei 225 Index rose amid some weakness in the yen versus the U.S. dollar, which fell to the lowest level in more than five years to buoy the markets. In the final trading day of the year, the Nikkei 225 Index registered a 57% gain for 2013, the largest annual advance since 1972. As noted in the Schwab Market Perspective, Japan is entering a critical period in its nascent recovery, which makes many analysts cautious.
China’s Shanghai Composite Index declined, despite a pullback in money market rates, which had surged as of late fostering a flare up in liquidity concerns. Elsewhere, the Hong Kong Hang Seng Index finished flat and India’s S&P BSE Sensex 30 Index declined, while Australia’s S&P/ASX 200 Index and South Korea’s Kospi Index both advanced.