Stocks Pare Gains to Finish Flat in Condensed Week
Despite spending most of the day in positive territory, with consumer discretionary stocks getting a lift amid the focus on retailers on media reports of strong traffic on “Black Friday,” stocks finished an abbreviated session in a holiday-shortened week nearly unchanged.
Energy-related stocks applied most of the pressure, as crude oil prices tumbled in the wake of OPEC’s decision to not cut production amid a supply glut, while the fall in oil prices gave airline stocks a nice boost.
Treasuries finished higher as rates moved lower, as the U.S. economic calendar was void of any major releases today, while gold prices were lower and the U.S. dollar was higher.
The Dow Jones Industrial Average was nearly unchanged at 17,828
The S&P 500 Index was 5 points (0.3%) lower at 2,068
The Nasdaq Composite gained 4 points (0.1%) to 4,792
In light volume, 642 million shares were traded on the NYSE, and 985 million shares changed hands on the Nasdaq
WTI crude oil tumbled $6.32 to $67.37 per barrel, wholesale gasoline plunged $0.15 to $1.86 per gallon
The Bloomberg gold spot price declined $22.32 to $1,170.35 per ounce
Markets were higher on the week, as the DJIA increased 0.1%, the S&P 500 Index gained 0.2% and the Nasdaq Composite Index added 1.7%
Economic front quiet to close out the week
Treasuries finished higher, while the U.S. economic calendar offered no major releases today, as the yields on the 2-year note and the 30-year bond declined 5 basis points to 0.47% and 2.90%, respectively, while the yield on the 10-year note was 6 bps lower at 2.18%.
Stocks moved modestly higher during the holiday-shortened week, successfully notching a sixth-straight weekly advance and back-to-back monthly gains. Sentiment has been supported by carried over optimism from last week’s surprising rate cuts out of China and growing speculation that the European Central Bank will expand its asset purchase program to include government bonds, launching a full-fledged quantitative easing campaign. The heavy pressure on energy-related stocks amid the sell-off in oil prices and some mixed domestic economic data has kept the advance in check. This week, an unexpected upward revision to 3Q U.S. GDP growth to an annualized quarter-over-quarter rate of 3.9% was partially offset by surprising declines in Consumer Confidence and the University of Michigan Consumer Sentiment Index, softer-than-expected personal income and spending, a disappointing durable goods orders report, and a jump in weekly initial jobless claims.
Looking ahead to next week, the domestic economic calendar will bring some key reports for traders to digest, beginning with Monday’s release of the ISM Manufacturing Index, which will be accompanied by the final Markit Manufacturing PMI Index. However, the week will culminate with the headlining November non-farm payroll report. Retail sales rebounded in October, capital spending plans increased in the National Federation of Independent Business’ upbeat small business optimism survey, and the quit rate in the Bureau of Labor Statistics’ Job Openings and Labor Turnover Survey rose to its highest level since before the Great Recession. A greater number of workers willing to quit indicates greater confidence in the job market and should help to pressure wages higher in the coming months.
Other releases on next week’s economic calendar include: monthly auto sales, construction spending, MBA mortgage applications, ADP’s employment change, final 3Q nonfarm productivity and unit labor costs, Markit’s Services PMI Index, the ISM non-Manufacturing Index, the Fed’s Beige Book, jobless claims, the trade balance, factory orders, and consumer credit.
European equities mixed, seeing some pressure on energy-related weakness
The European equity markets reversed course to finish mostly higher, with the German market able to eke out a slight gain to add to its winning streak. Oil & gas issues sold off on the heels of yesterday’s sharp drop in oil prices as OPEC decided to not cut production to help alleviate a supply glut, keeping a lid on the gains across the pond. The decline in energy stocks overshadowed a solid advance in travel-related issues, particularly airlines, which benefitted from the decisive downward move in oil prices. Meanwhile, the headline eurozone November Consumer Price Index estimate decelerated to a 0.3% y/y increase, as expected, from the 0.4% rise in October. In other economic news in the region, German retail sales rose more than expected last month, while the eurozone unemployment held steady at 11.5%, as forecasted, for October.
European stocks have rallied for the month, posting their best performance since February, per Bloomberg, aided by growing speculation that the European Central Bank (ECB) will expand its asset purchases to include sovereign debt to combat the threats of deflation and a return to recession for the eurozone economy. Next week, the ECB and Bank of England are expected to deliver their monetary policy decisions, with economists projecting the central banks to leave their benchmark interest rates unchanged at record lows of 0.05% and 0.50%, respectively. Other key economic releases from the international front include: Markit’s global business activity releases, eurozone 3Q GDP, retail sales and the Producer Price Index, German factory orders, Canada’s unemployment rate, China’s manufacturing and services sector reports, as well as the Reserve Bank of Australia’s monetary policy decision and Australian 3Q GDP.
The U.K. FTSE 100 Index was nearly unchanged, Germany’s DAX Index inched 0.1% higher, France’s CAC-40 Index rose 0.2%, Switzerland’s Swiss Market Index gained 0.3%, and Spain’s IBEX 35 Index finished 0.4% higher, while Italy’s FTSE MIB Index fell 0.7%.
Asia mixed following data and oil weakness
Stocks in Asia finished mixed following some lackluster economic data and as energy-related issues saw some pressure as crude oil prices tumbled yesterday on OPEC’s decision to not cut production. Stocks in Japan gained ground, boosted by a weaker yen, while the nation reported that consumer price inflation decelerated more than expected and retail sales dropped more than projected for last month, though a separate report showed the country’s industrial production unexpectedly rose.
Chinese equities continued to rally, rising to the highest level since August 2011, supported by lingering optimism from last Friday’s surprising rate cuts by the People’s Bank of China. However, Australia’s market fell, dragged down by a sharp drop in oil & gas issues, while South Korean equities dipped in the wake of a report showing the nation’s industrial production unexpectedly fell in October. In other economic news in the region, India’s 3Q GDP expanded at a 5.3% y/y rate, a deceleration from the 5.7% growth in 2Q, but above the 5.0% pace of increased output that economists had expected.