Early Gains Disappear
The U.S. equity markets gave up early gains and closed the final trading session of 2014 in the red. Identifying the catalyst for the change in price direction may prove a futile endeavor as volume was on the lighter side with all U.S. markets set to be shuttered tomorrow in observance of New Year’s Day and as the domestic bond markets traded in a shortened session.
Conflicting data from the domestic economic docket showed disappointing reads on jobless claims and regional manufacturing activity and a better-than-expected November pending home sales report. Treasuries were modestly higher, while notable news from the equity front was nearly nonexistent. Gold and crude oil prices were lower and the U.S. dollar was higher.
The Dow Jones Industrial Average declined 160 points (0.9%) to 17,823
The S&P 500 Index decreased 21 points (1.0%) to 2,059, all 10 S & P sectors finished in the red with Utilities giving back the most followed by Consumer Staples and Financials.
Small and Midcaps fared no better with the MidCap 400 down 1.05% and the SmallCap 600 giving back .71% to end the year
The Nasdaq Composite was 41 points (0.9%) lower at 4,736
In moderately light volume, 576 million shares were traded on the NYSE, and 1.4 billion shares changed hands on the Nasdaq
WTI crude oil decreased $0.85 to $53.27 per barrel, wholesale gasoline was unchanged at $1.47 per gallon
The Bloomberg gold spot price decreased $17.61 to $1,182.94 per ounce
Jobless claims and manufacturing reports disappoint, while housing sales top estimates
Weekly initial jobless claims rose by 17,000 to 298,000 last week, above the 290,000 level that economists surveyed by Bloomberg had expected, as the prior week’s figure was upwardly revised by 1,000 to 281,000. Moreover, the four-week moving average, considered a smoother look at the trend in claims, ticked higher by 250 to 290,750, while continuing claims fell by 53,000 to 2,353,000, south of the forecast of economists, which called for a level of 2,368,000.
The Chicago Purchasing Managers Index showed growth in Midwest activity decelerated more than expected, declining to 58.3 for December, from 60.8 in November, and versus expectations of a decline to 60.0, though a reading above 50 depicts growth.
Pending home sales rose 0.8% month-over-month in November, versus the projected 0.5% gain, and following the downwardly revised 1.2% drop registered in October. Compared to last year, sales were 1.7% higher last month, versus the 3.6% rise that was anticipated, and following October’s downwardly revised 2.1% gain. Pending home sales reflect contract signings and are used as a gauge of the pipeline of existing home sales, which fell more than expected in November.
Treasuries were modestly higher following today’s shortened session, with the yields on the 2-year and 10-year notes dipping 2 basis points to 0.67% and 2.17%, respectively, while the 30-year bond rate was 1 bp lower at 2.75%.
Europe pares monthly decline in shortened session, Asia mixed to end the year
The European equity markets pared their losses for the month that have come from the impact on the energy sector of the sharp sell-off in crude oil prices and the recent flare-up in political uncertainty in Greece after the nation failed to elect a president. The result fostered concerns that an anti-austerity party in the nation could gain control and potentially impact the composition of the European Union. The anti-austerity movement in Greece could raise doubts about the European Central Banks’s (ECB) decision to buy government bonds in early 2015. Some at the ECB object to buying government bonds from countries that aren’t committed to financial reform and may not meet their debt obligations. However, the recent easing of fiscal terms for France and Italy are a sign that the ECB will likely step up bond buying regardless of the outcome of the Greek election.
However, the Stoxx Europe 600 Index managed to post a gain 4.3% for the year, with sentiment buoyed by expectations that the ECB will step up stimulus efforts, including speculation that the central bank could deploy a full-blown quantitative easing campaign by expanding its asset purchases to include sovereign debt. Meanwhile, volume in today’s trading session in Europe was light, with markets in Germany, Italy and Switzerland closed for the New Year’s Day holiday, while other major markets closed early.
The U.K. FTSE 100 Index was up 0.3%, France’s CAC-40 Index gained 0.6%, Spain’s IBEX 35 Index finished flat, and Greece’s ASE Athens Index traded 1.2% higher.
Stocks in Asia finished mixed in the final trading session of the year, though volume was light with a plethora of markets in the region closed for holidays, including Japan and South Korea. China’s Shanghai Composite Index rallied despite a lackluster read on the nation’s manufacturing output and as the final HSBC China Manufacturing PMI Index improved slightly to 49.6 for December, from the 49.5 level estimated in the preliminary report, but below the 50.0 level recorded in November. A reading below 50 denotes contraction. The Shanghai Composite Index was the best performer among the major global markets this year, surging 53.0% to exceed the performance of 93 world indexes tracked by Bloomberg. China’s mainland stocks were bolstered this year by surprising rate cuts from the People’s Bank of China and the commencement of the trading link between the Hong Kong and Shanghai exchanges.