Stocks Lower, S&P 500 Finishes 2015 Flat
U.S. stocks closed the final trading session of 2015 lower, though losses were pared temporarily by strength in the energy sector as crude oil prices rebounded from yesterday’s drop.
Treasuries ticked higher in a shortened session on the heels of disappointing reads on domestic jobless claims and regional manufacturing activity. Gold was nearly unchanged and the U.S. dollar traded higher.
The Dow Jones Industrial Average fell 179 points (1.0%) to 17,425
The S&P 500 Index shed 20 points (0.9%) to 2,044
For 2015 the best performing sector was Consumer Discretionary adding 9% over the last year followed by HealthCare +5.23% and Consumer Staples +4%. While Energy took the biggest fall giving back over 24% over the past 12 months.
The Nasdaq Composite dropped 58 points (1.2%) to 5,007
In light volume, 752 million shares were traded on the NYSE and 1.4 billion shares changed hands on the Nasdaq
WTI crude oil added $0.44 to $37.04 per barrel and wholesale gasoline gained $0.03 to $1.27 per gallon
The Bloomberg gold spot price decreased $0.97 to $1,060.47 per ounce
The Dollar Index—a comparison of the U.S. dollar to six major world currencies—increased 0.3% to 98.60
Markets were lower for the week, as the DJIA decreased 0.7%, the S&P 500 Index declined 0.8%, and the Nasdaq Composite Index lost 0.8%
News on the equity front was sparse in the final trading session of 2015, as uncertainty remained regarding how the S&P 500 would finish for the year that saw mixed performances from the other major indices. The S&P 500 was down 0.7%, the Dow was off 2.2% and the Nasdaq was up 5.7% for the year.
It’s been a “running to stand still” market this year, with U.S. stocks breaking all-time records for the number of times they crossed above and below the flat performance line for the year. The start of 2016 looks to continue that grinding phase. Many global economies—including the United States—have become bifurcated, with manufacturing and commodities still struggling, but consumer and services sectors looking healthy. Investors should stick with their long-term allocations and not look to be either overly aggressive or defensive at this stage, given policy-related uncertainty. With some international central banks expanding their easing programs, assets in areas such as Europe and Japan look relatively attractive and most investors –in accordance with their personal risk tolerance– should have exposure to those regions in a diversified portfolio in our opinion
Jobless claims jump, Chicago business manufacturing activity unexpectedly falls
Weekly initial jobless claims rose by 20,000 to 287,000 last week, versus the Bloomberg estimate calling for a rise to 270,000 as the prior week’s figure was unrevised at 267,000. The four-week moving average grew by 4,500 to 277,000, while continuing claims increased by 3,000 to 2,198,000, north of the forecasted 2,190,000 level.
The Chicago Purchasing Managers Index showed the contraction (a reading below 50) in Midwest activity surprisingly accelerated in December, dropping to 42.9—the lowest since July 2009—from 48.7 in November, and versus expectations of a rise to 50.0. The drop was led by a deterioration in order backlogs, which fell by the largest amount since March 1951.
Treasuries were higher, with the yields on the 2-year note and 30-year bond dipping 2 basis points to 1.05% and 3.02%, respectively, and the yield on the 10-year note declining 3 bps to 2.27%.
Please note: All U.S. markets will be closed tomorrow in observance of the New Year holiday.
Europe trims gains for 2015, Asia mixed in subdued ending to a divergent year
European stocks finished lower in low volume, with several markets closing early today, while markets in Germany, Italy and Switzerland were closed for New Year’s Eve. Although Europe posted the worst December since 2002, per Bloomberg, the benchmark Stoxx Europe 600 Index posted a yearly advance of 6.8%. European stocks were buoyed by expanded monetary policy stimulus measures from the European Central Bank, diverging from the Central Bank in the U.S., as the Fed hiked rates for the first time since before the financial crisis. The euro lost ground versus the U.S. dollar.
Stocks in Asia finished mixed in the final trading session of 2015, with volume light as markets in Japan and South Korea were closed today and other markets closing early ahead of the New Year holiday. Japan’s Nikkei 225 Index posted a 9.1% gain for 2015, while South Korea’s Kospi Index advanced 2.4% for the year, per data compiled by Bloomberg. China’s Shanghai Composite Index was lower on the day with the volatility in oil prices commanding the most attention, but the index finished out the year with a 9.4% gain. The Hong Kong Hang Seng Index was slightly higher in its final session of the year, paring its annual decline slightly to a 7.2% drop. Chinese stocks finished 2015 mixed amid diverging global monetary policies, festering economic growth concerns, the implementation of trading links between the nation’s exchanges, and the devaluation of the country’s currency. Australia’s S&P/ASX 200 Index decreased, bringing its yearly decline to 2.1%, while India’s S&P BSE Sensex 30 Index rose to trim its annual loss to 5.0%.
Heavy economic calendar set to ring in the New Year
The first week of 2016 will deliver a fully-loaded U.S. economic calendar, headlined by business activity reports from the ISM and Markit, durable goods orders, the December Fed meeting minutes, and culminating with the December non-farm payroll report. We believe the current U.S. economic picture appears to be a flawed painting, with a softening manufacturing sector being countered by a continued healthy labor market and the more heavily-weighted services side of the economy. There are myriad issues to contemplate when trying to divine the future, but the focus of the market heading into 2016 will likely continue to be the Fed. At this point, the Fed has bent over backwards to soothe concerns by noting its desire to move gradually, allowing for the economy and markets to adjust. Slow rate hiking cycles have typically been positive for stocks, but with almost a decade having passed since the last hike, volatility is likely to persist.
Other key reports on next week’s domestic docket include: construction spending, December auto sales, ADP employment change, factory orders and trade balance.