Monthly Archives: November 2016

Market Insights 11/30/2016

Markets Lose Steam at the Finish Line

U.S. equities finished mostly lower, despite strength in energy stocks amid a surge in crude oil prices on an OPEC production cut agreement, as well as strong gains in financials amid the continued post-election rally in Treasury yields.

Political uncertainty overseas continued to bend the ear of investors, while the U.S. dollar’s steady move higher also fostered some concerns, and gold was lower.

Upbeat reads on personal income and Chicago manufacturing activity followed yesterday’s favorable GDP and Consumer Confidence data, while the Fed’s Beige Book showed continued economic growth.

The Markets...

The Dow Jones Industrial Average rose 2 points to 19,124

The S&P 500 Index lost 6 points (0.2%) to 2,199

The Nasdaq Composite tumbled 56 points (1.1%) to 5,324

In heavy volume, 1.6 billion shares were traded on the NYSE and 2.0 billion shares changed hands on the Nasdaq

WTI crude oil soared $4.21 to $49.44 per barrel and wholesale gasoline jumped $0.10 to $1.48 per gallon

The Bloomberg gold spot price fell $15.19 to $1,173.12 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—increased 0.6% to 101.49

Personal income and Chicago manufacturing jump, headlining robust economic docket

Personal income was 0.6% higher month-over-month in October, above the Bloomberg forecast of a 0.4% rise, and compared to September’s upwardly revised 0.4% increase. Personal spending gained 0.3% last month, below the expected 0.5% increase and versus September’s favorably revised 0.7% rise. The October savings rate as a percentage of disposable income was 6.0%. The PCE Deflator was up 0.2%, below expectations of a 0.3% increase. Compared to last year, the deflator was 1.4% higher, south of estimates of a 1.5% gain. Excluding food and energy, the PCE Core Index moved 0.1% higher m/m, in line with expectations, and the index was up 1.7% y/y, matching estimates.

The ADP Employment Change Report showed private sector payrolls rose by 216,000 jobs in November, above forecasts of 170,000, while October’s gain of 147,000 jobs was revised lower to a 119,000 rise. Today’s ADP data, which does not include government hiring and firing, comes ahead of Friday’s broader November non-farm payroll report, expected to show an increase of 180,000 jobs, while private sector payrolls are projected to rise by 170,000. The unemployment rate is forecasted to remain at 4.9%, and average hourly earnings are projected to rise 0.2% m/m.

The Chicago Purchasing Managers Index jumped further into expansion territory (above 50), after jumping to 57.6—the highest since January 2015—in November from 50.6 in October and versus expectations of a rise to 52.5. New orders, production, inventories and production all rose m/m, while employment declined.

The regional report comes ahead of tomorrow’s national read on November output from the sector, in the form of the ISM Manufacturing Index, projected to rise to 52.4 from 51.9 in October, posting the third-straight month in expansion territory (above 50).

Pending home sales ticked 0.1% higher m/m in October, in line with projections and following the downwardly revised 1.4% gain registered in September. Compared to last year, sales were 0.2% higher. Pending home sales reflect contract signings and are used as a gauge of the pipeline of existing home sales, which rose in October to near the highest level in a decade.

The MBA Mortgage Application Index fell 9.4% last week, following the previous week’s 5.5% rise. The drop came as a 16.2% tumble for the Refinance Index was accompanied by a 0.2% dip in the Purchase Index. The average 30-year mortgage rate rose 7 basis points to 4.23%.

Culminating today’s robust economic calendar, the afternoon release of the Federal Reserve’s Beige Book—an anecdotal look at national economic activity—showed that the economy continued to expand during the early-October to mid-November period. The report indicated that retail sales, real estate and business service saw increases in activity, and that “a tightening in labor market conditions was reported in seven districts, with modest employment growth on balance.” Inflation, according to the report, was slight, and a few districts mentioned some effects of the presidential election on certain sectors. The FOMC is scheduled to meet December 13–14, with many anticipating the Committee to announce a rate hike. As noted previously, “full” employment is at least in sight, housing is recovering, economic growth has improved and inflation is heating up. A December rate hike may remove some uncertainty, but questions will remain as to the path and frequency of rate hikes in 2017 and beyond. We continue to believe the Fed will be able to go slow in normalizing rates, as they have stated they want to do, but signs of rising inflation could force its hand.

Treasuries finished lower, as the yield on the 2-year note rose 3 basis points (bps) to 1.12%, the yield on the 10-year note jumped 9 basis points to 2.38%, and the 30-year bond rate gained 8 bps to 3.03%. With bond yields continuing a post-election rally, bolstered by elevated December Fed rate hike expectations.

In addition to the aforementioned national manufacturing report, the domestic docket will hold weekly initial jobless claims, with forecasts calling for a slight uptick to a level of 253,000 from the prior week’s 251,000, as well as the final Markit Manufacturing PMI Index for November, with economists expecting no change from the previous reading of 53.9. Rounding out the day will be construction spending, anticipated to have grown 0.6% m/m during October.

Europe higher as oil rallies on OPEC deal, Asia mixed as global uncertainties remain

European equities finished higher, with oil & gas issues leading the way as crude oil prices surged on the announcement of a production cut deal being reached at today’s OPEC meeting, reducing output to 32.5 million barrels a day beginning in January. The rally in oil overshadowed lingering political uncertainty ahead of this weekend’s Italian referendum, which will be followed by other political events in the region. European stocks are heightened by the uncertainty posed by these votes. However, the resulting political uncertainty isn’t sufficient reason to abandon global diversification. We believe having a diversified portfolio can set you up to participate if and when the trends switch.

U.K. banks were in focus after the Bank of England released the results from its stress tests of the sector, with Royal Bank of Scotland Group PLC. seeing pressure after it failed the BoE’s stress test and it announced a revised capital plan. Barclays PLC. and Standard Chartered PLC. were also found to have capital inadequacies though neither was required to submit revised capital plans, per Bloomberg. The Eurozone consumer price inflation estimate rose in line with forecasts. The euro was lower and the British pound dipped versus the U.S. dollar, while bond yields in the region finished mostly higher.

Stocks in Asia finished mixed, despite the upbeat GDP and Consumer Confidence data in the U.S. yesterday, with global market uncertainty festering ahead of today’s key OPEC meeting and upcoming political events in Europe, particularly this weekend’s Italian referendum. Energy stocks finished lower as crude oil prices fell yesterday amid skepticism regarding the outcome of the OPEC meeting. The sector remained under pressure even as oil prices rebounded during the session as headlines fostered optimism that there could be a production cut deal. Japanese equities finished flat, even as the yen continued its slide in late-day action and despite an unexpected rise in the nation’s industrial production.

Mainland Chinese stocks fell amid lingering liquidity concerns and following a recent rally, while those traded in Hong Kong rose slightly, paring some of yesterday’s decline.

Australian securities declined, with oil & gas issues falling and basic materials stocks paring a recent jump, while the nation reported an unexpected tumble in building approvals. Stocks in South Korea gained modest ground, while India’s markets rallied on some strength in the banking sector. After the closing bell, India reported a 7.3% y/y expansion in Q3 GDP, an acceleration from the 7.1% growth in Q2, but below the projected 7.5% increase. With the global markets choppy on flared-up global uncertainties and following the surprise U.S. election.

Market Insights 11/29/2016

Global Uncertainty Keeps Lid on Gains

U.S. equities finished modestly higher, as a favorable revision to Q3 GDP and a jump in Consumer Confidence was met with continued political uncertainty in Europe and a tumble in crude oil prices ahead of tomorrow’s OPEC meeting.

News on the equity front was positive, with Tiffany & Co. beating expectations and Dow member UnitedHealth Group guiding higher. Treasury yields, the U.S. dollar and gold were all lower.

The Markets…

The Dow Jones Industrial Average rose 24 points (0.1%) to 19,122

The S&P 500 Index gained 3 points (0.1%) to 2,205

The Nasdaq Composite added 11 points (0.2%) to 5,380

In moderately-heavy volume, 912 million shares were traded on the NYSE and 1.8 billion shares changed hands on the Nasdaq

WTI crude oil tumbled $1.85 to $45.23 per barrel and wholesale gasoline was down $0.03 at $1.38 per gallon

The Bloomberg gold spot price traded $4.99 lower to $1,189.01 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—decreased 0.4% to 100.97

First revision to Q3 GDP tops forecasts

The second look (of three) at Q3 Gross Domestic Product, the broadest measure of economic output, showed a quarter-over-quarter annualized rate of growth of 3.2%, revised up from the 2.9% expansion reported in the first report. The Bloomberg forecast called for an adjusted 3.0% pace of expansion. 2Q GDP grew by an unrevised 1.4% rate. Personal consumption came in at a 2.8% gain for Q3, up from the preliminary estimate of a 2.1% increase, and compared to the expectations of a 2.3% increase. Personal consumption grew by an unrevised 4.3% in Q2. The upward revision to GDP primarily reflected the stronger-than-initially reported personal consumption, which was partially offset by downward adjustments to nonresidential fixed investment and private inventory investment.

On inflation, the GDP Price Index was revised to a 1.4% gain, versus forecasts of an unrevised 1.5% increase, while the core PCE Index, which excludes food and energy, was adjusted at a 1.7% rise, matching expectations.

The Consumer Confidence Index jumped to the highest level since July 2007, surging to 107.1 in November from the upwardly revised 100.8 level in October, and compared to estimates of 101.5. Sentiment toward the present situation and expectations of business conditions both rose solidly. On employment, the labor differential—consumers’ appraisal of jobs being “plentiful” minus being “hard to get”—improved to 5.2 from the 3.6 posted in October.

Today’s GDP and Consumer Confidence reports add credence that recent economic releases have also provided support for the post-election rally, suggesting that some of the lift in the economy was already happening, and isn’t just a hope for next year under a Trump administration. Reflecting the better economic data and higher inflation, the Federal Open Market Committee (FOMC) is likely to raise rates at its December meeting. The question of whether the market has gone too far too fast, is that perhaps in the short-term, but animal spirits—assuming they’ve awoken—can fuel rallies for an extended period, discussing that there is much about this rally so far to behold—and much which is also unique. Many experts conclude that the secular bull market lives on, but some of next year’s performance may get pulled into this year.

The 20-city composite S&P CoreLogic Case-Shiller Home Price Index showed a 5.1% gain in home prices y/y in September, versus expectations of a 5.2% increase. Month/month (m/m), home prices were up 0.4% on a seasonally adjusted basis for September, roughly in line with forecasts.

Treasuries finished higher, as the yield on the 2-year note was flat at 1.11%, the yield on the 10-year note lost 1 basis point 2.30%, and the 30-year bond rate fell 2 bps to 2.95%.

Tomorrow’s economic calendar will bring a plethora of key reads, courtesy of weekly MBA mortgage applications, the ADP’s November employment change report, October personal income and spending, which includes the Fed’s favored inflation gauge of the PCE deflator, the Chicago PMI, and pending home sales. The day will culminate with the afternoon release of the Federal Reserve’s Beige Book—an anecdotal look at national economic activity—used as a tool by the FOMC when it is widely expected to announce a rate hike on December 14.

As noted, “full” employment is at least in sight, housing is recovering, economic growth has improved and inflation is heating up. A December rate hike may remove some uncertainty, but questions will remain as to the path and frequency of rate hikes in 2017 and beyond. We continue to believe the Fed will be able to go slow in normalizing rates, as they have stated they want to do, but signs of rising inflation could force its hand.

Europe mostly higher on U.S. data, Asia mixed

European equities finished mostly higher on the heels of the upbeat economic and earnings data in the U.S., though oil & gas issues were lower with headlines ahead of tomorrow’s OPEC meeting fostering supply change skepticism to put heavy pressure on crude oil prices. Political uncertainty continued to ramp up ahead of this weekend’s key Italian referendum and other political events are nearing to exacerbate the uncertainty.

The European Central Bank has reportedly pledged to step up purchases of Italian government bonds to help calm the markets in the wake of the referendum result.

Financials gained modest ground after yesterday’s drop on the political uncertainty in Italy, while the Bank of England is set to unveil its banking sector stress test results tomorrow. French preliminary Q3 GDP grew 1.1%, matching forecasts, but dipping from the 1.2% expansion in Q2, German consumer price inflation ticked 0.1% higher m/m, in line with estimates, and U.K. figures on consumer credit and mortgage approvals topped projections. The euro was little changed and the British pound gained ground on the U.S. dollar, while bond yields in the region finished mixed.

Stocks in Asia finished mixed as the surprise U.S. election fallout continued to fade, opening the door for the global markets to grapple with uncertainty ahead of tomorrow’s OPEC meeting and this weekend’s referendum in Italy. Japanese securities declined, with the yen choppy in the wake of yesterday’s rebound from a post-U.S. election drop that has come amid the U.S. dollar’s rally. Losses may have been limited by stronger-than-expected reads on Japan’s October household spending and retail sales.

Mainland Chinese stocks nudged higher, continuing a rally to the highest level since January amid optimism that the recent crackdown on the real estate market may vector funds into the stock market, per Bloomberg, but markets in Hong Kong declined, giving back yesterday’s advance that came amid the announcement that December 5 will commence the exchange link between Hong Kong and Shenzhen.

Australian equities dipped, with oil & gas and basic materials issues seeing pressure to overshadow gains in healthcare and financials, while those traded in India rose slightly, and stocks in South Korea finished flat after battling back from early losses as the nation’s President said she is willing to step down after coming under pressure following an influence-peddling scandal.

Similar to the domestic economic docket, tomorrow’s international economic calendar will be busy, with reports slated for release to include industrial production, housing starts and construction orders from Japan, industrial production from South Korea, GDP from India, consumer confidence and housing prices out of the U.K., employment data and retail sales from Germany, CPI and PPI from France, retail sales out of Spain, and CPI from Italy and the Eurozone.

What Happened To The Earnings Recession?

A year ago, profits for companies in the S&P had declined 15% year over year (yoy). Sales were 3% lower. Margins had fallen more than 100 basis points. The consensus believed all of this signaled the start of a recession in the US.

How has that dire prognosis worked out? In a word: terrible. Jobless claims are at more than a 40 year low and retail sales are at an all-time high. The US economy continues to expand.

In the past year, S&P profits have grown 12% yoy. Sales are 2.4% higher. By some measures, profit margins are at new highs. Why were the critics wrong? They confused a collapse in one sector – energy, where sales dropped by 60% – with a general decline in all sectors. Energy was considered the same as financials in 2007-08; events since then show that it is nothing like financials.

Where critics have a valid point is valuation: even excluding energy, the S&P is highly valued. With economic growth of 3-4% (nominal), it will likely take exuberance among investors to propel S&P price appreciation at a significantly faster annual clip.

The chart below was from Barclays at the start of the 2016, who said that big drops in profitability like those last year have coincided with a recession 5 of the last 6 times since 1973 (read further here).

Enlarge any chart by clicking on it.

Margin fall ahead of a recession

How have these dire prognoses for the US worked out? In a word: terrible. Jobless claims are at more than a 40 year low (first chart below) and retail sales are at an all-time high. US demand growth, measured a number of different ways, has been about 3-4% nominal yoy during the past two years (second chart below). There has been no marked deterioration in domestic consumption or employment.

initial claims 12.28.50 PM

PCE

So is the resilience of the US economy in the face of deteriorating sales and profits a surprise? Not at all. We wrote about this at the time saying that there was little in corporate reports to suggest that a recession was imminent (that post is here). Events since then bear this analysis out and provide a lesson in how to objectively read quarterly earnings reports.

Let’s review the latest corporate reports. More than 90% of the S&P 500 has reported their sales and earnings for 3Q16.

Overall sales are 2.4% higher than a year ago. This is the best sales growth since 4Q14 – almost 2 year ago. On a trailing 12-month basis (TTM), sales are just 0.2% higher yoy, but it’s the first annual rise on a TTM-basis in the past 5 quarters.

Overall SPX sales

In the chart above, note that overall S&P sales are still about 2% lower than their peak in 4Q14. Why has sales growth been sluggish?

It’s primarily due to oil prices, which peaked at the end of 2Q14 and then fell 70% before bottoming in February 2016. Energy sector sales fell by 60% between mid-2014 and early 2016 (red line). This has had a substantial impact on overall sales, as energy was one of the largest sectors in the S&P in mid-2014. Materials sales have also fallen, but the sector is very small.

sales energy and mats

If overall S&P sales since 2014 were indicating widespread economic weakness, then we should have expected to see declining sales growth in many sectors, not just in energy and materials. We didn’t.

In the past two years, industrial sector sales are up 6%, discretionary sales are up 14%, health care sales are up 18% and financials sales are up 24%. Outside of energy and materials, only utilities have seen a decline, a loss of a mere 1% (middle column).

Sector sales

Excluding the energy sector, the combined sales of the other sectors in the S&P are back at their prior highs from 2014 and 2015 (blue line). Simply stated: corporate sales never indicated widespread weakness in the economy.

S&P total sales + ex-enegergy

That is not to say that the combined sales outside of the energy sector are strong. Ex-energy sales growth was 5-6% in mid-2014. Over the past three quarters, growth has only been about 2%. While that’s not great growth, it’s also not recessionary.

Yearly sales growth

Why has non-energy sales growth been sluggish?

Companies in the S&P derive about half of their sales from outside of the US. Technology and materials are the sectors most dependent on foreign sales, but even 40% of staples sales come from overseas.

Europe and Asia are the main markets outside of the US. European GDP is growing at around 2.5%. Japan grew 2.2% in 3Q16. Thta’s slower growth than the US, but not dramatically so. Importantly, ex-US growth is better now than it was 2-3 years ago.

EU GDP

But a headwind for ex-US sales growth has been the value of those transactions measured in dollars. When the dollar rises in value, the value of sales earned abroad (in foreign currency) fall. If foreign sales grow 5% but the dollar gains 5% against other currencies, then sales growth will be zero in dollar terms.

That has been a well-established pattern for more than 30 years. The chart below compares changes in the dollar (blue line) with growth in S&P sales (red line). Overtime, the importance of the dollar’s value has grown as the proportion of S&P sales outside of the US has risen.

USD vs SPX sales

The trade-weighted dollar began to rapidly appreciate in July 2014 (3Q14) just as sales on the S&P peaked. By the beginning of 2016, the dollar had appreciated by 25%. With half of the sales of the S&P coming from outside the US, the dollar’s appreciation alone cut S&P sales by more than 10 percentage points. In the chart above, you can see that a similar fall in sales growth occurred in 1998 when the dollar also rapidly appreciated over the course of a year.

dollar chg

It’s not well remembered now, but the heart of the 1990s bull market had a severe earnings recession that lasted for the better part of 1996-98. It dissipated after the affects of the dollar’s appreciation had passed.

eps recession

Importantly, the headwind from the dollar has started to dissipate. In 3Q16, the dollar’s appreciation was only about 2% yoy. Even today, with the rapid rise in the dollar since the presidential election, appreciation is less than 4% yoy. The dollar’s current value is close to where it started the year.

Dollar

In summary, the sales growth for the S&P was 2.4% yoy in 3Q16. Energy continued to be the primary drag on overall sales growth, declining 18% in the past year. Looking ahead, the average price of oil was about $40 in 4Q15 versus the current price of $47. It’s possible energy will soon contribute positively to overall sales growth.

wtic

Let’s now look at earnings.

Overall EPS (GAAP-basis) are 11.5% higher than a year ago. This is the best EPS growth since 3Q14 two years ago. But on a trailing 12-month basis (TTM), EPS are 1.2% lower yoy. TTM EPS are still negative because yoy EPS declined six quarters in a row between 3Q14 and 1Q16.

EPS Q

Given the forgoing discussion on sales growth, it should come as no surprise that corporate profitability peaked right before the rapid fall in energy prices and appreciation in the dollar. In 3Q14, profit margins were 10.1%; that fell to a low of 8% in 4Q15.

overall Op margins

In the chart above, note that margins have now rebounded to 10.0%. That’s right, overall profit margins are right back at their prior highs from 2014. How is this possible?

For most sectors, margins expanded between 3Q14 and 3Q16 (second column). The big outlier was energy. Energy had an outsized affect on overall margins and falsely indicated a high risk of recession.

Sector margins

In summary, the EPS growth for the S&P was 11.5% yoy in 3Q16, the highest quarterly growth in two years. Overall profit margins are back at their former highs from 2014. Nearly all of the interim weakness in profitability was related to weakness in energy. That the other sectors showed continued strength was a very strong indication that corporate results were not indicative of an imminent recession.

margins 1a

Weakness in energy was a very clear outlier since late 2014. The point of excluding energy has not been to imply that actual S&P results are better than they are. By excluding energy companies’ financial results, we can see what the underlying trend for the rest of the S&P is.

Over the past two years, there have been several knocks on the practice of excluding energy from the other sectors. Most of these miss a basic truth: that in the past, large drops in energy sales and profits have falsely signaled economic risks that did not then materialize. We detailed all of these issues in the past (here). Below is a quick recap:

Excluding energy is not “like excluding technology in 2000 or financials in 2007″. Technology and financial stocks were in a bubble in 2000 and 2007, respectively; their market capitalization weighting in the S&P reached an extreme ahead of both of the subsequent bear markets. That was not at all the case for energy in 2014.

The environment since 2014 is nothing like 2006-07 because financial excesses in the banking sector are completely unlike excesses in energy or any other sector. Banks that are excessively leveraged are at risk of failure; when they retrench, lending to the rest of the economy is reduced, creating a drop in investment and consumption and a recession. Banks are a source of systemic risk; other sectors are not.

Lower gas prices do not materially impact other consumer spending. Gas represents only 5% of a typical family’s consumer spending.

Lower oil prices don’t have a notable positive impact on margins for most of the other large sectors. The importance of oil as an input cost is too minor. Note that most facility energy is produced using coal, natural gas, nuclear power and re-newables.

That the drop in energy since 2014 once again has not resulted in an economic recession shows that excluding energy in an analysis of sales and profits was right.

Market Insights 11/28/2016

Trump Rally Pauses

U.S. equities finished lower in their return to action following the Thanksgiving holiday break, as Eurozone political uncertainty has replaced the recent rally on the heels of the surprise U.S. election. Despite a rally in crude oil prices, energy stocks saw some pressure, as investors remain uncertain ahead of the outcome of Wednesday’s OPEC meeting.

Treasuries and gold were higher amid a light economic calendar. Equity news focused on “Cyber Monday” as the markets assimilate data regarding consumer activity during the “Black Friday” weekend.

The Markets…

The Dow Jones Industrial Average fell 54 points (0.3%) to 19,098

The S&P 500 Index lost 12 points (0.5%) to 2,202

The Nasdaq Composite declined 30 points (0.6%) to 5,369

In moderate volume, 852 million shares were traded on the NYSE and 1.6 billion shares changed hands on the Nasdaq

WTI crude oil jumped $1.02 to $47.08 per barrel and wholesale gasoline was up $0.03 at $1.41 per gallon

The Bloomberg gold spot price traded $8.80 higher to $1,192.36 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—decreased 0.2% to 101.34

The retail sector was in focus on “Cyber Monday,” historically one of the busiest online shopping days of the year, with the markets digesting estimates of activity during last week’s “Black Friday” holiday shopping weekend.

According to the National Retail Federation (NRF), although the number of shoppers over the weekend grew, the average amount per shopper spent dropped 3.5% year-over-year to $289.19, amid an environment of heavy markdowns and the continued shift toward e-commerce. The NRF is forecasting a 3.6% y/y increase in spending during the holiday season.

The American consumer continues to present a mixed picture to us. Wages are starting to rise, but caution still seems to permeate much of the consumer landscape. The mix in consumer spending is shifting, as reports show that online sales are rising while traditional department store sales have been relatively tepid, with the resulting price competition creating a tough environment for some retailers.

Regional manufacturing activity jumps to kick off a plethora of key data

The Dallas Fed Manufacturing Index unexpectedly jumped, rising to 10.2 for November, from October’s unrevised -1.5 level, with the Bloomberg forecast calling for an increase to 2.0. A reading above zero denotes expansion in activity. The index came in above zero for the first time since December 2014, and the highest since July 2014.

Treasuries are ticking higher in afternoon action, with the yield on the 2-year note little changed at 1.12%, while the yield on the 10-year note is falling 3 basis points to 2.33% and the 30-year bond rate is dipping 1 bp to 2.99%.

This week’s U.S. economic calendar will likely be scrutinized for evidence that the post-election moves in the markets have room to run. Key reports slated for this week begin with tomorrow’s second look at Q3 GDP, with economists forecasting a slight upward revision to a 3.0% quarter-over-quarter expansion from the 2.9% previously reported, while personal consumption is anticipated to have moved higher to 2.3% from the originally posted 2.1%. Other reports this week include: October personal income and spending, the ISM Manufacturing Index, and the Fed’s Beige Book.

However, the headlining report could be the last look at employment growth before the December 14th Fed monetary policy decision in the form of the November non-farm payroll report. Job growth is expected to remain solid, though the wage component of the release is poised to garner elevated attention as inflation expectations have ramped up in the wake of President-elect Trump’s victory. Average monthly earnings are projected to rise 0.2% month-over-month, marking a ninth-straight monthly gain after rising 0.4% in October to register the highest year-over-year rise since June 2009, per Bloomberg.

As noted previously, stocks slumped in the days leading up to the election, but despite a surprising result, stocks have soared off their post-election night lows. But there is much uncertainty ahead and we expect continued bouts of volatility. “Full” employment is at least in sight, housing is recovering, economic growth has improved and inflation is heating up. As such, the Fed funds futures markets are pointing to a rate hike at the Fed’s final meeting of the year. That may remove some uncertainty, but questions will remain as to the path and frequency of rate hikes in 2017 and beyond. We continue to believe the Fed will be able to go slow in normalizing rates, as they have stated they want to do, but signs of rising inflation could force its hand.

Europe lower as political uncertainty ramps up, Asia mixed to kick off the week

European equities traded lower, with the global markets shifting focus from the surprise Presidential election in the U.S. earlier this month to the plethora of political uncertainty in the region. Financials were dragged down by weakness in the Italian banking sector as a key vote looms on the horizon. December 4th Italy will hold a referendum to reform its constitution in a bid to streamline the government, with a failure possibly paving the way for an Italian exit from the European Union (EU). Other near-term risks to European stocks are heightened by the uncertainty posed by these votes. However, the resulting political uncertainty isn’t sufficient reason to abandon global diversification. We believe having a diversified portfolio can set you up to participate if and when the trends switch.

Oil & gas issues lost ground amid choppiness in crude oil prices as headlines fostered uncertainty regarding the outcome of this week’s meeting between major world oil producers. European Central Bank President Mario Draghi spoke today, warning that a hard U.K. Brexit from the EU could have the largest negative impact on the nation’s economy, while urging Britain to share its Brexit plans with its citizens. He also urged European leaders to not abandon economic and monetary unions and that we need to see what the policies of the new U.S. administration will be in order to assess their effect on interest rates. The euro was little changed and the British pound fell versus the U.S. dollar, while bond yields in the region finished mostly lower.

Stocks in Asia finished mixed as the global markets assess the recent rally that has ensued in the wake of the surprising U.S. election. The energy sector came under pressure amid volatile crude oil prices on uncertainty whether a meeting between major oil producers this week will deliver changes to global oil production. Japanese equities dipped, with some strength in financials being offset by a rebound in the yen versus the U.S. dollar. Stocks in both China and Hong Kong advanced amid optimism regarding the announcement that December 5 will commence the exchange link between Hong Kong and Shenzhen, while rail stocks moved higher as the government approved a $36 billion rail plan for cities around Beijing, per Bloomberg. Also, China reported that industrial profits accelerated in October. Australian securities fell amid the weakness in oil & gas stocks, while basic materials issues gave back a recent rally, while those traded in both South Korea and India ticked higher.

Tomorrow, a slew of reports are slated for release in Japan, including employment data, personal income and consumption, retail sales and trade figures, while other items on the international docket contain trade data from China, import prices from Germany, consumer spending and GDP from France, CPI from Spain and confidence data from the Eurozone.

U.S. Market Weekly Summary – Week Ending 11/25/2016

S&P Posts 1.44% Weekly Gain, Led by Telecommunications, Materials; Health Care Slips. The Standard & Poor’s 500 index rose 1.4% this week as telecommunications and materials stocks led a broad climb that only excluded the health-care sector.

The major market measure closed Friday’s session at 2,213.35, up from 2,181.90 a week ago. This week’s gains came in only about three and a half days versus the usual five-day week, as the market was closed all day Thursday for Thanksgiving, and closed three hours earlier than usual on Friday.

The telecommunications sector posted the biggest percentage gain of the week, up 4.6%. The category has been on the rise in recent weeks as it is expected to benefit from a likely deregulatory push in the US by president-elect Donald Trump’s administration.

Among the telecommunication sector’s gainers this week, AT&T shares rose 4.4%. Among the telecom company’s highlights of the week, it and 21st Century Fox reached an agreement to extend the reach of Fox Networks Group programming across AT&T’s DIRECTV products, including AT&T’s new DIRECTV Now streaming service. Separately, AT&T, DISH Network Corp.’s DISH Network LLC, and WPP agreed to acquire INVIDI Technologies, a provider of addressable advertising platforms, with AT&T holding a controlling interest in the venture.

The materials and energy sectors also climbed this week, boosted by related commodities. In the materials sector, copper prices hit a 16-month high in New York and a 17-month high in London this week on bullish expectations for manufacturing spending under the Trump administration. The sector’s advancers included miner Freeport-McMoRan with a weekly gain of nearly 17%; and stone, sand and gravel supplier Martin Marietta Materials with a weekly climb of 2.6%. Freeport-McMoRan’s gain also came as the company completed a $1.5 billion at-the-market equity offering.

In the energy sector, natural gas hit a three-week high this week as storage data showed an unexpected decline from record-high inventories. Forecasts for cooler temperatures also helped lift natural-gas prices after warmer-than-average weather in recent weeks had weighed on demand expectations. The energy sector’s gainers included Southwestern Energy (SWN), up 8.8% on the week; Range Resources, up 6.6%; Chesapeake Energy, up 11%; and Cabot Oil & Gas (COG), up 4.1%.

The health-care sector, meanwhile, slipped 0.3%, the only sector in the red for the week. Among its decliners, Eli Lilly tumbled 9.8% this week after its solanezumab product designed to treat dementia associated with Alzheimer’s failed to meet its primary endpoint during a phase 3 study. Shares of other companies with Alzheimer’s treatments in their pipelines fell in sympathy, including Biogen , which ended the week down 3.7% from last Friday.

11/25/2016 – Shortend Black Friday Session

Stocks Maintain Records in Shortened Week

U.S. stocks finished the holiday-shortened week higher in an abbreviated session, with the post-election rally continuing to foster records for the Dow, S&P 500 and Nasdaq. The markets focused on retail sector reports of “Black Friday” activity.

Treasury yields paused from a recent rally and the U.S. dollar pared some of a jump. Crude oil prices saw pressure, though gold was higher.

The Markets….

The Dow Jones Industrial Average rose 69 points (0.4%) to 19,152

The S&P 500 Index gained 9 points (0.4%) to 2,213

The Nasdaq Composite advanced 18 points (0.3%) to 5,399

In light volume, 402 million shares were traded on the NYSE and 760 million shares changed hands on the Nasdaq

WTI crude oil dropped $1.47 to $46.49 per barrel and wholesale gasoline was off $0.04 at $1.38 per gallon

The Bloomberg gold spot price traded $0.67 higher to $1,182.33 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—decreased 0.2% to 101.46

Markets were higher for the week, as the DJIA, S&P 500 Index and the Nasdaq Composite all rose 1.5%

Bond yields continue to run, services sector activity dips

The preliminary Markit U.S. Services PMI Index for November dipped to 54.7 from October’s reading of 54.8, where the Bloomberg forecast called for it to remain, with a reading above 50 indicating expansion. Markit said this was the ninth-straight month of expansion, with new business volumes increasing at the strongest pace since November 2015, though job creation remained modest. The release is independent and differs from the Institute for Supply Management’s (ISM) report, as it has less historic value and its index components are weighted differently.

The advance goods trade deficit widened more than expected to $62.0 billion in October, from the downwardly revised $56.5 billion in September, versus projections calling for the deficit to widen to $59.0 billion.

Treasuries finished little changed, with the yield on the 2-year note flat at 1.13% and the yield on the 10-year note rising 2 basis points (bps) to 2.36%, while the 30-year bond rate dipped 1 bp to 3.02%.

Please note: The U.S. markets closed early today following yesterday’s Thanksgiving Day holiday break.

Europe and Asia tick higher to close out the week

European equities finished slightly higher, with the global markets remaining focused on the impact of the surprise U.S. presidential election, while looming elections in the Eurozone continues to garner attention.

Healthcare issues led to the upside, bolstered by the reports that Johnson & Johnson approached Swiss drugmaker Actelion Ltd regarding a takeover. However, oil & gas issues saw pressure, with crude oil prices pulling back from a recent rebound. Preliminary U.K. 3Q GDP came in at a 0.5% pace of expansion, matching estimates, and compared to the 0.7% growth posted in 2Q. On a year-over-year basis, U.K. GDP expanded by 2.3%, in line with forecasts, and an acceleration from the 2.1% growth registered in 2Q. The report suggests the late-June vote to leave the European Union (EU), known as a Brexit, is having a limited impact on economic activity.

The euro and the British pound were higher versus the U.S. dollar, and bond yields in the region finished mixed.

Stocks in Asia finished mostly higher, with the global markets continuing to assess the implications of the U.S. election, which has been accompanied by some stronger-than-expected economic data, to overshadow concerns regarding U.S. trade relations.

Japanese equities extended a winning streak, with the yen choppy but holding onto recent weakness versus the U.S. dollar, while a report showed the nation’s core consumer price inflation dropped for the eighth-straight month. Chinese stocks moved higher with insurers maintaining a recent run amid the backdrop of persistent pressure on the yuan as the U.S. dollar has rallied.

Stocks continue post-election record run

The Dow, S&P 500 and Nasdaq all posted multiple record highs in the Thanksgiving holiday-shortened week, with the global markets continuing to rally following the surprising Presidential election victory for Donald Trump. Most major sectors posted gains, led by the continued jump for basic materials, though healthcare stocks gave back some of a post-election rally. Crude oil prices rebounded from a selloff as of late, while Treasury yields and the U.S. dollar held onto recent surges.

Fed rate hike expectations for December were all but solidified by some upbeat domestic economic data that followed signals from Fed officials in the past couple weeks. Existing home sales unexpectedly rose to near a decade high, durable goods orders jumped, and consumer sentiment surprisingly improved for November, while the minutes from the Federal Open Market Committee’s (FOMC) November meeting showed further evidence of a likely rate hike next month.

This sets the stage for next week’s U.S. economic calendar, which will likely be scrutinized for evidence that the post-election moves in the markets have room to run. Key reports slated for next week include: the first revision to Q3 GDP, October personal income and spending, the ISM Manufacturing Index, and the Fed’s Beige Book. However, the headlining report could be the last look at employment growth before the December 14th Fed monetary policy decision in the form of the November non-farm payroll report. Job growth is expected to remain solid, though the wage component of the release is poised to garner elevated attention as inflation expectations have ramped up in the wake of President-elect Trump’s victory. Average monthly earnings are projected to rise 0.2% month-over-month, marking a ninth-straight monthly gain after rising 0.4% in October to register the highest year-over-year rise since June 2009, per Bloomberg.

As noted previously, stocks slumped in the days leading up to the election, but despite a surprising result, stocks have soared off their post-election night lows. But there is much uncertainty ahead and we expect continued bouts of volatility. “Full” employment is at least in sight, housing is recovering, economic growth has improved and inflation is heating up. As such, the Fed funds futures markets are pointing to a rate hike at the Fed’s final meeting of the year. That may remove some uncertainty, but questions will remain as to the path and frequency of rate hikes in 2017 and beyond. We continue to believe the Fed will be able to go slow in normalizing rates, as they have stated they want to do, but signs of rising inflation could force its hand.

International reports due out next week that deserve a mention include: Australia—building approvals and retail sales. China—industrial profits and Manufacturing and non-Manufacturing PMI Indexes. India—3Q GDP and PMI Manufacturing Index. Japan—household spending, retail sales, industrial production, Q3 capital spending and PMI Manufacturing Index. Eurozone—CPI estimate and Markit’s Manufacturing PMI Index, along with German retail sales and unemployment rate. U.K.—Markit’s Manufacturing PMI Index.

Market Insights 11/23/2016 – Happy Thanksgiving

Markets Mixed Heading into Holiday Break

The U.S. equity markets headed into the Thanksgiving holiday mixed, with the Dow and the S&P 500 tacking on to their record runs, while the Nasdaq took a breather.

The rallies in the U.S. dollar and Treasury yields continued amid a plethora of economic data, highlighted by a jump in durable goods orders.

Crude oil prices ticked lower, showing little reaction to an unexpected decline in the government’s oil inventory report.

The Markets….

The Dow Jones Industrial Average rose 59 points (0.3%) to 19,083

The S&P 500 Index gained 2 points (0.1%) to 2,205

The Nasdaq Composite declined 6 points (0.1%) to 5,381

In moderate volume, 814 million shares were traded on the NYSE and 1.6 billion shares changed hands on the Nasdaq

WTI crude oil ticked $0.07 lower to $47.96 per barrel, wholesale gasoline gained $0.02 to $1.43 per gallon

The Bloomberg gold spot price tumbled $22.74 to $1,189.58 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.6% higher at 101.65

Durable goods orders jump to kick off heavy dose of mostly positive data

October preliminary durable goods orders surged 4.8% month-over-month, compared to Bloomberg’s estimate of a 1.7% gain and September’s upwardly revised 0.4% advance. Ex-transportation, orders rose 1.0% m/m, topping forecasts of a 0.2% rise, and versus September’s favorably revised 0.2% increase. Orders for non-defense capital goods excluding aircraft, considered a proxy for business spending, increased 0.4%, versus projections of a 0.3% increase, and following the negatively revised 1.4% drop in the month prior. The solid m/m gain in the volatile headline figure was led by a jump in orders for aircraft and parts, while orders for manufacturing and computers were also solidly higher to boost the core components of the report.

Weekly initial jobless claims rose by 18,000 to 251,000 last week, slightly above forecasts of an increase to 250,000, as the prior week figure was revised lower by 2,000 to 233,000. The four-week moving average declined by 2,000 to 251,000, while continuing claims jumped by 60,000 to 2,043,000, north of the estimated level of 2,008,000.

The final November University of Michigan Consumer Sentiment Index was revised to 93.8—the highest since May—from the preliminary level of 91.6, where it was expected to remain. The index was up solidly compared to October’s level of 87.2. The expectations and current conditions components both improved m/m. The 1-year inflation outlook remained at October’s 2.4% rate, while the 5-10 year inflation projection rose to 2.6% from 2.4%.

New home sales declined 1.9% m/m in October to an annual rate of 563,000, below forecasts of 590,000 units. The median home price increased 1.9% y/y to $304,500. The supply of new home inventory m/m rose to 5.2 months at the current sales pace. Sales declined m/m in all regions, except for in the West, which rose solidly. Compared to last year, sales in all regions were nicely higher, except for the Northeast, which was down. New home sales are based on contract signings instead of closings.

The MBA Mortgage Application Index rose 5.5% last week, following the previous week’s 9.2% drop. The increase came as a 3.1% drop for the Refinance Index was more than offset by an 18.8% jump in the Purchase Index. The average 30-year mortgage rate jumped 21 basis points to 4.16%.

Rounding out a busy day, the Federal Open Market Committee (FOMC) released the minutes to its November monetary policy meeting, showing what many on the Street were expecting—further evidence of a likely December rate hike. The Committee took note of a steady increase in jobs, as well as a tight labor market that appears to be pushing wage inflation higher. In light of the recent data and events, the Committee said that “most participants expressed a view that it could well become appropriate to raise the target range for the federal funds rate relatively soon.” The FOMC is set to meet again on December 13th and 14th. As noted previously, “full” employment is at least in sight, housing is recovering, economic growth has improved and inflation is heating up. As such, the Fed funds futures markets are pointing to a rate hike at the Fed’s final meeting of the year in December. That may remove some uncertainty, but questions will remain as to the path and frequency of rate hikes in 2017 and beyond.

Treasuries finished lower, as the yield on the 2-year note rose 3 basis points to 1.12%, the yield on the 10-year note advanced 5 bps to 2.36%, and the 30-year bond rate gained 2 bps to 3.02%. Bond yields have added to a recent surge that ensued after President-elect Donald Trump’s surprising victory in the election earlier this month, along with elevated expectations of a December rate hike by the Fed.

Please note: All U.S. markets will be closed tomorrow in observance of the Thanksgiving Day holiday. As well, the markets will trade in abbreviated sessions on Friday, and there are no economic reports scheduled for the remainder of the week.

Europe dips amid festering political uncertainty, Asia ticks higher

European equities finished mostly lower, despite a favorable read on Eurozone business activity, as political uncertainty in the region continued to ramp up ahead of some looming eurozone elections, while U.K. Brexit concerns persisted. Financials gave back some of a recent run that stemmed from the fallout from the surprise election and elevated December rate hike expectations in the U.S. The sector came under pressure amid festering Italian banking concerns and as the European Commission announced changes to its global capital rules. Oil & gas issues ticked higher following some bullish oil inventory reports and basic materials modestly extended a rally. .

Markit’s preliminary Eurozone Composite PMI Index—a gauge of business activity in both the services and manufacturing sectors—improved to 54.1 for November from 53.3 in October, where it was expected to remain. A reading above 50 denotes expansion. The markets are also digesting the U.K. government’s budget, which included an increase in the minimum wage and infrastructure spending, while the U.K. lowered its 2017 economic growth forecast. The euro fell versus the U.S. dollar, and bond yields in the region gained ground, while the British pound overcame early weakness and nudged higher in choppy trading.

The U.K. FTSE 100 Index was flat, France’s CAC-40 Index decreased 0.4%, Germany’s DAX Index declined 0.5%, and Spain’s IBEX 35 Index traded 0.3% lower, while Italy’s FTSE MIB Index and Switzerland’s Swiss Market Index ticked 0.1% higher.

Stocks in Asia finished mostly higher, with the continued rally in resource-related issues buoying the markets, notably Australia’s market, which rose solidly, as the global markets continue to speculate about the impact of the surprise Presidential election victory for Donald Trump.

The markets continued to shrug off a flare-up in concerns about U.S. trade relations after President-elect Trump said that he would withdraw the U.S. from the Trans Pacific Partnership (TPP) agreement. Action outside Australia was more muted, with equities traded in mainland China declining and those in Hong Kong finishing flat, while securities in South Korea and India saw modest advances. Volume was lighter than usual with Japanese markets closed for a holiday.

While the domestic economic calendar will be dormant as a result of the Thanksgiving holiday, international reports will consist of Japan’s Leading Index, GDP and trade data from Germany and Spain, as well as sentiment reports from France.

Market Insights 11/22/2016

Dow Reaches 19,000

The U.S. equity markets added to their recent highs, with the Dow eclipsing the 19,000 mark for the first time in history.

Treasuries and the U.S. dollar were flat, despite a decade high in domestic existing home sales, while crude oil prices gave back some of their recent rebound and gold was lower.

The Markets….

The Dow Jones Industrial Average rose 67 points (0.4%) to 19,024

The S&P 500 Index gained 5 points (0.2%) to 2,203

The Nasdaq Composite increased 19 points (0.3%) to 5,386

In moderately-heavy volume, 900 million shares were traded on the NYSE and 1.7 billion shares changed hands on the Nasdaq

WTI crude oil lost $0.21 to $48.03 per barrel, wholesale gasoline gained $0.01 to $1.41 per gallon

The Bloomberg gold spot price added $4.14 to $1,212.03 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was nearly unchanged at 101.04

Existing home sales jump to highest in almost a decade

Existing-home sales in October rose 2.0% month-over-month to a 5.60 million annual rate—the highest since February 2007—compared to the Bloomberg forecast of a 5.44 million pace. September’s figure was upwardly revised to a 5.49 million annual rate. Compared to last year, sales were 5.9% higher. The median existing-home price was up 6.0% y/y at $232,200. Housing supply came in at a 4.3-month pace at the current sales rate, with supply down 4.3% from a year ago.

All major regions saw monthly and annual sales increases in October. National Association of Realtors (NAR) Chief Economist Lawrence Yun said the wave of sales activity the last two months represents a convincing autumn revival for the housing market. Yun added that the good news is that the tightening labor market is beginning to push up wages and the economy has shown signs of greater expansion. “These two factors and low mortgage rates have kept buyer interest at an elevated so far this fall,” he noted.

The Richmond Fed Manufacturing Activity Index moved back into expansion territory (a reading above zero), rising to 4 for November from the -4 posted in October, versus expectations of a 0 reading.

Treasuries finished nearly unchanged, as the yields on the 2-year and 10-year notes were flat at 1.08% and 2.31%, respectively, while the 30-year bond rate ticked 1 basis point higher to 3.00%.

Due to Thursday’s Thanksgiving holiday market closures, tomorrow’s U.S. economic calendar will be robust as some releases are pulled forward. We will get weekly MBA mortgage applications and jobless claims, along with Markit’s preliminary Manufacturing PMI Index, new home sales and the final November University of Michigan Consumer Sentiment Index. However, the headlining reports will likely be the preliminary October durable goods orders report and the release of the Federal Open Market Committee’s (FOMC) November monetary policy meeting minutes.

Durable goods orders are projected to rise 1.7% m/m, after declining 0.3% in September, and excluding transportation, orders are estimated to increase 0.2%, after ticking 0.1% higher in the month prior. Non-defense capital goods orders excluding aircraft—a considered a proxy for business spending—are expected to grow 0.3% after falling 1.3% in September. Meanwhile, based on recent commentary from FOMC members since its unchanged November monetary policy decision, the details of the discussion are likely to solidify December rate hike expectations.

As noted previously, economic expansion continues at a modest pace, but businesses remain reluctant to invest. We are hopeful that some political certainty could finally move companies to expand their capital expenditures which could be aided by promised regulatory relief, corporate tax reform, a plan to bring back cash held overseas, or a combination thereof. Expectations of a December Fed rate hike have ramped up but questions remain as to the path and frequency of rate hikes in 2017 and beyond. We continue to believe the Fed will be able to go slow in normalizing rates, as they have stated they want to do, but signs of rising inflation could force its hand.

Europe higher as commodity stocks rally, Asia follows record run in U.S.

European equities finished mostly higher, with basic materials leading the way as the U.S. dollar gave back some of a post-election rally yesterday. Oil & gas issues continued to gain ground in the wake of the solid rebound in crude oil prices over the past couple sessions, bolstered by resurfacing optimism of a production cut agreement at a meeting next week between major oil producers.

Financials were also standout winners, extending a post U.S.-election run, despite a pullback in bond yields in the region from a rally as of late. However, political uncertainty in the region continued to ramp up ahead of some looming elections in the Eurozone, while U.K. Brexit concerns persist. In economic news, Switzerland’s October exports fell m/m, while U.K. public sector net borrowing came in below estimates for last month. The euro dipped and British pound fell versus the U.S. dollar.

The U.K. FTSE 100 Index was up 0.6%, France’s CAC-40 Index and Spain’s IBEX 35 Index increased 0.4%, Germany’s DAX Index advanced 0.3%, and Italy’s FTSE MIB Index rallied 1.4%, while Switzerland’s Swiss Market Index dropped 1.4%.

Stocks in Asia finished higher on the heels of the record highs reached in the U.S. yesterday, with the U.S. dollar paring a post-election rally yesterday to help commodity-related issues, while the extension of the rebound in crude oil prices bolstered the energy sector. The markets also shrugged off a flare-up in concerns about U.S. trade relations after President-elect Donald Trump said that he would withdraw the U.S. from the Trans Pacific Partnership (TPP) agreement.

Stocks in Australia increased on the strength in resource-related stocks, while those traded in Japan advanced, extending a rally as of late, with the yen choppy and the market overcoming early pressure that stemmed from a magnitude 7.4 earthquake that hit off the coast of Fukushima, per Bloomberg. Equities in mainland China and Hong Kong saw solid gains, with oil & gas issues leading the way, while markets in India and South Korea gained ground amid the backdrop of fading post U.S.-election posturing in the markets.

The Markit Manufacturing and Services PMI reports from across the globe will dominate tomorrow’s international economic calendar, while Spain will also report industrial orders.

Market Insights 11/21/2016

Oil Bolsters Markets

U.S. equities began the Thanksgiving holiday-shortened week on an up note, led by strength in the energy sector as crude oil prices have rebounded, and as the post-election fallout continues to dwindle.

Amid a dormant economic calendar, the U.S. dollar and Treasury yields were lower, retreating from recent rallies, while gold was higher.

News on the equity front was mixed, headlined by Tyson Foods’ disappointing earnings results, as well as a positive reaction to Facebook’s announced $6.0 billion share buyback plan.

The Markets…

The Dow Jones Industrial Average rose 89 points (0.5%) to 18,957

The S&P 500 Index gained 16 points (0.8%) to 2,198

The Nasdaq Composite increased 47 points (0.9%) to 5,369

In moderate volume, 845 million shares were traded on the NYSE and 1.7 billion shares changed hands on the Nasdaq

WTI crude oil jumped $1.88 higher to $48.24 per barrel, wholesale gasoline gained $0.06 to $1.40 per gallon

The Bloomberg gold spot price added $4.14 to $1,212.03 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.3% lower at 100.96

Economic calendar quiet to begin shortened week

Treasuries finished higher, as the economic calendar was void of any major reports today. The yield on the 2-year note was flat at 1.08%, while the yields on the 10-year note and the 30-year bond dropped by 3 basis point to 2.33% and 3.00%, respectively.

Although this week will be shortened by market closures on Thursday’s Thanksgiving holiday, focus on the fallout from the election and elevated Fed rate hike expectations is likely to continue. As such, the U.S. economic docket is poised to command attention, with the release of key reads on new home sales, durable goods orders, Markit’s preliminary Manufacturing PMI Index, the minutes from the Federal Open Market Committee’s (FOMC) November meeting, and the final University of Michigan Consumer Sentiment Index.

The release of tomorrow’s existing home sales report will get the week’s economic calendar started, with economists projecting a 0.6% month-over-month (m/m) decline to an annual rate of 5.44 million units. As noted previously “full” employment is at least in sight, housing is recovering, economic growth has improved and inflation is heating up. As such, the Fed funds futures markets are pointing to a rate hike at the Fed’s final meeting of the year in December. That may remove some uncertainty, but questions will remain as to the path and frequency of rate hikes in 2017 and beyond. We continue to believe the Fed will be able to go slow in normalizing rates, as they have stated they want to do, but signs of rising inflation could force its hand.

Europe mostly higher, Asia mixed amid continued post-U.S. election settling

European equities finished mostly higher, with oil & gas issues leading the way as crude oil prices extended a rebound. Basic materials were also higher, with the U.S. dollar and Treasury yields retreating from recent rallies as the posturing in the wake of the surprise U.S. election cools. However, political uncertainty in the region ramped up to likely stymie conviction ahead of some looming events in the eurozone, while U.K. Brexit fallout festers.

The euro and British pound gained ground on the U.S. dollar, while bond yields in the region mostly declined, maintaining direction following comments from European Central Bank (ECB) President Mario Draghi. The ECB leader reiterated that the central bank is committed to preserving the very substantial degree of monetary policy accommodation necessary to secure sustained convergence of inflation toward its target of just under 2.0%. Draghi also stressed the need for structural reforms to help unlock a more dynamic expansion of the Eurozone economy.

Stocks in Asia finished mixed with the markets settling after the past two weeks of posturing that stemmed from the surprising U.S. election.

Japanese equities gained ground to extend a recent rally that has be bolstered by a drop in the yen, despite data today that showed the nation’s exports fell more than expected in October. Stocks in China and those traded in Hong Kong finished higher, while Australian listings declined, as strength in oil & gas issues on crude oil’s continued rebound was more than offset by weakness in healthcare and technology stocks. South Korea’s bourse traded lower amid festering political uncertainty, while securities in India dropped sharply, as concerns remain in the wake of the government’s move earlier this month to reform the circulation of its currency notes.

Items in store for tomorrow’s light international economic calendar include: CPI from Hong Kong and public sector net borrowing from the U.K.

U.S. Market Weekly Summary – Week Ending 11/18/2016

S&P 500 Rises 0.8% This Week in Continued Post-Election Climb; Financials, Telecom Lead

The Standard & Poor’s 500 index rose 0.8% this week, extending the market benchmark’s post-election gains, led by a continued rally in the financial sector on expectations for eased regulations.

The index closed the week at 2,181.90, up from last week’s close of 2,164.45. The measure is now up nearly 2% since its close on Nov. 8 before the results of the presidential election showed Republican nominee Donald Trump had unexpectedly won.

Changes expected under the Trump administration include eased regulations for the financial sector and a removal of much of the Affordable Care Act. In turn, the financial sector has been rallying and added 2.2% this week, while the health-care sector was the weakest this week, slipping 1.2%. Health-care stocks, affected by concerns patient volumes would drop under contemplated changes to the health-care law, made up one of just two categories in the red this week; the other was consumer staples, down by just 0.1%.

The financial sector’s top contributors since the election include Bank of America (BAC), which rose 5.2% this week; Wells Fargo (WFC), up 2.1% this week; JP Morgan (JPM), which has gained 1.3% this week; and Citigroup (C), with a 5.0% weekly gain.

The telecommunications sector, which rose 3.0% this week, is also expected to benefit from a likely deregulatory push by the Trump administration. Among the sector’s advancers this week, IDT (IDT) rose 9.9% from a week ago and Frontier Communications (FTR) climbed 7.5% this week.

Among the health-care sector’s hardest-hit stocks, Endologix (ELGX) dropped 25% from a week ago after the Food & Drug Administration has requested the company provide two-year patient follow-up data from a study of its Nellix Endovascular Aneurysm Sealing System. Canaccord Genuity downgraded its investment rating on the stock to hold from buy due to the setback.