This week saw a V shaped market as declines early in the week were reversed with a sharp increase following the Federal Reserve’s minutes on Wednesday.  The language that the Federal Reserve will keep short term rates near zero “for a considerable time” was not removed as many had predicted.  The Fed noted the improving US economy and low inflation but also added that it was “patient” about raising rates and pretty much ruled out that such a rate hike would come in the first quarter of 2015.

In particular this week:

• The Federal Reserve reported that US industrial production rose in Nomvember by 1.3% from October.  Capacity utilization increased to 80.1% from 79.4% in October.  Both of these were much more than expected and may indicate the Fed’s willingness to start boosting short term rates next year.
• The Commerce Department reported that US housing starts declined a seasonally adjusted 1.6% in Novmember.  This represents 1.028 million units and the number has remained above 1 million for three months in a row.  Single family home starts actually declined in November after hitting a post recession high in October.
• The Labor Department reported that the consumer price index fell a seasonally adjusted 0.3% in November, its biggest drop in six years, mainly due to falling energy.  Excluding volatile food and energy prices rose 0.1%.  From a year ago conumer prices rise 1.3% and core prices rose 1.7%.
• The Labor Deparment also reported first time claims for unemployment fell in the previous week by 6,000 to 289,000 better than expectations.  The four week moving average of claims also fell 750 to 298,750.