Major stock indices ended the week lower on strong economic data and bets that the FED could delay any further rate cuts until October. Bonds also sold off as yields rose with the 30-year treasury hitting 5% intraday on Friday. Strong services purchasing manager’s indices and stronger than expected job gains and pay increases delayed the FED’s next expected rate cut until October.
Earnings season starts this week and will likely drive the direction of individual stocks.
Treasury bond yields were mixed with the 30-year bond yield at 4.997% and the 10-Year note at 4.760%. Freddie Mac reported that the average 30-year mortgage rate rose to 6.93%, the highest since July. Crude oil rose to $76.76 a barrel and natural gas rose to $3.386 per MMBTUs. The U.S. dollar index rose to 109.65 and gold rose to $2718.30 an ounce.
In economic reports this week:
- S&P Global released its services purchasing manager’s services indices for December. Keep in mind that anything over 50 represents expansion and anything under 50 represents contraction.
- US rose from 56.1 to 56.8.
- China rose from 51.5 to 52.2.
- Japan rose from 50.5 to 50.9.
- Eurozone rose from 49.5 to 51.6.
- Canada fell from 51.2 to 48.2.
- The Commerce Department reported:
- The Labor department reported:
- For November there were:
- 8.1MM job openings.
- 5.3MM hires.
- 5.1MM separations.
- Openings, hires, and total separations were little changed in November.
- Of the 5.1MM separations 3.1MM were quits which was down 218,000 from October.
- The U.S. created 256,000 jobs in December.
- The unemployment rate fell from 4.2% to 4.1%.
- Average hourly earnings rose 0.3% and was up 3.9% from a year ago.
- The average work week was unchanged at 34.3 hours.
- Seasonally adjusted first-time claims for unemployment were 201,000, a decrease of 10,000 from the previous week to an 11-month low.
- The 4-week moving average of claims, designed to smooth out volatility, was 213,000 a decrease of 10,250 from the previous week.
- For the full unemployment report go here: https://www.dol.gov/ui/data.pdf .
- For November there were:
- The EIA weekly oil report is here: http://ir.eia.gov/wps91wpsrsummary.pdf . Also, the EIA reported in the prior week:
- Field production of crude oil fell from 13.573MM BPD to 13.563MM BPD.
- Natural gas storage fell 40BN cubic feet and was about at its highest level during the past five years at this time of year.
- Baker Hughes reported the number of oil rigs fell 2 to 480 and the number of natural gas fell 3 to 100.
Please call us if you have any questions.
Loren Rex – Emeritus
Erik A Smith, AIF® – President & C.E.O.
These are the opinions of Loren Rex and Erik Smith and are not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice. The Indices mentioned are unmanaged and cannot be invested into directly. The Dow Jones Industrial Average, Dow Jones, or simply the Dow, is a stock market index of 30 prominent companies listed on stock exchanges in the United States. The DJIA is one of the oldest and most commonly followed equity indexes. The Nasdaq Composite is a stock market index that includes almost all stocks listed on the Nasdaq stock exchange (more than 2500 stocks).
Sources:
https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=WCRFPUS2&f=W
https://ir.eia.gov/ngs/ngs.html
https://www.freddiemac.com/pmms
https://www.wsj.com/market-data?mod=nav_top_subsection
https://bakerhughesrigcount.gcs-web.com/na-rig-count