Newsletter: In the Markets – Week-Ending February 5
Crystal Brook Advisors
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United States: U.S. companies added 151,000 workers. Average hourly wages rose by 0.5%, and the unemployment rate fell to 4.9% for the first time since February 2008.
Europe: The European Commission cut its prediction for 2016 growth in the 19-nation bloc to 1.7 percent from 1.8 percent and said the largest economies of Germany, France and Italy will all perform worse than predicted just three months ago.
Asia: The Shanghai Composite Index slumped 23 percent last month as economic growth concerns and policy missteps including a bungled attempt to introduce market circuit-breakers rattled investor confidence. Investors also sold Chinese stocks as expectations of a further depreciation in the yuan made domestic assets unattractive. (1)
• The ISM manufacturing index edged up ever-so-slightly in January, but at 48.2 continues to signal weakness. Employment and inventories are firmly negative, but new orders suggest some modest relief ahead .(2)
• Treasury prices fell, pushing yields slightly higher on Monday, even as oil futures saw renewed pressure.
• The dollar weakened against the euro and pound Monday as a selloff in crude oil resumed after four sessions of gains(3).
• Home prices rose solidly in September, with both the S&P/Case-Shiller U.S. National Index and the Composite 20-City Index posting strong gains on the month. National home prices are up 4.9 percent year over year.(4)
• WTI oil settled under $30 a barrel, with a plunge in gasoline leading the losses in the energy futures market .(5)
• The deficit is projected to grow from $544 billion, or 2.9 percent of GDP, in FY 2016 to $1.4 trillion, or 4.9 percent of GDP, by 2026 under current law .(6)
• The ISM non-manufacturing index came in weaker than expected in January. While the drop indicates a broadening slowdown in the economy, growth remains stronger than readings on industrial activity imply.(7)
• Losses in the Nikkei Stock Average deepened to 3.2% by the close(8).
• Reflecting a substantial slowdown in output growth and a sizable gain in hours worked, nonfarm productivity dropped at a 3.0 percent annualized rate in Q4 2015. Concurrently, Unit Labor Costs jumped on the quarter.(9)
• Gold futures rallied Wednesday to their highest settlement level in more than 3 months as a drop in the U.S. ISM services index weighed on the dollar, lifting the yellow metal’s investment appeal(10).
• For 2016, monthly job gains expected to slow and labor costs to rise. Today’s gain of 151,000 jobs and rising unit labor costs reported earlier this week are consistent with this theme.(11)
U.S. stocks sold off on Friday to end the week with steep losses after two straight weeks of gains. Technology shares saw the biggest losses this week with the tech heavy Nasdaq Composite COMP, -3.25% closing down 146.41 points, or 3.3%, at 4,363.14 on Friday and recording a 5.4% weekly loss. On Friday, investors grappled with a jobs report that had a weak headline number, but sharp improvements in wage growth and participation rate. The S&P 500 SPX, -1.85% closed 35.40 points, or 1.9%, lower at 1,880.05 and ended the week 3.1% lower. The Dow Jones Industrial AverageDJIA, -1.29% dropped 211.82 points, or 1.3%, to 16,204.83 and was down 1.6% over the week.(12)
Contributor: Felipe Vargas-Zúñiga
(1) Source: Bloomberg
(2) Source: Institute for Supply Management and Wells Fargo Securities, LLC
(3) Source: MarketWatch
(4) Source: S&P, FHFA, National Association of Realtors and Wells Fargo Securities, LLC
(5) Source: MarketWatch
(6) Source: U.S. Department of the Treasury, Congressional Budget Office and Wells Fargo Securities, LLC
(7) Source: U.S. Department of Labor, Institute for Supply Management and Wells Fargo Securities, LLC
(8) Source: MarketWatch
(9) Source: U.S. Department of Labor and Wells Fargo Securities, LLC
(10) Source: MarketWatch
(11) Source: U.S. Department of Labor and Wells Fargo Securities, LLC
(12) Source: Marketwatch