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In the Markets – Week-Ending January 6th

by Peter J. Creedon

Newsletter: In the Markets – Week-Ending January 6th
Crystal Brook Advisors
We Make Financial Planning Crystal Clear

United States: Nonfarm payrolls rose by a seasonally adjusted 156,000 in December from the prior month, a slowdown from November’s more robust gain, the Labor Department said Friday. For all of 2016, the economy added just under 2.2 million jobs, the smallest gain for a calendar year since 2011. (1)  The unemployment rate ticked up to 4.7% last month, but remains historically low. Wages showed new signs of firming, rising at the best annual rate since 2009, a sign that more than seven years into a slow-growing expansion labor-market conditions are finally tightening enough to reap payoffs for workers. (1) 

Europe: The euro in December reached its lowest level against the dollar since early 2003, falling to just $1.0352. It has weakened 3.1% against the greenback this year and is down 8.8% from its peak in May. It ended the year at $1.0520. (2)  “A weaker euro is in the interest of the euro-area economy, and pressing down on shorter-dated yields is a good way to [keep the euro weak] at a time when the Fed is moving in the other direction,” said Chris Scicluna, head of economic research at Daiwa Capital Markets Europe. (2)  A combination of a weak euro, decent economic growth and a stronger performance for banks could be just what European investors have wanted for years — at least for those bold enough to remain in the market despite political turbulence. (2)

Asia: China strengthened the yuan reference rate that determines the range within which the currency can trade by 0.9%, the most since Beijing abandoned the US dollar peg in favor of a crawling peg in July 2005, agencies reported. (3)  The yuan’s recovery marks a victory for China’s policymakers who have been pouring foreign exchange reserves into the market to prop up the currency and prevent a destabilizing collapse. Many currency bears betting that a slowing Chinese economy means a further devaluation is inevitable have been caught on the wrong side of the stronger currency, Bloomberg said. Short sellers needing to roll over their bets were hit by soaring borrowing costs: the odds of the onshore yuan breaching the psychologically important support of 7 yuan per US dollar slumped to 36% from 65% two days ago based on options prices, the news agency said. (3)

Latin America: U.S. prosecutors filed new criminal charges against a Venezuelan man living in the United States who they allege bribed officials at Venezuela’s state-run oil company, PDVSA. (4)  The defendant in the latest case, Juan Jose Hernandez Comerma, is accused of carrying out bribes between at least 2008 and 2012 for his business partner, Abraham Jose Shiera Bastidas, who owned several U.S.-based energy companies and pled guilty to bribery charges in March. (4)  The allegations come against the backdrop of Venezuela’s spiraling economy that’s running out of money. Venezuela badly depends on selling its vast oil reserves to survive. It’s been crippled by sky-high inflation under the socialist regime of President Nicolas Maduro. (4)

Monday 1/2
  • Euro zone stocks opened 2017 by climbing to their highest in more than a year on Monday after data showed manufacturers in the currency bloc ramped up activity at the fastest pace in more than five years. (5)
  • The euro zone’s blue-chip Euro STOXX 50 index rose half a percent to its highest since December 2015 after the purchasing managers’ index (PMI) for factories in the currency bloc came in at 54.9 – well above the 50 mark that separates growth from contraction. (5)
Tuesday 1/3
  • U.S. stocks on Tuesday started the first trading day of 2017 on a positive note but closed off of intraday highs as oil prices turned sharply lower, puncturing some of the initial exuberance that underpinned an early rally in the Dow Jones Industrial Average. (6)
  • The Dow DJIA, +0.32%  rose 119.16 points, or 0.6%, to close at 19,881.76. The blue-chip index had gained as much as 176 points at one point during the session. Nike Inc. NKE, -0.02%  and Verizon Communications Inc. VZ, +0.07%  were among the biggest gainers while Travelers Cos. Inc. TRV, +0.01% and McDonald’s Corp. MCD, -0.07% were notable laggards. (6)
Wednesday 1/4
  • U.S. stocks closed higher on Wednesday, with consumer discretionary and materials leading, as investors digested the Federal Reserve‘s December meeting minutes. (7)
  • The Dow Jones industrial average added about 60 points, with IBM contributing the most gains, putting it within 100 points of 20,000. The Nasdaq composite advanced about 0.9 percent. (7)
Thursday 1/5
  • Macy’s (M) said it expects to layoff about 3,900 workers as a result of the upcoming store closures, and another 6,200 jobs will be cut as the company works to streamline its management team, according to a press release. (4)

Friday 1/6

  • The Dow Jones Industrial Average rose to within one point of 20000, as a solid jobs report added the latest fuel to stocks’ postelection rally. (1)
  • The index repeatedly approached the mark Friday, rising as high as 19999.63 before paring gains. The S&P 500 and Nasdaq Composite notched fresh records after the Labor Department said December job growth slowed from the previous month, but wages posted their biggest annual gain in more than seven years. (1)

Market Close

  • The Dow Jones Industrial Average gained 65 points, or 0.3%, to 19964. The S&P 500 climbed 0.4% and the Nasdaq Composite added 0.6%. (1)

Contributor: Thomas Padula

Sources:  (1),Wall Street Journal (2),Fox Business  (3),Asia Times (4),CNN Money (5),Reutersl (6), MarketWatch (7) CNBC