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In the Markets – Week-Ending December 2nd

by Peter J. Creedon

Newsletter: In the Markets – Week-Ending December 2nd
Crystal Brook Advisors
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United States: Following a surge in the third quarter in private nonresidential construction, the pace of spending slowed to start Q4. Spending on residential construction showed some signs of strengthening in the fourth quarter. (1) The S&P CoreLogic Case-Shiller U.S. National Home Price Index rose 0.8 percent in September, pushing the index above its July 2006 peak. The national home price index has risen 5.5 percent over the past year. (1) The Conference Board’s measure of consumer confidence rose 6.3 points to 107.1 and is back at levels that existed prior to the Great Recession. Confidence typically gets a bounce following a presidential election. (1) Prices for gasoline at the pump could climb to levels not seen since the summer driving season, thanks to OPEC’s agreement to curb crude production. (2)

Europe: The European Central Bank is expected to announce a six-month extension to its quantitative easing program next week, according to a majority of economists polled by Reuters, who also expect the bank to keep the size of its monthly asset purchases unchanged. ECB President Mario Draghi said on Wednesday the bank will look at a combination of policy tools when it meets on Dec. 8 and that ultra-easy monetary policy has given governments in the region time for reforms. Those efforts need to be stepped up, he said. (7) If the government loses a Dec. 4 referendum on constitutional reform it will be harder for Italy’s struggling banks to recapitalize, Economy Minister Pier Carlo Padoan said on Thursday. Padoan told state television RAI that Italy’s banking system was solid, but said there were eight banks that were in a delicate position. One of those lenders, Monte dei Paschi di Siena (BMPS.MI), is looking to raise 5 billion euros ($5.3 billion) by year-end to plug a capital shortfall. (7)

Asia: Multinational companies are suddenly finding themselves in the crosshairs, as China dials back its effort to turn the yuan into a global currency, alarmed that it has accelerated the flight of capital from its shores. (3) Global stocks retreated as a fall in commodity prices, upcoming political tests in Europe and concerns about the pace of a recent rally on Wall Street combined to keep investors cautious. (3) Japan’s benchmark index rose more than 1 percent on Thursday as regional manufacturing surveys led by China beat expectations and on upbeat views a day after OPEC reached its first deal since 2008 to cut oil production. The Nikkei 225 closed 1.12 percent, or 204.64 points, at 18,513.12, led by energy stocks such as Inpex, which was up 9.95 percent and Japan Petroleum Exploration, which jumped 12.2 percent. A weaker yen helped as well. The yen traded around 114.12 against the greenback as of 2:11 pm HK/SIN, compared to levels as low as 112 earlier this week. (4)

Latin America: Latin American stocks and currencies largely rose on Wednesday, with a rally in crude prices and shares of Brazilian state-controlled oil company Petrobras saw their biggest daily gain over eight months. Shares of Petróleo Brasileiro SA, as the company is formally known, jumped 9.14 percent, by far the biggest gainer in Brazil’s benchmark Bovespa stock index. The move came as oil futures soared more than 10 percent after some of the world’s largest oil producers agreed to curb oil output for the first time since 2008. Mexico’s peso firmed slightly, edging up 0.19 percent to close at 20.585 per greenback while Colombia’s peso gained nearly 3 percent. Both countries are oil exporters. Investors also saw Brazil’s currency, the real, gain slightly after the country’s central bank rate cut interest rates by 25 basis points on Wednesday, extending an easing cycle despite a deepening recession that could extend into its third year. (7)

Monday 11/28
  • U.S. stocks closed lower on Monday as investors found few reasons to keep pushing shares higher following an extended rally that took major indexes to a string of records and lifted major indexes for three straight weeks. (6)
  • The S&P 500 dropped 11.63 points, or 0.5 percent, to finish at 2,201.72. Utilities and telecom, which are viewed as defensive groups, were among the biggest outperformers of the day. The financial sector was the biggest decliner, off 1.4 percent, with Bank of America Corp.(BAC) falling 2.7 percent. The Dow and S&P both snapped four-day win streaks. (6)
Tuesday 11/29
  • Stocks on Wall Street closed slightly higher on Tuesday, given a lift by health care companies like the UnitedHealth Group, which helped outweigh steep declines in energy companies. (5)
  • Tiffany jumped after it reported better quarterly results than analysts expected. (5)
  • The Dow Jones industrial average rose 23.70 points, or 0.1 percent, to 19,121.60. The Standard & Poor’s 500-stock index rose 2.94 points, or 0.1 percent, to 2,204.66, and the Nasdaq composite index rose 11.11 points, or 0.2 percent, to 5,379.92. (5)
Wednesday 11/30
  • Oil prices CLF7, -1.25%  jumped by more than 9 percent Wednesday to finish at their highest level in more than a month after the Organization of the Petroleum Exporting Countries said it would cut back its members’ production by 1.2 million barrels a day to target a ceiling of 32.5 million barrels a day. Key oil producers outside of OPEC have also agreed to ease back output by another 600,000 a day. (2)
Thursday 12/1
  • European markets closed lower on Thursday as investors eyed political developments in Italy and digested the oil-producing cartel OPEC’s announcement to cut oil production. (4)
  • Global stocks retreated as a fall in commodity prices, upcoming political tests in Europe and concerns about the pace of a recent rally on Wall Street combined to keep investors cautious. (3)
Friday 12/2
  • The Dow Jones industrial average lost 15 points, or 0.1 percent, to 19,176 as of 10:55 a.m. Eastern time. Goldman Sachs, which closed at a nine-year high Thursday, was responsible for the entire loss as it fell $2.80, or 1.2 percent, to $223.83. The Standard & Poor’s 500 index added 4 points, or 0.2 percent, to 2,195. The Nasdaq composite edged up 7 points, or 0.1 percent, to 5,258. (8)

Market Close

Market Close: Stocks are mostly higher Friday thanks to gains for companies that pay large dividends. Real estate and phone companies are rising. Banks are slipping after a huge rally over the last few weeks. Bond prices rose after a string of steep declines, sending yields lower. The Dow Jones industrial average, which closed at a record high a day ago, is down slightly. (8)

Contributor: Matthew Scheivert

Sources:  (1), Wells Fargo Securities Economic Group (2), Marketwatch (3),The Wall Street Journal (4), CNBC (5), The New York Times (6), NASDAQ (7), Reuters (8) Newser