The Markets
Domestic equities gave back last week's gains and then some. The Dow once again fell below the 12,000 mark but managed to remain the only domestic index in positive territory for the year, while the tech-heavy Nasdaq was the hardest hit. Meanwhile, investors once again fled to U.S. Treasuries, pushing the 10-year yield down to a level last seen in late September, while the euro dropped briefly below $1.30.
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Last Week's Headlines
- Noting that the economy has been "expanding moderately," the Federal Reserve Open Market Committee gave no indication that additional quantitative easing measures are forthcoming. However, it will continue to replace short-term bond holdings with longer maturities and reinvest the proceeds of its portfolio of agency and mortgage-backed securities. It also kept the fed funds rate steady at 0.25%, marking the third anniversary of record low rates.
- The Commerce Department said that though the 0.2% growth in November's retail sales was slower than the 0.6% and 1.3% gains seen during the previous two months, sales were still 6.7% higher than a year ago. The biggest monthly increases were in electronics and appliances (2.1%) and sales by nonstore retailers (1.5%).
- Declining energy costs for the second month in a row helped keep consumer inflation flat in November, the Bureau of Labor Statistics said. That put inflation over the past 12 months at 3.4%, a more moderate pace than the 3.9% annual rate seen in June. Meanwhile, inflation at the wholesale level rose 0.3%, led by a 3.8% increase in raw materials. That put year-over-year inflation at 5.7%, the smallest annual increase since March.
- A parts shortage caused by flooding in Thailand contributed to a 3.4% drop in auto manufacturing, which in turn helped cut overall industrial production by 0.2% in November, according to the Federal Reserve. However, industrial production was still 3.7% higher than a year ago.
- The Securities and Exchange Commission filed civil charges against six former executives of Fannie Mae and Freddie Mac, accusing them of deliberately misleading the public about the extent of the mortgage giants' exposure to risky subprime mortgages prior to the 2008 financial crisis.
Eye on the Week Ahead
Housing data will trickle in throughout the week, while the final number for third-quarter economic growth is due Thursday. And a certain gentleman in red is expected to make an appearance on Sunday.
Key dates and data releases: housing starts (12/20); home resales (12/21); final Q3 gross domestic product (12/22); durable goods orders, personal income/spending, new home sales (12/23).
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Data sources: Includes data provided by Brounes & Associates. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results. Equities data reflect price change, not total return.
The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indexes listed are unmanaged and are not available for direct investment.
