Stock prices and commodities dipped to multi-year lows by the middle of the week before rebounding by week’s end. Large company stocks outperformed small company stocks and developed country stocks outperformed emerging market stocks. Markets were encouraged by European Central Bank head Mario Draghi’s comments that there are no limits to the stimulus if needed to fight deflation and a slowdown in the European economy. The market’s attention will be focused on 4th quarter corporate earnings in the coming weeks. With 15% of the S&P 500 companies reporting earnings so far, earnings are running 6% below Q3. If this continues, this will be three consecutive quarters of earnings decline.
Economic news was mixed this week:
- The Commerce Department reported an unexpected decline of a seasonally adjusted 2.5% in housing starts in December. Both single and multi-family housing starts declined. Building permits, a measure of future building activity also fell 3.9%. Economists had been expecting an increase due to the unseasonably mild December weather. Keep in mind that November saw a double digit increase in housing activity.
- Markit’s Flash purchasing managers index (a preliminary reading composing about 85 to 90 percent of manufacturers) rose to 52.7 in January from 51.2 in December, reflecting an encouraging acceleration in manufacturing activity. Also encouraging is that inventories fell.
- The National Association of Realtors reported that existing home sales rose 14.7% in December making 2015 the strongest year for existing home sales since 2006. The NAR chief economist, Lawrence Yun is predicting an increase of only 1% for 2016 due to tight supply, rising prices and rising interest rates. The average median home price rose 7.6% in 2015.
- The Energy Information Administration reported that U.S. crude inventories rose 3.98 million barrels last week, more than expected.
- Baker Hughes reported that total active U.S. oil and gas drilling rigs were 637. This is a decrease of 996 from a year ago.
- The Labor Department reported
- Consumer prices fell a seasonally adjusted 0.1% in December and are up just 0.7% from a year prior. Excluding the volatile food and energy categories consumer prices rose 0.1%, the smallest increase since August.
- Initial jobless claims rose 10,000 in the prior week to 293,000.
Please call us if you have any questions.
Loren C. Rex, CFP®, AIF® Erik Smith
Generations Financial Planning & Wealth Management 269-441-4143
77 E. Michigan Ave, Suite 140
Battle Creek, MI 49017
Carrie Fuce, Assistant 269-441-4091
Toll Free: 800-513-8180
Visit our Website: www.genfinplan.com
Registered Representative of and securities offered through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Cambridge and Generations Financial Planning & Wealth Management are separate companies and are not affiliated.
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.