Stocks ended an otherwise unpleasant January with strong rally Friday. For the week International stocks outperformed U.S. stocks and large company stocks outperformed small company stocks. Markets were buoyed on Friday by Japan’s announcement of negative interest rates and increased asset purchases. Perversely, markets were also encouraged Friday by the weak 4th quarter GDP report which increased hopes for a delay in further Fed rate increases or possibly a reversal. Similarly the markets shrugged off the weak December durable goods orders. On the positive side first time claims for unemployment fell. On the negative side with 40% of S&P 500 companies reporting Q4 earnings, so far earnings have declined 5.8%. Treasury prices rose as yields declined and commodity prices rose. The dollar was mostly unchanged. Oil rallied on speculation of a production cut as Russia indicated they would be willing to discuss production cuts with OPEC. Frankly, I believe the likelihood of a deal is small at this point.
Economic news was mixed this week:
- The Commerce Department reported
- Sales of new homes rose a seasonally adjusted 10.8% in December. For the year of 2015, 501,000 new homes were sold making 2015 the best year since 776,000 homes were sold in 2007.
- Sales of durable goods fell 5.1% in December, much worse than expected. Durable goods include airliners, computers and other products designed to last at least 3 years. For the year durable goods sales were down 3.5%, the first decline since 2009.
- Fourth quarter gross domestic product grew at a 0.7% annual pace, less than expected. This was attributed to a slowdown in manufacturing. For the year the US grew at a 2.4% annual rate.
- The National Association of Realtors reported that pending home sales rose 0.1% in December.
- The Energy Information Association reported that U.S. Inventories of crude oil rose 8.4 million barrels in the prior week to 494.9 million barrels. This is the highest level since weekly data started in 1982. Based on the last monthly data inventories are the highest since 1930.
- The Labor Department reported
- First time claims for unemployment in the prior week fell 16,000 to a seasonally adjusted 278,000. The four week moving average of claims also fell 2,250 to 283,000.
- Employment costs rose 0.6% in the fourth quarter. For the year total compensation costs (wages and benefits) rose 2.1%. This was more than the rate of inflation but not as large as hoped to have a significant impact on consumer spending.
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.