Both the S&P 500 and Nasdaq ended the week slightly lower this past week. Concerns over China seizing a U.S. submersible research vehicle weighed on the markets Friday. The Federal Reserve raised short term interest rates 0.25% which was widely expected. Expectations for three more hikes next year were slightly more than expectations. However, the FED predicted four hikes in 2016 and we only got one. Intermediate and short term treasury rates rose sharply (and prices fell sharply), as did the dollar against a basket of foreign currencies. The 10-year Treasury bond yielded 2.6% at weeks end up from 1.85% before the election. The consumer price index is trending closer to the Fed’s goal of 2%. Retail sales rose less than expected in November after strong gains in September and October. Japan this week became the largest foreign owner of U.S. Treasury bonds. Both Japan and China have been sellers of U.S. debt. However, China has sold far more as it tries to defend the value of its currency. While China has been accused by the Trump administration of being a currency manipulator, essentially keeping its currency week to help exports, China has been doing the opposite in the past year, trying to keep the value of its currency from falling by selling U.S. Treasury bonds and buying its currency. Crude oil finished the week higher.
In the numbers this week:
- The German Destatis statistics office reported that manufacturing orders increase 4.9% in October, the strongest monthly gain in two years.
- The Commerce Department reported
- Retail sales rose a seasonally adjusted 0.1% in November following robust gains in September and October.
- Housing starts fell 18.7% in November to a seasonally adjusted 1.09-Million-unit pace. Permits for new construction fell 4.7% to a 1.201 million-unit-pace. These numbers follow a very strong October which was the strongest month since July 2007. Single family housing starts fell only 4.1% with a large 45.1% drop in multifamily starts. Housing starts tend to be very volatile from month to month.
- The Federal Reserve reported that industrial production fell 0.4% in November. Most of the decline was due to motor vehicles and parts. Utilities also fell 4.4% due to warmer than normal weather. (Where has that gone!)
- This week we are including the Energy Information Administration weekly report rather than quoting selected numbers here. For those that are interested, this should provide a more complete picture of the U.S. energy situation.
- Baker Hughes reported that oil drilling rigs rose by 12 to 510. Gas drilling rigs rose 1 to 126.
- The Labor Department reported:
- Initial claims for unemployment fell 4,000 to a seasonally adjusted 254,000. The four week moving average of claims rose 5,250 to 257,750.
- Consumer prices rose a seasonally adjusted 0.2% in November, the fourth straight monthly increase. Rent, gasoline and used car prices rose while groceries and clothing prices fell. Core prices (excluding volatile food and energy) also rose 0.2%. From a year ago, overall prices rose 1.7% and core prices rose 2.0%.
Please call us if you have any questions.
Loren C. Rex, CFP®, AIF®, MA 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.