Newsletter: In the Markets – Week-Ending December 18
Crystal Brook Advisors
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United States: The Federal Reserve raised its key interest rate on Wednesday from a range of 0% to 0.25% to a range of 0.25% to 0.5%. Major US stock markets have demonstrated negative dynamics this week. This was caused by the fall in prices for “black gold” against the background of the reluctance of OPEC to introduce new production quotas.
Europe: European stocks sank Friday, with a further rout in oil prices knocking sentiment over and driving the benchmark index to its largest weekly loss since August.(1)
Asia: Chinese trade balance data felt pressure, since it was worse than analysts’ expectations. The dollar weakened against the yen Friday after the Bank of Japan surprised investors by unveiling a new program of exchange-traded fund purchases that the bank said would supplement its existing monetary easing measures.(2)
• Benchmarks ended in the red on Friday dragged down by decline in energy shares due to further slump in oil prices.
• The implied volatility on the S&P 500 as measured by the CBOE Volatility index reversed earlier gains and fell 8% to 22, retreating from two-month highs reached intraday.(3)
• The CPI in November was unchanged, but picked up on a year-ago basis. Stronger core inflation supports Fed liftoff, although recent weakness in commodity prices supports a shallow path of future rate increases.(4)
• The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index fell one point in December, reaching a level of 61.(5)
• Foreigners recorded their largest monthly net sales of long-term Treasuries in history in October, likely due to expectations of Fed policy tightening. The total net outflow of long-term securities amounted to $16.6B.(6)
• The Fed’s interest rate announcement from a range of 0% to 0.25% to a range of 0.25% to 0.5%.
• Industrial production fell 0.6 percent in November, a larger decline than had been expected and it follows a downward revision to last month’s data.(7)
• Billings for design services fell in November, marking the third contraction this year.(8)
• Today the FOMC raised the fed funds target rate and will make further adjustments depending on the path of incoming data.(9)
• Fulfilling one of his most important campaign promises, the Macri administration unified the exchange rate system after four years of capital controls implemented by the Kirchner administration.(10)
• Loan performance continues to improve with noncurrent loan balances declining for the 22nd consecutive quarter.(11)
• The S&P 500 is down about 20 points, after Thursday’s 31-point selloff.(12)
• Oil futures hover around $35 a barrel, lowest level in nearly 7 years.(13)
• European shares fell as investors turned their attention back to global growth prospects, after the Federal Reserve’s interest rate move helped the Stoxx Europe 600 Index to its biggest three-day advance since August.(14)
U.S. stocks sold off sharply on Friday, with the main indexes ending the week lower. The selloff was largely blamed on continued weakness in the oil market as well as volatility due to options-expiration day. Today marked the simultaneous expiration of individual stock and index futures and options. The Dow Jones Industrial Average DJIA, -2.10% dropped 368.59 points or 2.1% to 17,128.39, its largest one-day drop since Sept 1. The blue-chip index booked a 0.8% loss over the week. The S&P 500 SPX, -1.78% fell 36.41 points or 1.8% to 2,005.46 and ended the week 0.3% lower. The Nasdaq Composite COMP, -1.59% ended the day down 79.47 points or 1.6%, at 4,923.08 and fell 0.2% for the week.
Contributors: Felipe Vargas-Zúñiga
(4)Source: U.S. Department of Labor and Wells Fargo Securities, LLC
(5)Source: National Association of Homebuilders and Wells Fargo Securities, LLC
(6)Source: U.S. Department of the Treasury and Wells Fargo Securities, LLC
(7)Source: Federal Reserve Board, Federal Reserve Bank of New York and Wells Fargo Securities, LLC
(8)Source: The American Institute of Architects and Wells Fargo Securities,
(9)Source: Federal Reserve Board, U.S. Dept. of Commerce, U.S. Dept. of Labor and Wells Fargo Securities, LLC
(10)Source: IHS Global Insight and Wells Fargo Securities, LLC
(11)Source: Federal Deposit Insurance Corporation and Wells Fargo Securities, LLC