The week that was…
We ended last week’s “The Week Ahead” section with the sentence: “There should be some fireworks”. Indeed there were. To be clear we are not talking 2007 / 2008 type fireworks but within the context of a relatively sleepy fall 2016 these were fireworks. All 5 sessions this past week were to the downside. Following 4 the prior week. So since the Hillary Clinton #EmailGate disclosure 2 Fridays ago the market has not been able to put in a positive day. One doubts that’s unrelated.
The last nine session selloff ended on December 11, 1980 … roughly 36 years ago. The current nine-session loss is -3.07%. The nine-day selloff in 1980 was a far more dramatic -9.37%.
“People would rather miss out on the post-election rally than being caught wrong-footed if Trump indeed wins the presidency, which many assume will be bad for markets,” said Jennifer Ellison, principal at BOS, California-based investment advisory firm.
To that end, as FBI director Comey has indicated nothing new in these emails late Sunday, the dollar is rallying quite sharply.
Back to the market of last week; most of the selling was midweek. But perhaps more sinister was the selling on Friday when the market tried to rally on the employment data and despite oversold conditions, the rally failed miserably.
Mid week the Federal Reserve meeting was a non event…. as expected. But the indications seem to be there for a rate hike finally hitting in December. #FedSpeak
In announcing its decision, the Fed indicated that it doesn’t need for much more evidence to justify a move, boosting the chances of a hike at its final meeting of the year. “The committee judges that the case for an increase in the federal-funds rate has continued to strengthen but decided, for the time being, to wait for some further evidence of further progress toward its objectives,” the Fed said in a statement. Fed watchers latched on to the word “some” as confirmation that a December move is likely. Analysts at BNP Paribas now see about a 75% chance of a 25 basis point hike next month, compared with 65% before Wednesday’s meeting.
It was a very heavy week of news on the economic front. Monday saw Americans increasing spending in September by the fastest amount in three months; incomes also rose 0.3%. Tuesday brought ISM Manufacturing and construction spending.
The Institute for Supply Management manufacturing index rose to 51.9 in October, slightly surpassing the 51.7 forecast. Meanwhile construction spending declined 0.4% in September.
On Thursday we went back to the ISM, this time on the much larger non manufacturing part of the economy; there news was not quite as bright as the ISM services index fell to 54.8 in October from 57.1, and below the 56 forecast. Any reading over 50 still signals expansion! Friday came the big one with the economy adding 161,000 jobs in October, while the unemployment rate fell to 4.9%. Employment gains for September and August were revised up by 44,000. Hourly pay jumped 0.4%; wages have climbed 2.8% over the past year, the fastest 12-month increase since June 2009.Continue reading