Clarksville, TN – The economic calendar was thin. The headline retail sales figures for November were not far from expectations, but core sales (which exclude autos, building materials and gasoline) were up 0.6% (stronger than anticipated). The Producer Price Index continued to reflect disinflation pressure, with falling prices within the pipeline.
Commodity prices fell further, led by a drop in oil (now below the critical $40.00 level). Anxieties about the decline in commodity prices fed through to the stock market, which fell broadly during the week and cast some doubt about the Fed’s ability to raise rates next week (still likely, but increased financial instability could lead to a delay).
The China Foreign Exchange Trade System, part of the country’s central bank, began issuing a new exchange rate index – the renminbi (RMB) vs. a basket of currencies. The move was, according to the CFETS, meant to shift the focus away from RMB/US$, and was widely interpreted as paving the way for currency devaluation – adding to worries about commodity prices.Next week, the Federal Open Market Committee is widely expected to raise the target range for federal funds (to 0.25-0.50%). In its policy statement, the FOMC is expected to stress that 1) policy will still be accommodative, 2) future moves will be data-dependent and 3) economic conditions are expected to evolve in such a way as to warrant a gradual path of interest rate increases.
Fed officials will revise their projections of growth, unemployment and inflation, including a new dot plot. Fed Chair Yellen will explain it all in her post-meeting press conference. In a perfect world, the Fed results would lead to a collective yawn on Wednesday and we would all sit back and contemplate what’s for dinner. However, there are a lot of moving parts here and we could see some over-reaction in the global markets.
Indices
Last | Last Week | YTD return % | |
DJIA | 17574.75 | 17477.67 | -1.39% |
NASDAQ | 5045.17 | 5037.53 | 6.53% |
S&P 500 | 2052.23 | 2049.62 | -0.32% |
MSCI EAFE | 1705.53 | 1740.66 | -3.91% |
Russell 2000 | 1149.02 | 1170.57 | -4.62% |
Consumer Money Rates
Last | 1 year ago | |
Prime Rate | 3.25 | 3.25 |
Fed Funds | 0.14 | 0.12 |
30-year mortgage | 4.02 | 3.93 |
Currencies
Last | 1 year ago | |
Dollars per British Pound | 1.516 | 1.572 |
Dollars per Euro | 1.094 | 1.245 |
Japanese Yen per Dollar | 121.560 | 117.820 |
Canadian Dollars per Dollar | 1.363 | 1.148 |
Mexican Peso per Dollar | 17.192 | 14.560 |
Commodities
Last | 1 year ago | |
Crude Oil | 36.76 | 60.94 |
Gold | 1071.58 | 1226.31 |
Bond Rates
Last | 1 month ago | |
2-year treasury | 0.91 | 0.85 |
10-year treasury | 2.06 | 2.22 |
10-year municipal (TEY) | 3.17 | 3.42 |
Treasury Yield Curve – 12/11/2015
As of close of business 12/10/2015
Economic Calendar
Dec 16th | — | Building Permits, Housing Starts (November) Industrial Production (November) FOMC Policy Decision, Yellen Press Conference |
Dec 17th | — | Jobless Claims (week ending 12/12) Leading Economic Indicators (November) |
Dec 22nd | — | Real GDP (3Q15, 3rd estimate) Existing Home Sales (November) |
Dec 23rd | — | Durable Goods Orders (November) Personal Income and Spending (November) New Home Sales (November) |
Dec 25th | — | Christmas Holiday (markets closed) |
Important Disclosures
US government bonds and treasury bills are guaranteed by the US government and, if held to maturity, offer a fixed rate of return and guaranteed principal value. US government bonds are issued and guaranteed as to the timely payment of principal and interest by the federal government. Treasury bills are certificates reflecting short-term (less than one year) obligations of the US government.
Commodities trading is generally considered speculative because of the significant potential for investment loss. Markets for commodities are likely to be volatile and there may be sharp price fluctuations even during periods when prices overall are rising. Specific sector investing can be subject to different and greater risks than more diversified investments.
Tax Equiv Muni yields (TEY) assume a 35% tax rate on triple-A rated, tax-exempt insured revenue bonds.
Material prepared by Raymond James for use by its financial advisors.
The information contained herein has been obtained from sources considered reliable, but we do not guarantee that the foregoing material is accurate or complete. Data source: Bloomberg, as of close of business December 10th, 2015.