US Stock Market Overview – Stocks Drop and the VIX Surges as the Fed Stands Ready

US stocks continue to tumble on Friday, with the major averages down more than 3% at the lows of the session. Some of the larger tech stocks like Microsoft and Apple slammed lower but rebounded to close well off their lows. Gold prices tumbled on Friday, pulling down the metal mining stocks. The Fed was on the tape mid-day saying that they stand ready to lower rates if need be. The market is currently pricing in 3-rate cuts in 2020 with one coming in March of 2020.

All sectors in the S&P 500 index were lower on Friday, led down by Utilities, Energy was the best performing sector in a down tape. Inflation came out in line with expectations, but this did not affect the 10-year treasury yields which dropped to another all-time low. There is little word from the White House about how they will coordinate a response to the coronavirus which is also keeping inventors skittish. The VIX volatility index hit multi-year highs climbing up to 50%, the highest level since 2008.

Inflation Rises

The Personal-consumption expenditures rose 0.2% in January from December, according to the Commerce Department. Personal income advanced 0.6% last month, the largest gain in 11 months. Expectations were for a  0.2% increase in spending and a 0.4% gain in personal income. Gains in income and spending came against the backdrop of still-modest inflation pressures. The price index for personal consumption expenditures, rose 0.1% on the month and was up 1.7% from a year earlier. Year-over-year price gains were 1.5% in December and 1.3% in November.

Mortgages Continue to Buoy Housing Sales

The spread of the coronavirus and the fears associate with it sent bond yields tumbling, the average rate on the popular 30-year fixed mortgage fell to 3.23%, an 8-year low. The lower yields are buoying housing sales. The 30-year fixed loosely follows the yield on the 10-year Treasury, which is now at a record low.

US Stock Market Overview – Stocks Close Mixed; Nasdaq Outperforms; The Russell Drops Sharply

US stocks were mixed on Wednesday after initially rising, but the Dow and S&P moved into the red and remain underwater for the latter half of the trading session. The Nasdaq broke a 4-day losing streak driven by the FANG stocks which outperform. The Russell 200 was the worst-performing average declining by 1.2%. Oil prices were under significant pressure falling 3%, as concerns over the coronavirus continued to weigh on energy. All sectors in the S&P 500 index were lower driven down by Energy, Healthcare was the worst-performing sector. US home sales surged higher rising nearly 8%, driven by rising mortgage applications. The VIX volatility index slipped slightly but still remain buoyed above 27%.

US Home Sales Rise

The commerce department reported that US single-family homes raced to a 12-year high in January. New home sales jumped 7.9% to an annual rate of 764,000 units last month, the highest level since July 2007. December’s sales pace was revised up to 708,000 units from the previously reported 694,000 units. Expectations had been for new home sales, which account for about 12.3% of housing market sales, which would advance 3.5% to a pace of 710,000 units in January. New home sales jumped 30.3% in the Midwest to their highest level since October 2007.

The gain in home sales was driven by rising mortgage application volume which rose 1.5% last week from the previous week, according to the Mortgage Bankers Association. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances decreased to 3.73% from 3.77%, with points decreasing to 0.27 from 0.28. Applications to refinance a home loan fell 1% for the week but were still 152% higher than a year ago.

Energy Inventories Rose

US crude oil inventories increased by 500 thousand barrels from the previous week. At 443.3 million barrels, crude oil inventories are about 3% below the five year average for this time of year. Gasoline inventories decreased by 2.7 million barrels last week and are about 2% above the five year average for this time of year. Distillate fuel inventories decreased by 2.1 million barrels last week and are about 5% below the five year average for this time of year.

HYCM Releases ETFs on Their MT5 Platform

Limassol, 20th February 2020

In addition to forex, stocks, indices, cryptocurrencies**, and commodities, HYCM now also offers 20 different ETFs including the top 3 traded ETFs: SPDR S&P 500, iShares Russell 2000 Index, and VelocityShares 3x Inverse Crude Oil ETN.

An ETF is a basket of assets such as stocks, commodities, bonds and other securities that can be traded during the trading hours. ETFs can be bought or sold through brokerage firms and generally operate with an arbitrage mechanism designed to keep the ETF as close to its net asset value as possible.

Giles Coghlan, HYCM’s Chief Currency Analyst, explains why more traders are becoming interested in ETFs:

” One of the key benefits of an ETF is that it allows our investors to diversify their portfolios. As ETFs hold a basket of stocks or securities, they are also an ideal way of investing in market sectors. For example, say market conditions are looking good for banks, you could use an ETF to invest in the financial sector as a whole rather than take a chance on an individual bank stock. It is not hard to see why ETF’s have grown in popularity year on year since their inception in 1993. They are now attracting over US$5 trillion per year. By investing in a sector via an ETF, the ups and downs of individual stocks are reduced, portfolios are diversified, and volatility can be reduced.”

In this era of high volatility including recent news cycles concerning coronavirus, Brexit, and US-Iran tensions, traders are looking for less volatile instruments, making ETFs very desirable. Not only are ETFs less volatile than stocks, but they also incur lower operating costs and fewer broker commissions than buying each stock individually would. Traders can choose between existing ETFs that focus on a variety of targeted industries knowing that they tend to have a more innovative and faster response to trends.

HYCM is one of the few brokers that offer ETFs. This new asset class comes with excellent trading conditions including competitive spreads, leverages up to 1:20, and different account types to suit all trading styles. HYCM is a reliable and trusted broker with over 40 years of group experience.

Register with HYCM to trade ETFs and more

*HYCM Group is launching ETFs, available only on MT5 under CIMA and SVG.

**Cryptocurrencies are not available under HYCM (Europe) Ltd.

About HYCM

HYCM is the global brand name of Henyep Capital Markets (UK) Limited, HYCM (Europe) Ltd, Henyep Capital Markets (DIFC) Ltd and HYCM Ltd, all individual entities under Henyep Capital Markets Group, a global corporation founded in 1977, operating in Asia, Europe, and the Middle East.


High Risk Investment Warning: Contracts for Difference (‘CFDs’) are complex financial products that are traded on margin. Trading CFDs carries a high degree of risk. It is possible to lose all your capital. These products may not be suitable for everyone and you should ensure that you understand the risks involved. Seek independent expert advice if necessary and speculate only with funds that you can afford to lose. Please think carefully whether such trading suits you, taking into consideration all the relevant circumstances as well as your personal resources. We do not recommend clients posting their entire account balance to meet margin requirements. Clients can minimise their level of exposure by requesting a change in leverage limit. For more information please refer to HYCM’s Risk Disclosure.

US Stock Market Overview – Stocks Rally Led by Nasdaq; Building Permits Soar

US stocks moved higher on Wednesday led by the Nasdaq, which rallied nearly 0.9%. Most sectors in the S&P 500 index were higher led by energy and technology shares. Utilities and Real-estate bucked the trend. The Labor Department reported that U.S. producer prices increased by the most in more than a year in January, boosted by rises in the costs of services. US Housing Starts declined less than expected. The Fed meeting minutes showed that central bankers are content with rates where they are. Gold prices rallied another 0.65% helping to buoy gold mining shares.

Producer Prices Rise More than Expected

The Labor Department reported that US producer prices increased to an 18-month high in January, boosted by rises in the costs of services such as healthcare and hotel accommodation. The producer price index increased by 0.5% in January, the largest gain since October 2018, after climbing 0.2% in December. On a year over year basis, PPI advanced 2.1%, the biggest increase since May, after rising 1.3% in December. Expectations were for PPI to gain 0.1% in January and rising 1.6% on a year-on-year basis. Excluding the volatile food, energy and trade services components, producer prices increased 0.4%, the most since April, after rising 0.2% in December. The core PPI increased 1.5% in the 12 months through January, matching December’s rise.

Housing Start Fall Less than Expected

US Housing Starts fell less than expected in January while permits surged to a near 13-year high. Housing starts dropped 3.6% to an annual rate of 1.567 million units last month, according to the Commerce Department. That followed three straight monthly increases. Data for December was revised up to show homebuilding rising to a pace of 1.626 million units, the highest level since December 2006, instead of surging to a rate of 1.608 million units as previously reported. Expectations had been for housing starts to fall  to a pace of 1.425 million units in January. Housing starts jumped 21.4% on a year-on-year basis in January. Building permits soared 9.2% to a rate of 1.551 million units in January, the highest level since March 2007, lifted by gains in both single- and multi-family housing segments.

The Fed Meeting Minutes Show Rates Will Remain Unchanged

Federal Reserve meeting minutes showed that officials expressed confidence at their most recent meeting about the state of the U.S. economy. They believe that interest rates likely would remain unchanged for a while. The central bank’s policymaking group voted to leave its benchmark overnight funds rate in a range between 1.5% and 1.75%. In coming to that decision, Federal Open Market Committee members noted that the outlook for the economy had gotten stronger just since the previous forecast in December.

US Stock Market Overview – Stocks Close Lower as Coronavirus Fears Perk Up

US stocks moved lower on Thursday following a report that the number of people affected by the coronavirus surged. Stocks were under pressure at the open but that was the lowest price for the trading session. A judge ordered Thursday a temporary block on the JEDI cloud contract, which was awarded to Microsoft, in response to a suit filed by Amazon. Tesla shares whipsawed initially declining but then surging following an announcement that the company was planning a second common stock offering. US CPI came out in line with expectations while jobless claims remained lower than expected. Sectors were mixed, driven lower by materials, defensive sectors such as utilities and consumer staples bucked the trend.

A Judge Put a Stay on Jedi Deal

A judge ordered a temporary block on the JEDI cloud contract, which was awarded to Microsoft, in response to a suit filed by Amazon. Amazon Web Services is instructed to earmark $42 million for any costs and damages that could be incurred in the event that the injunction. Amazon must file a notice with the courts indicating it has obtained the $42 million by February. 20.

Tesla Plan a Secondary Offering

Tesla plans a $2 billion common stock offering, to raise more capital. Shares of Tesla initially fell after the announcement, dropping as much as 6%. But the stock reversed those losses, climbing 6% in the middle of the day as investors cheered the move as a way to shore up its balance sheet and possibly further its expansion plans. Shares hit a high of $818 in intraday trading.

US CPI Edge Higher

The Labor Department reported that CPI in January edged up 0.1% after increasing 0.2% for three straight months. On a year over year basis in January, the CPI rose 2.5%, the biggest gain since October 2018, after advancing 2.3% in December. The consumer price index excluding food and energy rose 0.2% last month after edging up 0.1% in December. The core CPI was up by an unrounded 0.24% last month. In the 12 months through January, the core CPI increased 2.3%, rising by the same margin for four straight months.

Jobless Claims Remain Low

Initial claims rose 2,000 to 205,000 for the week ended February 8, according to the Labor Department. Claims fell in the prior week to 203,000, which was the lowest reading since November. Expectations were for claims to rise to 210,000 in the latest week. The four-week moving average of initial claims, considered a better measure of labor market trends as it irons out week-to-week volatility, was unchanged at 212,000 last week.

US Stock Market Overview – Stocks Close Mixed, Job Openings Decline

US Stocks were mixed on Tuesday following the first leg of Fed Chair Jerome Powell’s semi-annual testimony to Congress. The Nasdaq and the S&P 500 hit fresh all-time highs. The Fed Chair said the state of the economy is strong, and that they would monitor whether the coronavirus started to weigh on US economic growth. Large-cap tech stocks continued to grind higher, despite the FTC announcing that they would examine prior tech deals that involved Apple, Amazon, Alphabet, and Microsoft. All sectors in the S&P 500 index were higher, led by energy shares, consumer staples was the worth performing sector in the S&P 500 index.

President Trump took to Twitter during the Fed Chairs testimony to describe his displeasure with higher rates. He complained that the dollar was too strong and weighing on US exports. Job openings declined to the lowest level in 2-years which is a sign of an impending recession. The total number of openings is down more than a million from where it was a year ago. A decline in demand for several industries over the past several months is sending a signal that the jobs market is around a peak.

 

Job Opening Decline to 24-month Lows

The Labor Department reported on Tuesday that Job openings dropped in December to their lowest level in two years. Total vacancies now at 6.4 million, down from nearly 6.8 million in November. Wall Street estimates had been for about 6.9 million. Vacancies continued to decline in manufacturing with a 24% decline year-over-year. Overall, the hiring rate fell from 4.3% to 4%. The Job Openings and Labor Market Survey showed that total vacancies outnumber job seekers by nearly 700,000, down nearly by half from a few months ago. The total hire rate increased for the month, from 3.8% to 3.9%. Separations increased from 3.7% to 3.8% and quits held steady at 2.3%.

US Stock Market Overview – Stock Rally Led by Communications; Energy Bucks the Trend

US stocks were higher on Thursday, following news that China would reduce tariffs on $75 billion of U.S. imports by 50% as part of its efforts to implement phase one of the trade agreement between the US and China. The Nasdaq was the best performing major index, rising 0.67%, while the Russell 2000 declined. Tesla continued it wild ride, first declining by another 10% and then rallying to close up 5%. Sectors in the S&P 500 index were mixed, led higher by communication as Alphabet rebounded from disappointing earnings earlier in the week.

Energy shares were the worst-performing sector losing 1.2%, despite small rallies in both crude oil and natural gas. The VIX volatility index edged lower and is now hovering near the 200-day moving average at 15. Despite the continued spread of the coronavirus, and the likely decline in economic activity globally, US stocks continue to rise and volatility is moderating. US Jobless claims fell more than expected and productivity rebounded in the latest quarter.

China Will Cut Tariffs

The Chinese government announced that on February 14, China will cut tariffs on some U.S. goods to 5% from 10%, while levies on some other items will be reduced to 2.5% from 5. The tariffs were imposed in September and December during the height of the trade war. The US has already described its plans to reduce the tariff rate on certain imports from China that have been penalized in the trade war, although most tariffs will remain.

Productivity Rebounds

 

US nonfarm productivity, increased at a 1.4% annualized rate last quarter, according to the US Labor Department. Productivity decreased at an unrevised 0.2% pace in the Q3, the biggest drop since the fourth quarter of 2015. Expectations were for productivity to rebound at a 1.6% rate in the Q4. Compared to the Q4 of 2018, productivity increased at a 1.8% rate. It accelerated by 1.7% in 2019, the strongest since 2010, after increasing 1.3% in 2018. Productivity increased at an average annual rate of 1.3% from 2007 to 2019,

 

Jobless Claims Fall More than Expected

US jobless claims fell 15,000 to 202,000 for the week ended February 1 according to the Labor Department. This is the lowest reading since April 2019. Claims data for the prior week was revised to show 1,000 more applications received than previously reported. Expectations had been for claims to dip slightly to 215,000.  The four-week moving average of initial claims, fell 3,000 to 211,750 last week, also the lowest level since last April.

US Stock Market Overview – Stocks Rebound Led by Nasdaq; Tesla Continues to Surge

US stocks surged higher rebounding from the sharp declines experienced on Friday. The Nasdaq was the best performing of the major indices led by a strong rebound in Alphabet and Netflix. Tesla continued to rip higher rising by nearly 18%. Telsa has more than tripled since October of 2019. Most sectors in the S&P 500 index were higher on Monday, led by Materials and Technology. The energy was the worst-performing sector as declines in oil prices continued to generate headwinds for energy shares. US Manufacturing rebounded in January rising to the highest levels since July 2019. Construction spending disappointed. Gold prices eased after attempting to break out on Friday. Oil prices dropped more than 2% as fears of the coronavirus continue to weigh on the energy sector.

Manufacturing Rebounded

The ISM reported that US national factory activity increased to a reading of 50.9 last month, the highest level since July, from an upwardly revised 47.8 in December. This represents expansion. Expectations were for the index to rise to 48.5 in January from the previously reported 47.2 in December. The new orders sub-index jumped to 52.0 last month, the highest since May, from a revised 47.6 in December. The ISM’s factory employment index rose to 46.6 last month from a revised reading of 45.2 in December, suggesting manufacturing payrolls could remain weak.

Construction Spending Slips

The Commerce Department reported that US construction spending declined by 0.9%. For the year, construction spending fell 0.3%, the first setback since a 2.6% decrease in 2011. The home building sector rose a solid 1.4%. This category continues to benefit from falling mortgage rates.

The Coronavirus Remains in the Headlines

The coronavirus continues to spread across China and this is likely to weigh on global growth. Eventually, this virus will make its way around the globe, and the question for investors is how much this will eat into global economic growth. Volatility has perked up slightly but a substantial decline in growth has not been priced into US equity markets.

US Stock Market Overview – Stocks Fall Led by Energy, Boeing Warns of Further Delays

US stocks traded lower on Tuesday, as news that a new virus had spread through China weighed on riskier assets. Boeing announced on Tuesday that the company does not expect regulators to sign off on the 737 Max until the middle of 2020. Despite robust growth in the US housing market demand continues to outpace supply putting upward pressure on houses. The US Senate begins the impeachment Trial of Donald Trump on Tuesday, with a vote on the rules the Senate will use to create a trial. Most sectors in the S&P 500 index were lower on Tuesday led down by Energy, Utilities and Real estate bucked the trend. Energy shares were hammered as natural gas prices hit a fresh 4-year low. US yields edged lower on Tuesday but the dollar was unchanged.

New Virus Breaks Out

Authorities in the US reported that a man in Washington state has been diagnosed with the new Wuhan coronavirus. This is the first case reported in the U.S. from an outbreak that has sickened hundreds of people in Asia. The patient recently traveled to Wuhan, China, the city where the outbreak was first reported. The SARs virus which broke out in February of 2003, saw stocks initially slip and then eventually rally.

Boeing Will Hold off on 737 Max Production

Boeing told suppliers that it doesn’t expect regulators to sign off on the 737 Max until the middle of 2020. This is well after the company expected.  The extended delay poses another headache for carriers who have already missed one peak travel season without the fuel-efficient planes.

Home Prices Rise with Demand

Homebuilding is on the rise and continues to rally into 2020 as the current supply is far from enough to satisfy the current demand. The U.S. housing market is short nearly 4 million homes, according to a new analysis from realtor.com. Analyzing U.S. Census data, the report showed that the 5.9 million single-family homes built between 2012 and 2019 do not offset the 9.8 million new households formed during that time.

US Stock Market Overview Stocks Hit Fresh High Buoyed by Housing Starts

US stocks closed at a fresh all-time high with the S&P 500 climbing nearly 2% on the week. Better than expected housing data, and solid industrial output continued to help riskier assets gain traction. Most sectors were higher in the S&P 500 index, led by communications and utilities, energy shares bucked the trend. Natural gas prices broke down to a 3-year low which weighed on production and development companies.

The week was marked with several milestones. The US and China signed their phase one of their trade deal. And likely more of a truce than a trade deal, markets continued to rise as global growth prospects could recover. China reported in-line GDP data, which closed for the year at 6.1%. The US Senate signed the USMCA trade deal between the United States, Canada and China. This will likely benefit Mexico as it provides the least expensive data.

Housing Starts Surge

US Housing Starts surged to a 13-year high in December, jumping 16.9% to an annual rate of 1.608 million units last month, the highest level since December 2006. The percentage gain was the largest since October 2016. Data for November was revised higher to show homebuilding rising to a pace of 1.375 million units. Expectations were for housing starts to increase to a pace of 1.375 million units in December. Housing starts soared 40.8% year over year in December. An estimated 1.290 million housing units were started in 2019, up 3.2% compared to 2018. Building permits fell 3.9% to a rate of 1.416 million units in December after hitting their highest level in more than 12 years in November.

Manufacturing Rises

The Federal Reserve reported that manufacturing production rose 0.2% in December following a revised 1.0% increase in November. Overall industrial output fell 0.3% in December. Excluding motor vehicles and parts, industrial production in December was flat and manufacturing rose 0.5%. Expectations were for overall industrial output and manufacturing output would fall 0.2% in December. On an annualized basis production at factories fell 1.3%.

 

 

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US Stock Market Overview – Stocks Surge to Record Highs

US stocks moved higher on Thursday driven by robust liquidity and stronger than expected retail sales. All sectors in the S&P 500 index were higher on Thursday driven by sharp gains in technology, energy shares were the worst performing sector. A stronger than expected core retail sales number in conjunction with declining initial jobless claims helped buoy riskier assets. The US senate passed the USMCA trade deal a day after the US and China agreed to their phase one trade deal.

US Retail Sales Rise Led by Core

The Commerce Department said on Thursday retail sales increased 0.3% last month. Data for November was revised up to show retail sales gaining 0.3% instead of rising 0.2% as previously reported. Expectations were for retail sales to gain 0.3% in December. Compared to December last year, retail sales accelerated 5.8%. Excluding automobiles, gasoline, building materials and food services, retail sales jumped 0.5% last month after falling by a downwardly revised 0.1% in November.Online and mail-order retail sales rose 0.2% after being unchanged in November.

Jobless Claims Drop

The jobs market continues to outperform and claims for unemployment continued to point to additional jobs coming online. Initial claims dropped 10,000 to 204,000 for the week ended January 11, according to the Labor Department. Expectations had been for claims to rise slightly to 216,000 in the latest week from the unrevised 214,000 reported for the previous week.

USMCA Passes Senate

The Senate approximate the United States-Mexico-Canada Agreement in an overwhelming 89-10 vote. After Trump signs the bill into law it needs only Canada’s approval to take effect. The Senate rushed to pass the agreement before the expected start of the president’s impeachment trial next week. USMCA will head to the president more than 14 months after the North American nations agreed to the deal. The Senate’s passage of USMCA came a day after Trump signed a partial trade deal with China.

US Stock Market Overview – Stocks Slide Following Soft US Payroll Report

US stock prices whipsawed between positive and negative territory for most of the session with the Dow underperforming and all three major indices closing in the red. Both Facebook and Microsoft had technical outside days which points to a potential round of profit-taking. The Dow Industrials hit 29K for the first time in history but turned lower into the close. Most sectors in the S&P 500 were lower, led down by Financials, while real-estate bucked the trend.

Non-farm payrolls were released by the Department of Labor, coming in softer than expected. US yields moved lower, and the dollar eased, which paved the way for higher gold prices. Oil prices were lower, unable to gain traction following whipsaw price action earlier in the week. Volatility remained subdued which means that investors remain confident.

Job Growth is Softer than Expected

The US labor department reported on Friday that US Nonfarm payrolls increased 145k, less than the 160k expected, while the unemployment rate held steady at 3.5%. Revisions to the October and November numbers brought those two months down by 14,000 as well.

Average hourly earnings rose by just 2.9%, below the 3.1% projection. December marked the first time that wage gains were below 3% July 2018. Average hourly earnings increased 3 cents last month to $28.32. The labor force participation rate held steady at 63.2% as the workforce rose by 209,000 to 164.6 million and the job pool fell by 48,000 to 95.6 million.

The total employment level rose to 158.8 million, also a fresh high. However, the unemployment rate for African Americans rose 0.3 percentage points to 5.9%. There were still 477,000 open positions as of October, down less than 5% from the year-ago level, according to the Labor Department.

Volatility is Priced Low

There is still a geopolitical risk and while the Trump administration will use sanctions, Iran is likely to increase terrorism., The Trump administration expanded its sanctions campaign against Iran. The US secretaries of state and treasury signaled the administration is choosing to wage more economic war rather than use military force.

US Stock Market Overview – Stocks Rally on PBOC Rate Announcement

US stocks surged on Thursday the first trading day of the new year as the People’s Bank of China announced that the central bank would further loosen monetary policy by reducing the amount of reserves banks needs to keep on hold at the central bank. The stimulus would help commercial banks ease lending requirements on corporations, which would help buoy Chinese equities. Investors were also upbeat that the US and Chinese would sign a trade deal on January 15, according to US authorities, but CNBC reported that Chinese officials have yet to announce they would sign a deal on January   15, and are still in the process of translating their version of the deal into English. This has helped buoy gold prices.

The VIX volatility index tumbled as stocks surged, falling by more than 8% below 13. US jobless claims declined by 2,000 on Thursday ahead of the government’s report on nonfarm payrolls. Sectors in the S&P 500 index were mixed, driven higher by Technology shares. Real estate and utilities bucked the trend declining as yields dipped.

Jobless Claims Declined

The labor department reported that Initial claims decreased 2,000 to 222,000 for the week ended December 28. Expectations were for jobless claims to rise by 1,000 to 225,000. The four-week moving average of initial claims rose by 4,750 to 233,250, the highest level since January 2018.

The PBOC Reduces Reserve Rate Requirements

The People’s Bank of China announced a 50 basis point cut in the required reserve ratio for bank effective Monday, January 6.  The change in reserve requirement will release an estimated 800 in Chinese yuan and reduce banks’ funding costs, which in turn is expected to be passed on to corporate borrowers.  This suggests the benchmark one-year Loan Prime Rate will likely fall.  The required reserves ratios are set currently at 13% for large banks and 11% for smaller banks.

US Stock Market Overview – Stocks Rally and Finish the Year on a High Note

US stocks finished the last day of the decade in the green. For the year, the US benchmark the S&P 500 notched up a 30% gain including dividends. The tech sector was the best forming sector for the year. All sectors were higher on the last trading day of 2019, driven by gains in energy. Industrials were the worst-performing sector. Gold prices moved higher as Iranian funded militia tried to storm the US Embassy in the Iraqi capital, in an intensifying backlash against the US. US short-term yields moved lower, which has weighed on the US dollar, which declined to a 3-month low.

Chicago PMI Index Rose

The Chicago Purchasing Management Index rose to 48.9 in December from  46.2 in November and 43.2 in October. The October reading was the weakest since the end of 2015. The regional survey showed that new orders and employment fell at an even faster pace compared to the prior month, but those negatives were largely offset by improved but still soft production numbers.

Confidence Slips in December

The conference board reported that consumer confidence dipped slightly in December. The index came in at 126.5 for the month, down from 126.8 in November. Expectations were for the consumer confidence reading to come in at 128.2 for December. The Conference Board also announced an upward revision to November’s reading.

Geopolitics Buoys Miners

Gold miners were buoyed by an increase in gold prices as geopolitics reared its ugly head. Gold prices moved higher as Iranian funded militia tried to storm the US Embassy in the Iraqi capital, in an intensifying backlash against the US. after it conducted deadly strikes on the group. Video and photos from the scene showed the blast walls surrounding the compound were on fire. The protesters flew the flag of Kataib Hezbollah, which the U.S. has blamed for a recent spate of rocket attacks targeting Iraqi base.

US Stock Market Overview – S&p 500 Hits Record but VIX Rises

US stocks were mixed on Friday, as the tech-heavy Nasdaq took a breather. The S&P 500 index notched up another fresh all-time high. The sectors in the S&P 500 index were mixed, driven by gains in defensive sectors such as Real-estate and Utilities. Energy shares were the worst-performing sector, despite bullish news on crude oil. There were no important US economic data releases on Friday. The Chicago PMI is scheduled to be released on Monday. The VIX volatility index rebounded on Friday, climbing more than 6%.

Crude Oil Remains Buoyed but Fails to Lift Energy Shares

Energy shares slid on Friday despite a larger than expected draw in crude oil inventories reported by the Department of Energy 2-days late due to the Christmas Holiday. According to the Energy Information Administration, crude oil inventories decreased by 5.5 million barrels from the previous week. This compares to expectations that stockpiles would decline by 250K barrels. Gasoline inventories increased by 2.0 million barrels last week while distillate fuel inventories decreased by 0.2 million barrels last week Total commercial petroleum inventories decreased last week by 10.2 million barrels last week. Demand unfortunately disappointed. Total demand was down by 3.0% from the same period last year, according to the EIA.

The VIX Rallies

The VIX volatility index perked up and rallied more than 6% on Friday, climbing above 13% for the first time in 2-weeks. After hitting 1-month lows this week, the VIX rebounded into the last week of the year. The VIX represents the “at the money” implied volatility on the S&P 500 index. As stock prices hit fresh highs, traders have been selling implied volatility allowing complacency to settle in. The rise in the VIX despite an S&P 500 index hitting fresh all-time highs, shows that traders are beginning to purchase protection ahead of the new year.

US Stock Market Overview – Nasdaq Eclipses 9K

US stocks closed higher on Thursday continuing the upward trend the market has experienced in the Q4. The Nasdaq closed above 9,000 for the first time ever, and the S&P 500 index hit fresh all-time highs. Most sectors in the S&P 500 index were higher, driven by Communications, while Healthcare bucked the trend. Amazon shares surged more than 4% on Thursday as the company said that 2019 holiday season was record-breaking for the company, saying billions of items were ordered on the site. Apple shares continued to hit fresh highs helping to drive technology shares. The VIX volatility index ticked lower on Thursday closing at 12.65%. Gold prices continue to trend higher as the dollar eased, and yields were mixed. The Russell 2000 surprisingly closed in the red.

Amazon Describes Record Sales

Amazon reported that 2019 holiday season was record-breaking for the company, saying billions of items were ordered on the site and millions of Amazon devices purchased world-wide. Amazon said that some of its best-selling products this holiday season were the Echo Dot, Fire TV Stick with Alexa Voice Remote. Amazon shares began the day 12% its July highs as some of the other tech stocks like Apple continued to close at fresh all-time highs.

Energy shares continued to make headway on Thursday as crude oil prices close above $61 per barrel on a WTI basis for the first time in 4-months. OPEC cuts of future production continue to drive crude oil prices which are helping to buoy energy shares. Energy shares have underperformed the broader markets in the S&P 500 index, but now appear to be playing catch up football.

US Stock Market Overview – Stocks Continue to Rally Led by Consumer Staples

US stocks moved higher on Thursday with the S&P 500 index hit fresh all-time highs rising above 3,200 for the first time. The Nasdaq was the best performing of the major stock indices, rising 0.67%. Most sectors were higher, led by consumer staples, which increased by 1.13%, consumer cyclicals bucked the trend. Jobless claims declined by less than expected. After the closing bell the House of Representatives announced that there were enough votes to pass the USMCA which is the replacement for NAFTA. Nike earnings came out after the bell. While the company beat on the top line their guidance was worse than expected to put downward pressure on the stock price.

Jobless Claims Decline Less than Expected

The Labor Department reported on Thursday that jobless claims decreased 18,000 to 234,000 for the week ended December 14. Despite the large decline the drop did not unwind the prior week’s jump of 49,000. The prior week’s surge, which boosted claims to 252,000, which was the highest reading since September 2017,  probably reflected a late Thanksgiving Day. Expectations were for claims to fall to 225,000 in the latest week.

Leading Economic Index was Flat

The conference board on Thursday reported that the Leading Economic Index was unchanged in November. The LEI is a weighted gauge of 10 indicators designed to signal business-cycle peaks and valleys. The unchanged reading broke a streak of 3-consecutive month that the LEI declined.

The Bank of England Keeps Rates Unchanged

The Bank of England warned of mounting weakness in the British economy as it kept interest rates on hold despite two members of its monetary policy committee voting for an immediate cut. Sounding the alarm that economic growth would come close to unchanged in the Q4, the Bank’s monetary policy committee voted 7-2 to keep the official interest rate on hold at 0.75%.

US Stock Market Overview – Stocks Rally Led by Energy Shares; Apple Hits Record Highs

US stocks surged on Monday, as investors had a chance of the weekend to absorb the benefits of a US Chinese trade deal. Although there still are several issues to fine-tune, such as when the tariffs will role off and how much Ag the Chinese will purchase, the agreement is a halt of tensions that is upbeat. Apple shares led the market higher with the large-cap technology firm rising more than 1.7%. Homebuilder confidence also surged rising to a 20-year high. Most sectors in the S&P 500 index were higher on Monday led by Energy and Healthcare, real-estate bucked the trend in an upmarket. The Dow Industrials was the worst-performing of the major indices, weighed down by declines in Boeing.

Strong Chinese Data Leads Goldman to Increase its Commodity Forecast

China’s November industrial production and retail sales came in stronger than expected helping to buoy riskier assets. Industrial output rose 6.2% from 4.7% in October compared to expectations of a 5% gain. Retail sales rose 8% from 7.2%. The better than expected data comes in the wake of a phase-one deal that could continue to help Chinese growth.  In the wake of the stronger numbers, Goldman Sachs is raising its 12-month commodity returns forecast to 6.4% which is a 3% increase,  based on calming geopolitical tensions. The firm said that following clarity on the US-China trade deal and UK election, demand for commodities will increase, without any changes to supply.

Home Builder Confidence Surges

The national association of home builder reported that builder confidence in the newly built, single-family home market jumped 5 points in December to 76, the highest reading since June 1999. November’s reading was also revised higher by 1 point. The index stood at 56 last December. The current sales conditions rose 7 points to 84, sales expectations in the next six months rose 1 point to 79 and buyer traffic increased 4 points to 58.

US Stock Market Overview – Stocks Edge Higher Ahead of Jobs Report

US stocks moved higher on Thursday, after fluctuating between positive and negative territory for most of the trading session. Most sectors were higher led by materials which rallied 0.9%. Energy shares bucked the trend. The VIX volatility index decline by another 1.5% on Thursday, ahead of Friday’s jobs report which is scheduled to be released at 8:30 AM ET. Expectations are for non-farm payrolls to rise by 175,000 jobs. There has been a divergence in economic data this week. While the ISM manufacturing and services reports came in weaker than expected, the job components in the service sector and claims remain very robust. Jobless claims on Thursday unexpected declined by 10,000, moving back to an 8-month low. Factory order also came in stronger than expected.

 

Jobless Claims Unexpectedly Declined

US jobless claims dropped 10,000 to 203,000 for the week ended November 30, the lowest level since mid-April, according to the US Labor Department. Data for the prior week was unrevised. The expectation had been for claims to rise to 215,000 in the latest week. Thursday’s claims report also showed the number of people receiving benefits after an initial week of aid rose 51,000 to 1.69 million for the week ended November 23. The four-week moving average of the so-called continuing claims was unchanged at 1.68 million.

Factory Orders Rise More than Expected

The commerce department reported on Thursday that Factory orders rose 0.3% in October. This is the first gain in three months. Orders in September were revised to a 0.8% drop compared with the previous estimate of a 0.6% fall. Expectation were for a 0.2% rise. Durable goods orders rose a revised 0.5%, down slightly from last week’s initial estimate of a 0.6% rise. Orders for nondurable goods were flat in the month.

Zoom Shares Tumble

After the closing bell Zoom the teleconference software company reported earnings that beat on the top and bottom line but the shares tumbled after the company issued fiscal third-quarter earnings that revealed slowing growth. Earnings were 9 cents per share, versus 3 cents per share expected. Revenue came in at $166.6 million, versus expectation of $154.9 million. Zoom’s revenue increased 85% on an annualized basis in the third quarter of the company’s 2020 fiscal year.

US Stock Market Overview – Stocks Close Mixed, Powell Testifies, Google Announces Consumer Checking Accounts

US stocks were mixed and traders shrugged off news that the US and China had hit a snag in their trade negotiations. It appears that not only does the Trump administration not want to remove tariffs but the number of Agricultural products the Chinese want to purchase is less than the US had expected. This has created a hold up and stocks initially whipsawed on this news. US consumer inflation came in slightly stronger than expected, but yields moved lower on dovish commentary from Fed Chair Powell. Sectors in the S&P 500 were mixed, with defensive sectors Utilities and Real-estate moving higher and energy bucking the trend.

Powell Testifies in Front of Congress

Gerome Powell testified in front of a joint economic committee on the hill on Wednesday. He reiterated that the bar for additional rate cuts is high but extended a dovish tone. He was asked multiple times about trade, and consistently said that he believes this was out of the Fed lane. He did say if economic growth started to slip the Fed would readjust its focus.

CPI Came in Stronger Than Expected

US CPI came in stronger than expected according to the Labor Department. Headline CPI was reported at 0.4% last month compared to expectations that it would rise by 0.3% month over month. For the year ending October 31, CPI increased 1.8% after climbing 1.7% in September. Expectation were for CPI to rise 1.7% on a year-on-year basis. Core CPI, which excludes food and energy, rose 0.2% after edging up 0.1% in September. Year over year through October, the core CPI increased 2.3% after rising 2.4% in September.

Google Announces Checking Accounts

Google will soon offer checking accounts to consumers, according to reports. The project, code-named Cache, is expected to launch next year and will be run by Citigroup. Their ambitions could challenge incumbent financial-services firms, which fear of losing their primacy and customers.