Weekly Economic Update for December 22, 2014

Summit Brokerage Services Weekly Economic Update

ONE WORD TURNS STOCKS AROUND

That word was “patient,” and it was found in the Federal Reserve’s December 17 policy statement. The Federal Open Market Committee again pledged to take “a considerable time” to raise interest rates in the absence of easing, but added that it would also be “patient” in making a move. At the central bank’s final press conference of 2014, Fed chair Janet Yellen noted that several FOMC meetings might pass without any increase in the benchmark interest rate. Investors celebrated: the Dow soared 288 points Wednesday and another 421 points Thursday. 1,2

LOWER PRICES FOR THE HOLIDAYS

Inexpensive gasoline makes life easier for consumers, and its effect was felt in the Consumer Price Index. The CPI’s 0.3% November retreat was its largest monthly pullback in five years. Less inflation pressure gives the Fed less incentive to adjust the federal funds rate. 1

HOUSING STARTS, BUILDING PERMITS DECLINE

Was it the weather? That could have been one factor for the 1.6% November dip in groundbreaking measured by the Commerce Department. Building permits were down 5.2% last month. November’s decrease snapped three straight months of housing starts at a million-per-year pace, something unseen since early 2008.3

A LITTLE PATIENCE GOES A LONG WAY

A long way toward righting the stock market, that is. Thanks largely to the Fed’s reassuring policy statement, the DJIA rose 3.03% across five days to settle at 17,804.80 Friday. Major weekly gains were also logged by the S&P 500 (3.41% to 2,070.65) and NASDAQ Composite (2.40% to 4,765.38). How about oil? Light sweet crude for January delivery climbed 4.4% on the NYMEX Friday, closing at $56.52. Gold lost 2.2% across five days on the COMEX, settling Friday at $1,196.00.4,5

THIS WEEK : Wall Street considers November existing home sales numbers Monday. Tuesday, the federal government’s final estimate of Q3 growth arrives along with the University of Michigan’s final December consumer sentiment index, reports on November new home buying, consumer spending and hard goods orders and an earnings announcement from Walgreen’s. Wednesday being Christmas Eve, the NYSE and NASDAQ will wrap up trading at 1:00pm EST and the bond market will likely close an hour later. All U.S. financial markets will be closed Thursday for Christmas Day. Friday is a standard trading day on Wall Street; investors will consider new factory output, consumer spending and inflation data from Japan.

% CHANGE

Y-T-D

1-YR CHG

5-YR AVG

10-YR AVG

DJIA

+7.41

+10.05

+14.48

+6.70

NASDAQ

+14.10

+17.43

+23.09

+12.40

S&P 500

+12.03

+14.43

+17.56

+7.33

REAL YIELD

12/19 RATE

1 YR AGO

5 YRS AGO

10 YRS AGO

10 YR TIPS

0.49%

0.79%

1.31%

1.62%

Sources: online.wsj.com, bigcharts.com, treasury.gov – 12/19/146,7,8,9

Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly.

These returns do not include dividends. 10-year TIPS real yield = projected return at maturity given expected inflation.

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This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. It is not possible to invest directly in an index. NYSE Group, Inc. (NYSE:NYX) operates two securities exchanges: the New York Stock Exchange (the “NYSE”) and NYSE Arca (formerly known as the Archipelago Exchange, or ArcaEx®, and the Pacific Exchange). NYSE Group is a leading provider of securities listing, trading and market data products and services. The New York Mercantile Exchange, Inc. (NYMEX) is the world’s largest physical commodity futures exchange and the preeminent trading forum for energy and precious metals, with trading conducted through two divisions – the NYMEX Division, home to the energy, platinum, and palladium markets, and the COMEX Division, on which all other metals trade. Additional risks are associated with international investing, such as currency fluctuations, political and economic instability and differences in accounting standards. This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. Past performance is no guarantee of future results. Investments will fluctuate and when redeemed may be worth more or less than when originally invested. All economic and performance data is historical and not indicative of future results. Market indices discussed are unmanaged. Investors cannot invest in unmanaged indices. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional.

Citations.

1 – tinyurl.com/ohagdrr [12/19/14]
2 – money.cnn.com/2014/12/18/investing/stocks-markets-fed-oil/ [12/19/14]
3 – bloomberg.com/news/2014-12-16/housing-starts-in-u-s-exceed-1-million-pace-for-third-month.html [12/16/14]
4 – markets.on.nytimes.com/research/markets/usmarkets/usmarkets.asp [12/19/14]
5 – proactiveinvestors.com/companies/news/58941/gold-up-01-at-1196-wto-jumps-44-to-settle-at-5652-58941.html [12/19/14]
6 – markets.wsj.com/us [12/19/14]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=12%2F19%2F13&x=0&y=0 [12/19/14]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=12%2F19%2F13&x=0&y=0 [12/19/14]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=12%2F19%2F13&x=0&y=0 [12/19/14]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=12%2F18%2F09&x=0&y=0 [12/19/14]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=12%2F18%2F09&x=0&y=0 [12/19/14]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=12%2F18%2F09&x=0&y=0 [12/19/14]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=12%2F20%2F04&x=0&y=0 [12/19/14]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=12%2F20%2F04&x=0&y=0 [12/19/14]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=12%2F20%2F04&x=0&y=0 [12/19/14]
8 – treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyield [12/19/14]
9 – treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyieldAll [12/19/14]

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