WHAT HAPPENED TO RETAIL SALES?
Wall Street was surprised by the news of December’s 0.9% retreat, especially given November’s (revised) 0.4% advance. Minus auto buying, the decline was 1.0%. Economists surveyed by Briefing.com had forecast a gain of 0.1%. The plunge came even with holiday sales, cheap gas, strong hiring and increasing optimism about household economic prospects (see below). This disappointment raises concerns about the strength of Q4 consumer spending.1,2
CONSUMER PRICES TAKE A BIG DIP
December saw the Consumer Price Index decrease 0.4%, its largest monthly pullback since December 2008. That brought its 2-month decline to 0.7%. Falling gas prices were a major influence, of course – on Friday, AAA announced a nationwide average price of just $2.08 for a gallon of regular unleaded. The University of Michigan’s consumer sentiment index hit an 11-year peak last week with a preliminary mark of 98.2.1
DRAMA FOR CURRENCIES, A BIG GAIN FOR GOLD
The Swiss National Bank rocked the currency markets Thursday by abruptly lifting its cap on its franc. In the minutes after the announcement, the Swiss franc gained 25% on the dollar and 30% against the euro while Germany’s DAX index fell 250 points. Perhaps the SNB anticipates a stimulus from the European Central Bank. COMEX gold futures were up 4.5% last week to $1,276.90 at Friday’s close; WTI crude settled at $48.69 on the NYMEX Friday.3,4
NO WEEKLY GAIN FOR THE S&P 500
It lost 1.24% across five volatile days to close at 2,019.42 Friday. No 5-day advances came for the Nasdaq or Dow either: the former gave back 1.48% to end the week at 4,634.38, the latter 1.27% to settle at 17,511.57 at Friday’s final bell.5
THIS WEEK: On Monday, U.S. financial markets are closed in observance of the birthday of Dr. Martin Luther King, Jr. Tuesday sees IBM and Netflix release earnings. Wednesday, earnings from U.S. Bancorp, eBay and Deluxe Corp. complement the Census Bureau’s December report on housing starts and building permits. Thursday offers earnings from Southwest Airlines, Verizon, Key Corp., Starbucks and Union Pacific and new initial claims figures. Friday brings December existing home sales data from NAR, the Conference Board’s latest leading indicator index and earnings from Honeywell, GE, State Street Corp. and McDonald’s.
|% CHANGE||Y-T-D||1-YR CHG||5-YR AVG||10-YR AVG|
|REAL YIELD||1/16 RATE||1 YR AGO||5 YRS AGO||10 YRS AGO|
|10 YR TIPS||0.23%||0.61%||1.34%||1.71%|
Sources: online.wsj.com, bigcharts.com, treasury.gov – 1/16/156,7,8,9
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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1 – businessweek.com/news/2015-01-16/consumer-sentiment-in-u-dot-s-dot-surges-to-11-year-high-as-fuel-drops [1/16/15]
2 – briefing.com/investor/calendars/economic/2015/01/12-16 [1/16/15]
3 – tinyurl.com/kyk96kq [1/15/15]
4 – proactiveinvestors.com/companies/news/59328/gold-gains-1-to-1276-wti-up-at-4869-59328.html [1/16/15]
5 – markets.on.nytimes.com/research/markets/usmarkets/usmarkets.asp [1/16/15]
6 – markets.wsj.com/us [1/16/15]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=1%2F16%2F14&x=0&y=0 [1/16/15]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=1%2F16%2F14&x=0&y=0 [1/16/15]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=1%2F16%2F14&x=0&y=0 [1/16/15]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=1%2F15%2F10&x=0&y=0 [1/16/15]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=1%2F15%2F10&x=0&y=0 [1/16/15]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=1%2F15%2F10&x=0&y=0 [1/16/15]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=1%2F18%2F05&x=0&y=0 [1/16/15]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=1%2F18%2F05&x=0&y=0 [1/16/15]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=1%2F18%2F05&x=0&y=0 [1/16/15]
8 – treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyield [1/16/15]
9 – treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyieldAll [1/16/15]