MMRecap
for December 15th
There were no economic reports
released last Monday, but the price of oil and its effect on oil-producing
countries grabbed headlines. So has the question of “to frack or not to
frack?” Now that oil is cheap, many oil companies are deserting fracking and
just continuing to drill. The yield on the 10-year note was down 0.05
points to close at 2.26%.
Tuesday was another
“report-less” day -- almost. Wholesale inventories for October came in at
+0.4%, the same as in September. But the talk on Wall Street centered on oil
and the various effects it can have on the environment as well as on the
economies of heavy users of the product. There is little good news available.
The Russian ruble has lost 40% of its value vs. the U.S. dollar. It is also
troubled by Western sanctions, declining oil prices and high inflation. There
are no easy answers. The 10-year yield had dropped four more
points to close at 2.22%.
How can this be? Wednesday was
yet another day with no meaningful reports! But the price of oil has taken
another huge hit, and that’s as much news as we need to know for now. It’s
the sole topic of conversation, no matter where you look. The price of oil rose $0.28 a barrel, and the 10-year note fell by 4
basis points to 2.18%.
On Thursday there were finally
some economic reports worth talking about. Initial jobless claims for the
week ended Dec. 6 fell to 294K from 297K -- a scant 3,000 when compared to
previous decreases. However, continuing claims, people applying for a second
or more weeks of benefits, for the week ended Nov. 29 jumped to 2514K from
the previous 2372K.
The best news came from retail
sales in November, which rose 0.7%. Excluding autos, sales were up 0.5%.
That’s a relief after a couple of months of grim data.
The importance of other
reports went downhill from there. Import and export prices both fell, with
exports down 1.2%, excluding agriculture. Imports, excluding oil, fell 0.2%. The
10-year Treasury added one basis point to close at a very friendly 2.19%.
The week concluded Friday with
the producer price indices and the first of two consumer sentiment reports
from the University of Michigan.
The PPI for November fell
0.2%. Nothing says “no inflation” like a minus sign. The PPI core, which
excludes food and energy prices, came in flat, versus a 0.4% increase in
October.
The final report from the
University of Michigan’s consumer sentiment report came in at 93.8, topping
not only the previous report of 88.8 but the estimates, as well. The 10-year Treasury dropped to
the lowest point of the year so far, and closed at 2.10%.
The MBA reported a significant
decline of mortgage applications for November with new home applications
decreasing by 22% over October. Interestingly, higher-priced new homes seem
to be doing better than the lower-priced entry-level homes as the average
loan size increased from $300,000 in October to almost $307,000 in November.
Conventional loans, including refinances, accounted for 69.3% of all loan
applications.
This week is a relatively
quiet week as far as reports go. The Empire State Manufacturing index is the
first report released today, and there is some discrepancy on the
predictions. That
will be followed by industrial production and capacity utilization reports
for November. Both should rise, with production expected to hit somewhere
between 0.7% and 0.9% in November -- up from -0.1% in October. The Home-builders’ index
report is expected to remain flat at 58% in December, but after all, it’s
December.
Tuesday we get to the
nitty-gritty with housing starts for November. Analysts expect a reading of
1035K, up from the previous 1009K. Building permits for November may come in
lower than the 1080K for October, as the predictions are hovering around
1050K.
On Wednesday we’ll look at
consumer price indices, but they have barely moved. In October, the CPI was
flat, coming in at 0.0%, and is expected to drop perhaps to -0.1% for
November. The CPI core, which eliminates food and energy prices, may drop a
little, as well.
As usual, Thursday the reports
on initial and continuing unemployment figures come out. The Philly Fed report will be released on Thursday, and here
there is a big chasm among the predictors. The previous report came in at
40.8. The markets are predicting a drop to 26.5, while the Briefing.com guys
are predicting a major drop to 10.0. Either way, that seems to be a big
decrease.
As we approach the last two weeks
of the year, the reports are slowing down and there are no reports coming out
on Friday. This is a good opportunity to take advantage of all those
door-buster sales.
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Monday, December 15, 2014
Money Market Recap
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