Market Update: Thursday, December 22, 2016

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  • Indexes flat following swath of economic data. U.S. stocks are little changed in early trading, following the release of durable goods data, which came in above expectations, while initial weekly claims showed a rise to 257,000, and third quarter gross domestic product (GDP) was revised upward to 3.5%, from 3.2%. Wednesday’s low-volume session saw the S&P 500 drop 0.3%, led lower by healthcare (-0.6%), specifically biotech. Asian equities closed mostly lower overnight; Japan’s Nikkei slipped 0.1%, though the Shanghai Composite managed a 0.1% gain. European stocks are near flat in afternoon trading, the STOXX Europe 600 is unchanged while Italy’s MIB (+0.6%) is climbing on news that the world’s oldest bank, Monte Paschi, will be rescued by the government.  COMEX gold ($1,131/oz.) and WTI crude oil ($52.36/barrel) are slightly lower, while the yield on the 10-year Treasury is down slightly to 2.55%.

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  • Claims move higher on early shutdowns of vehicle assembly plants and cold weather but still suggest tightening labor market. Initial claims for unemployment insurance rose to 275,000 in the week ending December 17, the highest reading since June.  Record cold weather in much of the nation during the week and some early shutdowns at auto plants may be behind the 21,000 increase in claims in the latest week. Despite the rise, claims are within striking distance of 43-year lows, and will remain subject to year-end, quarter-end and holiday distortions for the next four weeks or so.
  • Durable goods orders and shipments turning the corner. Core durable goods orders rose 0.9% between October and November 2016, exceeding expectations of a 0.4% increase. The gain in November was the fourth monthly gain in the past five months, supporting the idea that the manufacturing sector, which has struggled since oil prices peaked in mid-2014, may have finally turned the corner. Today’s data bode well for business capital spending in Q4 2016 and in early 2017. Shipments of core non-defense capital goods, which flow through to GDP growth as business spending, grew just 0.2% in November, accelerating from October (-0.3%) and exceeding expectations of +0.1%. Core shipments in the first two months of Q4 2016 are running 1% ahead of Q3. If sustained, the Q4 gain would be the first quarterly gain in core shipments in more than a year and just the second in two years.
  • Get ready for Santa. The well-known Santa Claus Rally officially starts tomorrow, as this historically bullish time for equities is the last five trading days of the year and first two trading days of the following year. Going back to 1950[1], these seven days are up, on average, 1.4% and higher 77.3% of the time, as measured by the S&P 500. It is worth noting that Santa hasn’t come the past two years, and this has led to weak January returns, down 3.1% and 5.3%, in 2015 and 2016, respectively. These seven days haven’t been down three years in a row since 1946, 1947, and 1948. We took a closer look at this phenomenon early this week on the LPL Research blog.
  • How boring was yesterday? Things have been slow, but yesterday took the cake, as the Dow traded in a range of only 44.6 points. That was the smallest intraday point range since the day before Thanksgiving two years ago. In terms of the percent range, the Dow moved in only a 0.22% range on the day–one of the four smallest ranges going back to 2007, and the smallest since July 2, 2014, the last day of trading before the July 4 holiday.

 

1] Please note: The modern design of the S&P 500 stock index was first launched in 1957. Performance back to 1950 incorporates the performance of predecessor index, the S&P 90.
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Thursday

Leading Indicators (Nov)

Durable Goods Orders and Shipments (Nov)

Russia: President Putin Holds His Annual Press Conference in Moscow

Friday

New Home Sales (Nov)

Click Here for our detailed Weekly Economic Calendar

Important Disclosures

Past performance is no guarantee of future results.

The economic forecasts set forth in the presentation may not develop as predicted.

The opinions voiced in this material are for general information only and are not intended to provide or be construed as providing specific investment advice or recommendations for any individual security. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly.

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