U.S. and World News
- At the World Economic Forum in Davos, Switzerland this week, European Central Bank President Mario Draghi hinted at more stimulus for the Eurozone which has struggled to produce growth and inflation close to their 2% target. This action helped to stabilize global markets that had been in freefall early in the week. Draghi stated, “We have plenty of instruments and especially we have the determination and willingness and capacity of the Governing Council to act and deploy these instruments.”
- The ECB wasn’t the only central bank suggesting additional easing. China’s Vice President Li Yuanchao signaled that Beijing would keep intervening in its stock market in an attempt to stabilize prices. Additionally, there is wide speculation that the Bank of Japan will opt for extra stimulus at its policy meeting next week.
- This past summer’s landmark nuclear deal between Iran and six world powers came into effect this week. The result was an end of years of sanctions and the unfreezing of $100 billion of Iranian assets. Secretary of State John Kerry said in Vienna, “Today marks the first day of a safer world. We are really reminded once again of diplomacy’s power to tackle significant challenges.”
- Markets rebounded midway through the holiday shortened week. The S&P 500 gained 1.46% and closed at 1,907. Likewise, the Dow Jones rose 0.69% and closed at 16,093. So far in 2016, the S&P is down 6.61% and the Dow is down 7.53%.
- Interest rates ended the week relatively unchanged from where they began; however, there was plenty of volatility in between. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.48% and 2.05%, respectively.
- The spot price of WTI Crude Oil began to rally midweek, much like the stock markets, gaining 9.62% to close at $32.25 per barrel. WTI Crude has fallen 12.93% in 2016.
- The spot price of Gold advanced 0.83% this week, closing at $1097.95 per ounce. Year to date, gold prices are up 3.47%.
- Initial jobless claims came in at 293,000 which was an increase from last week’s reading of 284,000. The Labor Department noted no special factors in the data. The four week moving average for claims now stands at 285,000.
- The Consumer Price Index (measure of inflation) declined 0.1% in December, reflecting another 2.4% decline in energy prices. Core CPI (excludes food and energy) increased by 0.1%, below expectations of 0.2%. Over the last 12 months, core CPI has risen 2.1%.
- Housing starts unexpectedly declined by 2.5% in December, much lower than expectations of a 2.3% gain following an unseasonably warm December. Multi-family starts declined by 1.0% and single-family starts were also soft, falling 3.3%.
- Existing home sales increased 14.7% in December, beating expectations of 9.2%. The rise follows a 10.5% decline in November. Single family unit sales increased 16.1%, while multi-family unit sales rose 4.9%.
Fact of the Week
- The U.S. economy has been expanding since July 2009 and the expansion reached 78 months as of the end of 2015. This duration of expansion has been exceeded by just 4 other U.S. expansions since 1854 or 162 years ago. (Source: National Bureau of Economic Research)
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