U.S. and World News
- The Bank of Japan stunned financial markets this week by announcing negative interest rates for the first time in an effort to push Japan’s economy toward higher growth. BOJ Governor Haruhiko Kuroda slashed the deposit rate on excess reserves with the central bank from +0.1% to -0.1% and stated that the policy would remain in place “as long as it is necessary.” Many economists expected the BOJ to remain accommodative but the decision to push the deposit rate into negative territory was a big surprise.
- Meanwhile, the Federal Reserve held a policy meeting this week and made no change to its monetary policy, leaving interest rates unchanged. Comments from the committee were ‘dovish’, saying they are monitoring current economic and financial developments closely. The statement acknowledged recent tightening of financial conditions and international risks. The committee made no comments regarding the future path of interest rate hikes so attention now turns to the March Fed meeting.
- Markets finished the week positive, led by a strong rally on Friday. The S&P 500 gained 1.76% and closed at 1,940. Likewise, the Dow Jones rose 2.32% and closed at 16,466. So far in 2016, the S&P is down 4.97% and the Dow is down 5.39%.
- Interest rates ended the week lower, despite the rally in equities. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.34% and 1.93%, respectively.
- The spot price of WTI Crude Oil gained 4.63% this week to close at $33.68 per barrel. WTI Crude has fallen 11.76% in 2016.
- The spot price of Gold advanced 1.84% this week, closing at $1,118.19 per ounce. Year to date, gold prices are up 5.38%.
- Initial jobless claims came in at 278,000 which was a decrease from last week’s reading of 293,000. The Labor Department noted no special factors in the data. The four week moving average for claims now stands at 283,000.
- The Case-Shiller home price index rose 0.9% in November, beating expectations of 0.8%. All 20 cities in the index showed price gains during the month. Over the last 12 months, home prices have risen 5.8% as measured by the index.
- The Employment Cost Index (ECI, measures wage growth) increased by 0.6% in the 3rd quarter, in line with expectations. On a year over year basis, total compensation has increased 2.0%.
- The first estimate of 4th quarter Real GDP showed growth of 0.7%, slightly below expectations of 0.8%. With this 4th quarter estimate, U.S. GDP growth was 2.4% in 2015.
Fact of the Week
- With 2015 GDP coming in at 2.4%, this marks the 10th consecutive year of sub 3% growth in the United States. The next longest streak in U.S. history of sub 3% growth was the four years from 1930-1933 (during the Great Depression). (Source: Commerce Department)
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