U.S. and World News
- After a long period of calm markets, the U.S equity market posted its first correction (10% loss) in two years amid concerns over rising interest rates, an overheating economy, and complex leveraged funds driven by algorithms used to speculate on volatility. International stock indexes followed suit and are now about 10% off their highs.
- The government briefly shut down late Thursday night following a failure to reach an agreement on a new budget deal, but was reopened early this morning after a major fiscal spending bill was passed. The bill includes an extension to the debt ceiling, a two-year increase in spending on military and domestic programs by $300 billion, and an additional $90 billion to help aid the disasters that occurred in 2017, extend the Children’s Health Insurance Program, and fight the opioid crisis. House Speaker Paul Ryan stated this morning, “Ultimately, neither side got everything it wanted in this agreement, but we reached a bipartisan compromise that puts the safety and well-being of the American people first.”
- Vice President Mike Pence stated that “The United States of America will soon unveil the toughest and most aggressive round of economic sanctions on North Korea ever” as North Korea continues its nuclear and ballistic missile program despite numerous threats to terminate it. The Vice President did not give any details regarding the planned sanctions, but it is likely that they will target Chinese businesses that do business with North Korea.
- In the most volatile week that we have seen in 2 years, the market has dipped into correction territory. The S&P 500 fell 5.10% and closed at 2,619. The Dow Jones followed suit by also plummeting 5.10% and closing at 24,191. Year to date, the S&P is down 1.83% and the Dow Jones is down 1.90%.
- After trading in a wide range throughout the week, the 5 year and 10 year U.S. Treasury Notes are now yielding 2.54% and 2.85%, respectively.
- The spot price of WTI Crude Oil fell 9.52% this week, closing at $59.22 per barrel. Year to date, Oil prices are down 1.48%.
- The spot price of Gold decreased by 1.36% this week, closing at $1,315.21 per ounce. Year to date, Gold prices are up 1.00%.
- Initial jobless claims fell 9,000 from last week, coming in at 221,000 vs. consensus estimates of a slight increase. The decline is largely attributed to a 6,000 decline in Missouri. The four week moving average for claims now stands at 225,000.
- The trade balance came in at -$53.1 billion in December versus consensus expectations of -$52.1 billion.
- Wholesale inventory growth increased 0.4% in December versus consensus expectations of a 0.2% increase.
Fact of the Week
- The stock market, on average, has a correction every 357 days, or about once a year. (Source: Deutsche Bank)
- Based on research conducted on the Dow between 1945 and 2013, the average correction (which worked out to 13.3%) lasted a mere 71.6 trading days, or about 14 calendar weeks. (Source: MarketWatch)
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