Not even a whopping 2% gain on Friday was enough to provide traction for equity markets this week. The averages, similar to last week’s trading sessions, remained virtually flat over the past five days. Markets reacted to positive U.S. economic data, divergent moves by the European Central Bank and ultimately the Federal Reserve and another drop in oil prices. The ECU announced a rate cut that took stocks down 3% on Wednesday, signaling that Europe is far from out of the woods yet, as originally hoped. Stocks on the Continent fell and the Euro rose, sending shock waves around world equity markets and gold soared nearly $30/oz. Here at home, the Fed is almost certain now to raise interest rates as Friday’s Labor Department report showed a 211,000 increase in jobs, ahead of expectations, as well as upward revisions in previous months’ data. Oil prices, however, remained a drag as OPEC failed to announce a reduction in output and inventories are at all-time highs. West Texas crude fell below $40/bbl. closing the week at $39.97 with no bottom in sight. This negative has taken a toll on the three portfolios, all of which contain energy plays: Conservative Schlumberger, aggressive candidate Hess and Total, SA and ETRACS Alerian MLP Index in the income account. All four price declines have offset some nice gains from the other choices. The lackluster week saw strength in technology and telecommunication stocks, but industrials were negative and energy stocks fell 4.6% on average. Looking ahead, I would like to see more stocks participating in the rally and see the Dow Transportation Average show improved relative strength. The transports were down nearly 4% this week on the prospect that coal and oil shipments will continue to be a hindrance on freight volumes and profits. In all, valuations are not indicating an overbought condition, although stocks are far from cheap. For the final month of the year, barring any significant global political or economic turmoil, technical signals are positive and hopefully next year will be a breakout from the malaise of 2015.
Here is the answer to last week’s trivia question: Dodge automobiles, a division of Fiat-Chrysler, was founded in 1900. The name originates from? The Brooklyn Dodgers; Dodge City Kansas; sudden quick movement of automobiles of the day; the Dodge brothers. Answer: The Dodge brothers – Horace Elgin Dodge and John Francis Dodge.
Today’s Trivia Question: Technicolor, the iconic color motion picture process developed in 1916, is now? A unit of Panavision; defunct; now Technicolor, SA of France; a division of Twentieth Century Fox Film Corp.