A rout in commodity prices helped push stocks down around 4% on the week, with the Dow tumbling nearly 310 points on Friday alone. The S&P 500 dropped 3.8% for the week and left the index in negative territory for the year by 2.3%. The setback was the worst weekly performance for equities in four months. The NASDAQ fell over 4% and the small-cap Russell 2000 gave up 5%. Oil plunged 11% to close the week at $35.62/bbl., the lowest level in seven years. Other commodities, from metals to agricultural fertilizers, are also cratering to multiyear lows, leading some investors to wonder whether the slump is foreshadowing a slowdown in the global economy. The selloff took down junk bonds as well, as concerns for many energy-related debt issues are seen as being vulnerable. Nonetheless, the Federal Reserve appears determined to begin raising interest rates on Wednesday, following a two-day meeting of the bank’s Open Market Committee and will issue forecasts on economic growth, producer prices and employment. All sectors were negative this week, with the “best” showing in utility stocks off by 2%. Basic materials and financials were weak shedding 4.25% and 5.1%, respectively. But energy shares got slammed by 6.6%, on average. On Friday, the International Energy Agency forecast that supply for oil would stay high and demand low into next year. Retail sales, however, rose in November as continued low gasoline prices and a slowdown in auto purchases translated to more clothing and electronics buying, providing some hope to retailers looking for a stronger finish to a holiday shopping season that started with a whimper. Sales at retailers and restaurants rose a seasonally adjusted 0.2% from October, the largest increase since July. As the job market tightens, wages have risen gradually, but wage growth has been modest over the year. For many Americans, the few extra dollars saved from low gasoline prices are diverted toward services such as rising rents and healthcare costs or stashed away for a rainy day. In October, the personal savings rate—the share of a person’s disposable income that is saved—hit 5.6%, the highest rate since 2012, even as personal income rose 0.4% from the previous month. Looked at in its entirety, the economy, as measured by the U.S. gross domestic product, should increase by 2% or more, in the fast-concluding fourth quarter. But things are decidedly less settled internationally, as Japan’s economy is limping along; economic activity is decelerating in China; oil prices have yet to bottom; and tensions are rising globally. Merger and acquisitions are back in fashion before financing becomes tighter, including the announcement by Dow Chemical and DuPont to join. However, the share price gains were markedly muted given the positives of the two giants combining, indicating that investors believe such a tie-up is a sign of a very difficult economic climate.
Here is the answer to last week’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. Answer: Now Technicolor SA of France. The company is headquartered in Issy-les-Moulineaux, France and along with film processing, Technicolor provides other services and products for the communication, media and entertainment industries.
Today’s Trivia Question: Activist investor Carl Ichan revealed a 7.1% stake in which storied company that has struggled to adapt? Xerox Corp., Arch Coal, Polaroid Corp., or Avon Products.