The economy moves into the homestretch of 2016 in decent shape. Recent reports are sufficiently supportive in the areas of job growth, wages and retail sales for GDP to move ahead by 2.0%-2.5% this quarter. Likewise, spending by consumers, housing starts, business investment and government spending add to future growth into 2017, with the potential of a 3% bump in GDP next year. With this said, the Federal Reserve believes a rate hike should come “relatively soon” (think December). With the likelihood for a .25% boost, all is priced into the equity markets, but bonds are still adjusting to rising inflation and higher rates, as is the dollar. The 10-year Treasury yield rose 0.2 percentage points to 2.337%, its highest level since November, 2015 and the U.S. Dollar Index popped 2.2% to its highest level since 2003.
For the week, the Dow Industrials took a bit of a breather from the post-election rally and eked out a small gain of 20 points, but the S&P 500 moved higher by nearly 1% and the NASDAQ by 1.6%. Transports were again the star of the week with a 3.25% gain, this time led by airlines. Berkshire Hathaway began picking up shares of the three major carriers for its portfolio. Except for healthcare stocks, all other sectors gained, surprisingly led by interest-sensitive telecoms, up nearly 3%. Oil moved higher on the week to close at $45.69/bbl. and energy stocks rose over 2% on average. Gold, once again, fell to close at $1,208.50/oz.
Looking ahead at the holiday-shortened week with U.S. markets closed on Thanksgiving and closing at 1 PM on Friday, Black Friday will kick off the all-important fourth quarter buying season. Retail is off to a good start with sales rising a brisk 0.8% in October after a strong gain in September. Retailers will be reporting earnings in droves this week. One buttonwoodproject choice: Deere & Co. will report on Wednesday with an estimate for the fourth quarter of $0.40 per share, well below last year’s $1.08. Deere, however, is in striking distance of a 52-week high with investors hopeful the worst is over for the agricultural giant.
Enjoy the Thanksgiving Day holiday.
Here is the answer to last week’s trivia question: Netscape Communications, provider of the once No. 1 Internet browser Netscape Navigator, is now owned by? AOL/Verizon, Mozilla Foundation, Alphabet (Google) or Red Hat. Answer: AOL/Verizon. AOL continues to use the Netscape brand but discontinued supporting the Navigator browser in 2008. AOL (now part of Verizon Communications) still markets the Netscape name as a discount Internet Service Provider. The original Netscape Navigator has morphed into what is now Firefox after Mozilla re-wrote the entire code.
Today’s Trivia Question: In 1998, CSX Corp. and what other rail operator joined to acquire the assets of government-owned Conrail? NY Susquehanna and Western Railway, Genesee & Wyoming, Inc., Norfolk Southern Railway or Burlington Northern-Santa Fe Railroad.