This week was all about oil as traders rotated into the sector in full-force. Energy and energy-related stocks were ahead by 3% on the week as OPEC came to grips with the supply and demand pressures of crude. If the counties that agreed to cut production by 1.2 million barrels per day stay true to their deal, oil prices may continue to hover in the $50/bbl. range. West Texas Intermediate soared 12.2% to close at $51.68 on Friday. Brent crude finished at $54.43, its highest level since the summer of 2015. Thebuttonwoodproject energy choices all did well, led by Hess and Schlumberger up 9% and 4.5%, respectively. Chemical giant and oil refiner LyondellBasell and French energy company Total also moved higher.
In all, stocks took a breather with the Dow Industrials up 0.10% while the S&P 500 moved lower by 1.0% and the tech-heavy NASDAQ fell by 2.65%. Technology was again the biggest looser giving up about 3%, but there was some strength in the sector on Friday. In economic news, non-farm payrolls rose by 178,000 new jobs and the unemployment rate fell to a nine-year low at 4.6%. Preliminary GDP figures were positive with the third quarter estimated at a 3.2% annualized rate and home prices are topping out after a prolonged ten-year slump. Fixed income instruments were again lower on inflation worries as Treasury yields surged.
Looking ahead, consumer confidence is high and the retail season for the all-important fourth quarter looks decent, although not great. Online buying, however, is off to a strong start and should once again post a year-over-year record in sales volume. Equity fundamentals are largely supportive, but interest rates are likely to increase this month with a few more bumps up in 2017 and oil prices bear watching. For now, the bulls have been given the benefit of the doubt.
Here is the answer to last week’s trivia question: In 1999, 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. Answer: Norfolk Southern Railway. CSX owns 42% of the assets of Conrail and Norfolk Southern 58%, and jointly operate the line as a subsidiary. Conrail still serves as a contract local carrier and switching company for its two owners.
Today’s Trivia Question: Bank of America can trace its roots to 1904 in San Francisco when it began operating as? The Bank of California, American Bank & Trust Co., Golden State Bank or Bank of Italy.