DOW -99.99 = 17,180
SPX – 12 = 1989
NAS – 48 = 4605
10 YR YLD + .01 = 2.11%
OIL – 2.53 = 55.28
GOLD – 28.30 = 1194.50
SILV – .85 = 16.29
The S&P 500 index traded below its 50 day moving average for the first time since the end of October. At its session low, the S&P 500 was down about 5 percent from its record intraday high hit earlier this month but up more than 8 percent from a low hit in October. Oil continues to be a drag on the stock market, and West Texas Intermediate hit a 5 ½ year low; now down right at 50% from the highs of June. OPEC’s Secretary General reiterated the oil producing organization will not cut production despite the current low prices and glut of supply coming out of the US and elsewhere. That’s leaving supply plentiful and prices low even as demand has been waning.
We have seen the lower prices at the pump and that basically means everybody gets a break, a few extra dollars in your pocket. That’s a good thing. So, why is the stock market reacting badly to lower oil prices? Quite simply there are a lot of companies involved in the energy sector, and that is where we get the drag. Also, the decline in oil prices alongside other economically sensitive commodities, including copper, might signal trouble in the global economy. A sputtering recovery in Europe and concerns about Asia have undercut oil demand even as robust production adds to a global oil glut. The fear is that the drop in oil prices might be a warning of something more sinister in the global economy. And if there are really global economic problems, it could spell trouble for the debt accumulated by energy companies, especially in the high yield market.
In economic news today, the National Association of Home Builders/Wells Fargo released the homebuilders’ confidence index today; it dropped one point to 57. A reading above 50 indicates optimism about new home sales trends. December marks the sixth consecutive month of above-50 readings.
Industrial production rose a seasonally adjusted 1.3% in November. This is the biggest increase since May 2010. The Federal Reserve also made upward revisions to output in the past three months. In November, manufacturing output rose 1.1% with broad-based gains. Output of consumer goods rose 2.5%, the largest increase since August 1998. Utilities output jumped 5.1% on cold weather in the month. Mining output dropped 0.1%.
The Great Recession is officially over, but Americans are still 40% poorer today than they were in 2007, the year before the global financial crisis. According to a new report by the nonprofit think-tank Pew Research Center, the net worth of American families — the difference between the values of their assets, including homes and investments, and liabilities — fell to $81,400 in 2013, down slightly from $82,300 in 2010, but a long way off the $135,700 in 2007. There is also a dramatic disparity in net worth between races. The median net worth of white households was $141,900 in 2013, down 26% since 2007. It declined by 42% to $13,700 over the same period for Hispanic households and fell by 43% to $11,000 for African-American households. One theory for the wealth gap: White households are more likely than other ethnicities to own stocks directly or indirectly through retirement accounts.
