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DOW + 33 = 17912
SPX + 7 =2074
NAS + 18 = 4774
10 YR YLD + .01 = 2.29%
OIL + .49 = 67.37
GOLD + 11.60 = 1211.10
SILV – .04 = 16.52
Record high for the Dow Industrials and the S&P 500.
About 2 weeks before the Federal Reserve FOMC meets to determine monetary policy they gather together reports from across the nation on how the economy is doing; the Fed then binds those reports in a Beige folder, or what we call the Beige Book. As the name would imply, the Beige Book is not always a page turner, but it can provide some useful information as well as an indicator of what the Fed policymakers are thinking, and then there is the occasional surprise nugget of information.
The Beige Book was released today and it shows the US economy holding up well despite global slowing; economic activity continued to expand in October and November, with lower gasoline prices boosting consumer spending. Despite a sharp drop in crude oil prices, drilling activity in shale production districts remained steady; oil and gas exploration activity decreased in North Dakota and increased in Montana relative to a month earlier; production remained at record levels. Lower oil prices have some oil companies concerned and closely monitoring prices, which are close to many firms’ breakeven price.
Employment gains were widespread. Better conditions in the labor market meant more employers were struggling to retain key workers as well as fill job openings in sectors such as information technology, engineering, legal and health services, manufacturing and transportation. Inflation remains tame, thanks to lower gas prices, and also because a stronger job market has not yet pushed inflation higher.
Oil was a dominant theme is this edition of the Beige Book; it got more mentions than any other word. Contrary to the Fed’s outlook for domestic oil producers, Reuters reports a drop of almost 40% in new well permits issued across the US in November. Just a reminder that about 20% of the high yield or junk bond market involves the energy sector, and fully a third of the capital expenditure among S&P 500 companies can be traced to the energy sector. The Beige Book takeaway is that the economy isn’t seeing much response to the falling price of oil right now, but everyone is on the lookout for a big impact.
