The DJIA traded in a range of 23,300 to 24,014 last week before closing on Friday at 23,996 a gain of around 520 points. The 10 year treasury traded in a range of 2.63% to 2.75% before closing the week at 2.70%.
Last week we had a number of interesting economic reports that might give us some strong clues on the future. We had the ISM Manufacturing Index on Monday which came in below forecast and below November by a fair amount. The JOLTS report (Job Openings and Labor Turnover report) on Tuesday came in with 6.9 million job openings versus 7.1 million on the previous report. Consumer Credit for November was reported on Tuesday at growth of $22 billion versus $25 billion in October. On Wednesday we had the release of the FOMC minutes from December being released. While the release was fairly consistent with everything we had heard through various Fed governors who spout off on a regular basis there is plenty of lobbying going on for a ‘pause’ in rate increases (our forecast is for the next increase in June–if even then). Friday we had the Consumer Price Index (CPI) come in at a minus .1%–the core rate which strips out food and energy rose .2%. Also while the government hasn’t released new home sales because of the government shutdown others have released data showing new home sales down 19% in December–assuming this is near correct it is likely that the wild stock market drops during the month contributed to some level of the drop. With a bit of a lag you can always count on stock prices drops which go on days after day and week after week to affect economic data–it takes a month or two to show up, but the wealth effect individuals felt going up totally reverses to ‘the world is ending’–there will be economic consequences.
For this coming week we have the PPI (Producer Prices) on Tuesday and it is forecast to show falling prices at the producer level. We also have the Empire State Index on Tuesday so we will see how manufacturing is holding up in New York. On Wednesday we have Retail Sales for December being released. Additionally we will see the Home Builders Index being released and we will see how builders are feeling–we could see more weakness here. Thursday brings Housing Starts being released along with Building Permits. We are going to also see the Philly Fed Index on Thursday. Friday brings Industrial Production and Capacity Utilization. Friday also brings us the very important Consumer Sentiment Index. The consumer drives the economy and we are looking for weakness here–with the wild market actions in December and the government shutdown late in the month we are bound to see softness in sentiment.
All in all we are watching to see what kind of weakness we see in the macro economy. Seems reasonable to believe we are going to see weakness–not strength as there simply is too much political turmoil occurring and we think if the politicians are unable to come to an agreement of sorts this week we are likely to see a sizable selloff in equity markets.
We saw that the Fed Balance Sheet fell by just $2 billion last week which is the smallest runoff we have seen in a month.
We had 1 new issue announced by Medallion Financial last week, but just like the 2 previously announced new issues they have not priced the issue. We previously had new issues announced by Priority Income Fund and OFS Credit–neither has ever priced–guess they can’t round up enough buyers at the right price to get these issues off the ground.
The average $25/share preferred last week gained 25 cents last week giving us a 2 week gain of $1.12–pretty darned massive. We have 265 issues still trading at $25/share or less with is about a dozen less than the week before.