Market Perspective for November 20, 2015

The S&P 500 Index enjoyed its best weekly return of the year, rising 3.27 percent.  Along with Nike (NKE) shares jumping, investors welcomed good news from Wal-Mart (WMT), (CRM), Home Depot (HD) and Lowe’s (LOW). Nike has been a silver bullet for the Dow Jones Industrial Average, helping that index outperform recently and rise 3.35 percent on the week.

On Thursday, the athletic apparel maker announced plans for a share buyback, a stock split and a dividend hike; investors rewarded the firm with an increase of more than 5 percent. The home improvement giants were bolstered by the robust housing sector and helped lift both home construction funds as well as retail funds. The NASDAQ and Russell 2000 were up 3.57 percent and 2.45 percent for the week, respectively. The US Dollar and 10-year treasuries rallied, but crude oil headed lower, falling below $40 per barrel level. Copper also broke to a new 5-year low.

The number of Americans filing for first-time unemployment benefits fell slightly last week. This data points to continued strength in the labor market as claims stayed below the 300,000 threshold for the 37th consecutive week. This trend supports the opinion that the Federal Reserve will raise the benchmark lending rate at its December meeting. This position was discussed in the minutes of the central bank’s October policy meeting that were released on Wednesday. The following day during a conference sponsored by the San Francisco Federal Reserve, Vice Chairman Stanley Fischer said that some major central banks would move away from their near-zero interest rate policies in the near future.

Although a sharp drop in multi-family construction led to an 11 percent decline in housing starts last month, another positive sign for the Fed was the Consumer Price Index, which rose 0.2 percent. It was the first headline increase since July. Core CPI was also up 0.2 percent. Both numbers are within the Fed’s target range for inflation. While the Empire Manufacturing Survey showed weakness, it was counterbalanced by the Philadelphia Fed Survey, which showed a slight expansion in November.

Speaking at a conference on Thursday, Peter Praet, the Chief Economist for the European Central Bank, indicated that the central bank would implement new policies within the next few weeks. This sent the euro lower versus the U.S. dollar. The Bank of Japan’s monetary easing policies remained the same despite reports that the world’s third largest economy has once again slipped into recession. As a result, investors sold the yen versus the U.S. dollar. iShares MSCI EAFE (EFA) and iShares MSCI Emerging Markets (EEM) were up approximately 2.75 percent and 4.71 percent on the week.

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