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Weekly Vantage Point | 11.9.15

Stocks Rose for a Fifth Week in a Row

November 9, 2015 – U.S. stocks ended mostly positive on Friday, as the largest monthly gain in payrolls this year helped boost investor confidence even as the Federal Reserve remains poised to raise interest rates. Economic data, together with an increase in merger and acquisition (M&A) activity, drove the S&P 500 to a sixth consecutive weekly gain. The benchmark equity index ended the week just 1.5% below its May 21, 2015 all-time high of 2,130. Around $47B worth of North American M&A deals were announced last week and $104.2B on a world-wide basis, reflecting a 66.5% year-over-year (YoY) increase. As the third quarter earnings season winds down, about 74% of the S&P 500 companies that have reported results have exceeded analysts' forecasts, while only 44% have beaten their revenue forecasts. S&P Capital IQ now estimates that third quarter earnings have declined 3.8% YoY, better than initial projections for a 6.1% decline.

Markit Economics' said on Monday its U.S. manufacturing PMI index increased to 54.1 in October, the strongest gain in business conditions since April. Commerce officials said Wednesday that factory orders declined a second month, while the latest monthly auto sales remain robust. On Friday, the U.S. Department of Labor said the economy created 271,000 jobs in October, widely exceeding economists' consensus forecasts for 182,000, which brought the unemployment rate down to 5% from 5.1%.

For the week, the S&P 500 rose 1.02%, the Dow Jones Industrial Average gained 1.40%, while the NASDAQ Composite returned 1.92%. Seven of the ten major sectors posted gains, led by a surge in Financials (+2.79%), Energy (+2.41%) and Technology (+1.97%). Utilities (-3.50%) starkly underperformed, falling the most last week. WTI crude oil futures sank 4.9% last week, while gold futures lost 4.6%, ending below the $1,100 for the first time since early August. Treasuries also declined last week, with the yield on 10-year Treasuries climbing over 18 basis points to 2.326%.

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Words of Wisdom

"There have been three great inventions since the beginning of time: Fire, the wheel and central banking."

Humorist Will Rogers

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Market Watch
Stocks 1-Wk MTD 3-Month YTD 1-Year
DOW 1.40% 1.40% 2.82% 0.49% 2.03%
S&P 500 1.02% 1.02% 1.30% 3.76% 5.52%
NASDAQ 1.92% 1.92% 2.09% 9.74% 12.25%
Russell 3000 1.20% 1.20% 0.63% 3.25% 5.12%
MSCI EAFE -1.54% -1.54% -6.46% 0.56% -0.87%
MSCI Emerging Markets 0.56% 0.56% -3.20% -8.94% -11.93%
Bonds 1-Week MTD 3-Month YTD 1-Year
Barclays Agg Bond -0.80% -0.80% -0.09% 0.34% 1.33%
Barclays Municipal -0.40% -0.40% 0.99% 1.76% 2.80%
Barclays US Corp High Yield -0.33% -0.33% -1.54% -0.10% -2.12%
Commodities 1-Week MTD 3-Month YTD 1-Year
Bloomberg Commodity -2.51% -2.51% -5.84% -18.28% -27.14%
S&P GSCI Crude Oil -4.43% -4.43% -0.30% -16.41% -42.87%
S&P GSCI Gold -4.69% -4.69% -0.20% -8.12% -4.79%
Source: MorningStar
Inflation Liftoff Expected Too
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Inflation Liftoff Expected Too

As of September, headline Consumer Price Index (CPI) inflation was running 0.0% on year average (oya), while core was running 1.9% oya. This gap is mostly due to the drop in energy prices that began in June of last year and dragged significantly on overall inflation; core and food price inflation meanwhile were more stable. As oil price base effects turn more supportive, we expect this gap to become less exaggerated, with headline inflation moving rapidly from 0.1% oya in 3Q15 to 1.6% oya by 1Q16 (in Figure 1 above). We expect core CPI inflation to move gradually to 2.0%.

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Week's Economic Calendar

Monday, November 9: No major releases;

Tuesday, November 10: Import & Export Prices, Wholesale Trade;

Wednesday, November 11: Veteran's Day, Equity markets open, Bond market closed, no releases;

Thursday, November 12: Weekly Jobless Claims, JOLTS, Treasury Budget;

Friday, November 13: Producer Prices, Retail Sales, Business Inventories, Consumer Confidence.

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Weekly Trivia

Today: What is the most expensive thing ever sold on eBay?

Last Week: When was the last inspection of Gold vaulted at Fort Knox and how much is there?

Answer: The last gold "inspection" at Fort Knox was on September 23, 1974, while the last official audit occurred sometime in 1953. Peak gold holdings were 20,000 metric tons during WWII, but how much remains is a closely guarded secret. Some estimate between 4,500 and 8,000 metric tons.

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