- Markets inch lower to begin data-heavy week. U.S. equities are pulling back modestly this morning as investors pause following a record-setting week for major indexes and ahead of a swath of economic data due out this week, including Friday’s non farm payrolls report. Volatility in WTI crude oil prices is also adding to caution amid doubts a deal will be reached at Wednesday’s OPEC meeting. As expected, Friday’s shortened session saw low volume, and the major averages all moved modestly higher (S&P 500 +0.5%); utilities (+1.4%) and telecom (+1.1%) outperformed, while only the energy sector (-0.4%) lost ground on the day, trading lower alongside a 3% drop in oil. Asian markets finished mostly positive overnight Monday, with the exception of the Nikkei (-0.1%) due to a strengthening yen. Italy’s MIB (-0.9%) is leading the retreat in European stocks ahead of Sunday’s constitutional referendum. Finally, oil is back in positive territory by over 2% ($47.15/barrel) after seeing sharp declines overnight, COMEX gold ($1186/oz.) has advanced 0.6% after touching nine-month lows on Friday, and the yield on the 10-year Treasury is down 2 basis points to 2.33%.
- Corporate Beige Book shows improved sentiment among corporate executives, based on the use of more strong words relative to weak ones in earnings conference calls during Q3 2016 earnings season. Talk of recession was virtually non-existent, election comments were minimal, and fewer mentions of currency suggested limited Brexit disruption and reflected a smaller currency drag on earnings. Meanwhile, oil and China continued to garner a lot attention. We believe Q3 results were strong enough to justify the improved tone from corporate executives and support our expectation for mid- to high-single-digit earnings growth in 2017.
- Soft Black Friday shopping weekend reflects shifting retailer behavior, not consumer weakness. The National Retail Federation (NRF) said shoppers spent 3.5% less over the four-day Black Friday weekend than they did in 2015. The NRF said the decline in spending was a function of earlier promotions and longer-lived discounts. The trade group maintained its 3.6% growth forecast for holiday spending. Within these sales totals, online sales were very strong, rising 18% year over year on Thanksgiving and Black Friday, according to Adobe, and more people shopped online than in stores over the weekend.
- OPEC deal in doubt? Headlines are all over the place regarding the likelihood of a deal. Comments out of Saudi Arabia suggesting the oil market would balance itself in 2017 even without a deal, coupled with Iran’s continued push for an exemption, suggested a deal was unlikely. On the flip side, Saudi Arabia’s comments are likely intended to increase negotiating leverage, while Iraq has stated its desire to cooperate with other OPEC members to reach an agreement. This one is tough to call, but our bias would be to buy on weakness in the absence of a deal should oil prices return to $40 a barrel or lower.
- S&P 500 scores more new highs. The week of Thanksgiving tends to have a bullish bias and that played out this year, as the S&P 500 gained all four days of the week to close higher by 1.4%, the third straight higher weekly close. Interestingly, this was the third consecutive election year that the week of Thanksgiving was higher all four days. In the process, the S&P 500 closed at a new all-time high four consecutive days for the second time this year (it did it in July as well), but the index hasn’t closed at new highs five straight days since November 2014. Speaking of November, the S&P 500 is now up 4.1% for the month, the second best November return going back 14 years. As another way to show how strong the market has been, the S&P 500 hasn’t violated the previous day’s low for an amazing 14 consecutive days, which is the longest streak since 15 in a row in November 2004.
- Small caps continue to soar. The Russell 2000 (RUT), a proxy for small caps, is up an incredible 15 days in a row. This now ties the streak of 15 in a row from February 1996 for the second-longest win streak ever. The record is 21 straight green days in 1988. Lastly, the RUT has made a new high nine straight days for the first time since September 1997 and the last time it made it to 10 in a row was May 1996.
- Here comes December. The upcoming month is full of potential market-moving events. Historically, December is a strong month for the S&P 500; since 1950, no month sports a better average gain or is positive more often. Still, with the first Federal Reserve Bank (Fed) rate hike of the year likely coming in the middle of the month, the potential for a volatile month is much higher. Factoring in a highly anticipated OPEC meeting, the November employment report, elections in Austria and constitutional referendum in Italy, and a European Central Bank (ECB) meeting – you have all the ingredients for some big market moves in December. We will take a closer look at all of these events, along with the Santa Claus rally.
 Please note: The modern design of the S&P 500 stock index was first launched in 1957. Performance back to 1950 incorporates the performance of predecessor index, the S&P 90.
- ECB’s Draghi Speaks in Brussels
- OECD releases 2017 Economic Outlook
- GDP (Q3 – Revised)
- Dudley (Dove)
- Germany: CPI (Nov)
- Personal Income and Spending (Oct)
- Chicago Area PMI (Nov)
- Beige Book
- Mester (Hawk)
- OPEC Meeting in Vienna
- China: Official Mfg. PMI (Nov)
- China: Official Non-Mfg. PMI (Nov)
- China: Caixin Mfg. PMI (Nov)
- ISM Mfg. (Nov)
- Vehicle Sales (Nov)
- Mester (Hawk)
- Employment Report (Nov)
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