Daily Market Color

Stocks Extend Rally Post-Holiday, Oil Fluctuates Ahead of Next Week’s Meeting

Dow, S&P Reach Record Highs on Shortened Day  With very thin post-holiday trading volumes and US stock markets closing early at 1pm EST, the DJIA and S&P 500 managed to extend the week-long rally and hit new all-time highs today.  Utilities led the gainers (+1.58%), helping to offset a fall in energy shares (-0.6%).  Today, Black Friday, marks the official opening of the 2016 holiday season, which covers the last 10% of the year but generally accounts for 40% of annual sales for retailers.  Online spending today is forecast to exceed $3 billion for the first time in history, up 11% from last year.  Bond markets in turn, closing at 2pm EST, have also extended the general trend with a mild selloff, with Treasury yields/swap rates up 1-2 bps across the curve.  The US dollar is marginally weaker against other major currencies, falling 0.3% from its ten-year high set on Wednesday.

Oil Prices Fluctuate on Deal Speculation
With OPEC’s meeting in Vienna set for next week, investors have followed the rumor sentiment surrounding broad participation in a production cut among both OPEC and non-OPEC member nations.  Today’s initial reports showed promise that a deal would be reached after Iraq’s prime minister signaled that his country would indeed freeze production levels, prompting the price of a barrel of crude oil to trade over $48/barrel.  Later in the session, however, it was released that representatives from Saudi Arabia, OPEC’s top exporter, will not make any effort to attend informal talks geared towards expanding the reach of the agreement with non-OPEC member nations on Monday.  Saudi Arabia announced that it remains primarily focused on having a deal struck within OPEC first.  Oil prices have since shed 3.5% to $46.30 per barrel.

Japan’s Inflation Struggles Continue
As reported by Japan’s statistics bureau, consumer prices excluding fresh food, the Bank of Japan’s primary measure of inflation, fell for the 8th consecutive month (-0.4% YoY) in October, matching the nation’s longest streak of declines since 2009-2011.  The figure highlights Japan’s uphill battle to combat stagnant wages, lackluster consumer demand, and price wars developing between retail companies looking to capture a larger share of volumes.  The BOJ’s target for inflation has long been set at 2%, however monetary policy prescribed by the central bank over the past few years has failed to bring consumer price growth anywhere close to that level.  Interestingly, the election of Donald Trump is viewed by many economists as a positive for Japan’s CPI, as the Japanese yen has recently declined against the dollar, which should lead to increased import prices that will in turn be passed on to the consumer.  The current exchange rate sits near 113 JPY per dollar, the weakest Yen level in almost eight months.

Have a great weekend.


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