Stocks gapped down at the open again this morning. The Dow and SPX are currently off 170 pts & .8%, respectively. Every sector except utilities is lower on the day. Commodities are mixed. Gold and copper are up over 1.50%; WTI crude oil turned around and is trading up toward $64/barrel. Yesterday oil hit a fresh 5-year low around $62/barrel. Remember, the Saudis say they are comfortable with oil at $60/barrel. It’s beginning to look like gasoline prices will hover around $2.50/gallon by the end of the year. Bonds are higher on the day. The 5-year Treasury yield ticked down to 1.62% and the 10-year edged down to 2.20%.
This morning on CNBC, Jim Cramer explained why he thinks stocks are selling off. This probably has a lot to do with the calendar. Institutional investors are likely locking in gains toward the end of the year. So it’s a temporary, orderly kind of thing and in no way implies the stock market is overvalued. He pointed out yet again that “We’re stronger than the other guys overseas,” and noted falling oil prices are a tailwind to our economy.
Wharton professor Jeremy Siegel, often a stock market bull, says 2015 will see a 10%+ correction. He advises investors not to try and time it, because it’s impossible to predict when it will come, and impossible to know what gains will be achieved between now and then. The market still looks attractive and bond rates will come up very gradually. Rate normalization won’t “tank stocks.” He thinks the Fed-funds rate will end 2015 somewhere in the range of .75% – 1.0%. My sense is that Mr. Siegel’s view is now becoming consensus on Wall Street.
The Nat’l Federation for Independent Business (NFIB) Small Business Optimism Index rose to 98.1 in November. That’s the highest since early 2007. Over 20% of small business managers said they’ve recently increased employee compensation levels and another 15% say they plan to do so in the near future. The NFIB’s chief economist had this to say about the results: “Labor market conditions are suggestive of a tightening, which will put further upward pressure on compensation.” So that could be a very early sign of accelerating wage growth. Separately, we got the JOLTS Job Openings report this morning, and it is hovering around a 10-year high. The number of job positions waiting to be filled rose to 4.83 million. Accelerating end demand is forcing employers to look for additional workers.
MikesMarketUpdate 