Stocks opened higher this morning on very light trade volume. The Dow and SPX are currently up 45 pts & .43%, respectively. By now you are certainly aware that the Santa Claus Rally did show up. The Dow has rallied for seven straight days. The SPX briefly touched an all-time high in early trading and is now up 15% year-to-date. Even the Russell 2000 (small caps) Index is participating today, up .68%. All ten market sectors are up at the moment, led by utilities. In fact, 6 of 10 sectors are currently setting multi-year highs. Commodities are mixed: copper, oil and natural gas are down; gold is up. WTI crude oil is hovering around $55/barrel after having bottomed at $54 back on the 18th. Since then, the S&P 500 Energy Sector has rallied 3%. Bonds sold off hard over the last several sessions, but yields are roughly unchanged today. The 5- and 10-year Treasury yields are trading at 1.76% and 2.26%, respectively.
Industry research firm ComScore says online holiday shopping could rise 16% y/y in the November/December period. They project total online spending at $61bil, which would be a record. Another research group, ChannelAdvisor, notes Amazon.com’s sales surged 20% from Black Friday through 12/21. IN the US, online makes up about 6.5% of all retail sales. Yet another source, SpendingPulse, estimates total US retail sales grew 5.5% y/y from Black Friday through Christmas Eve. That agrees (roughly) with what Mastercard is saying.
Saudi Arabia keeps insisting it will keep oil production at 30 million barrels per day, and doesn’t mind oil prices at $60/barrel or even lower. But a Bloomberg interview with a former economic adviser to the Saudi government suggests otherwise. John Sfakianakis believes the country’s 2015 budget assumes oil prices hover around $80/barrel. Oil exports are absolutely key for Saudi Arabia’s budget, accounting for nearly 90% of total revenue. Mr. Sfakianakis says this is a sign the Saudis believe an oil rebound is imminent.
Bloomberg reports Russia is on the brink of recession. If oil prices average $60/barrel, the Russian economy could shrink by about 4% next year. Economists, according to a recent survey, believe the recession could last two years. The Russian government is selling down its foreign currency reserves in order to defend the Ruble (to fight rising inflation), but that’s not sustainable over the long term. The government will likely be forced to restructure its budget (i.e. cut spending) to address the issue. For an idea of the scale of the problem, understand that the Ruble has lost nearly 40% of its value against the US dollar this year.
MikesMarketUpdate 