The major US stock market averages sank at the open (Dow -119 pts; SPX -.6%). Consumer staples, tech and utilities are leading the market lower. This comes despite a small bump in oil. WTI crude oil is up .27% to $36.70/barrel. Energy is the only sector in the green in early trading despite the fact that the dollar is a bit stronger on the day. So for the moment, the familiar patterns are not holding true. Bonds prices are higher as yields tick lower. The 5- and 10-year Treasury yields are trading at 1.76% and 2.27%, respectively.
So the S&P 500 Index and Dow Jones Industrial Average are going out roughly flat for the year. And a CNBC anchor said this morning, “This has been the hardest year to make money in traditional assets since 1937.” I’m not exactly sure what that means, but clearly we’ve been in a low return environment for stocks, bonds and commodities. Commodities have been a terrible investment this year. Copper is down nearly 28%, the iShares Gold ETF (GLD) is down 10.6%, and of course oil has fallen from $50/barrel to $36. Gasoline prices are at their cheapest since 2009, averaging $2.40/gallon this year. Bonds yields are up and most of the major fixed income ETFs are lower for the year (TLT, LQD, HYG, AGG). Speaking of interest rates, the average 30-year US mortgage rate just went over 4% for the first time in five months. Freddie Mac’s chief economist projects the rate will climb to 4.7% by the end of 2016.
The Chicago Purchasing Managers Index (PMI) collapsed to 42.9 this month, the lowest reading since the summer of 2009. The forward-looking new orders component collapsed to 38.8, which is very contractionary. In addition, production, backlogs and employment components are all in contraction (below 50). This report suggests the manufacturing sector in the Chicago area is in recession. At the same time, US consumer confidence is rising throughout the US. The Bloomberg Consumer Comfort Index rose to 43.6 this week and I’d point out that the index has been up around 8-year highs for all of 2015.