View PDF


The BLS stated the U.S. added 211,000 jobs in November and the
unemployment rate remained the same at 5.0%. According to the Labor Department, initial jobless claims increased by 9,000 to 269,000 in the week ending November 28, 2015. The four-week moving average was 269,250. The ADP National Employment Report stated the private sector added 217,000 jobs in November.


CPI strengthened in October as headline consumer prices rose 0.2% m/m, on track with consensus expectations, helped by the durability in food and oil prices. Headline inflation is currently up 0.2% from October 2014 delayed primarily by the energy index which has fallen 17.1% in the same time. Core CPI inflation continued to have a sturdy 1.9% y/y growth and increased by 0.2% m/m with core services prices rising 0.3%, driven by a 0.8% rise in medical care services. With the burden from energy prices set to dissolve in early 2016, headline inflation should shift closer to the Fed’s 2.0% mandate in the medium term.


The 10-year U.S. Treasury note yield increased 0.06% to 2.28% for the week ending December 4, 2015.The FOMC left rates unchanged in October, and indicated in its policy statement that it is concentrating more on the near-term condition of the U.S. economy rather than the longer-term outlook. The committee reduced their attention on international developments and their references to the U.S. economic condition slightly improved, stating that although the “pace of job gains slowed” they still sustain that labor market slack has decreased. The committee included a reference to “its next meeting” and while this is not a physical change from previous statements, the Fed seems to be preparing investors by taking a more hostile tone and hinting that a December rate hike is still a possibility.


The U.S. economy grew at a 2.1% q/q saar pace, the BEA showed in its second estimate of 3Q 2015 GDP. While the second estimate restated expansion was up from 1.5%, the fundamental sources of growth show a larger inventory overhang than originally estimated. Inventory accumulation in the first half of the year deducted 0.6% from 3Q growth, revised up from the original estimate of -1.4%. However, the lower-than-expected negative hit from inventory accumulation means a forceful headwind to future growth as the pace of inventory accumulation returns to average levels. Consumption remained steady in 3Q, with consumer spending increasing 3.2% y/y following a 3.3% rise in 2Q. The ISM posted manufacturing contracted and services increased at a slower pace in November. The NAR stated pending home sales increased in October. The Commerce Department posted factory orders rose 1.5% and construction spending increased 1.0% in October.


According to S&P Dow Jones Indices, as of November 30, 2015, of the 488 S&P 500 Index companies reporting earnings, 68.0% beat analysts’ estimates. As earnings season comes to an end, two of the major themes this year, high U.S. dollar and falling energy prices, definitely continued to cut down earnings. The estimate for y/y S&P 500 EPS in 3Q has now dropped 15.2%, but ex-energy has increased by 1.9%. Looking forward into 2016, these themes should continue, but the impact from low prices should begin to die down and point to stronger earnings growth.



Leave a Reply

Your email address will not be published. Required fields are marked *