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Market Update

Upbeat December Stock Start is Possible as Spending Brings Street Cheer

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December 1, 2015

U.S. stock indexes pointed to a higher start for December, a day after a modestly weaker final November session slightly trimmed monthly gains. Asian markets advanced amid hopes weak data justifies monetary stimulus there, while Europe’s stocks shifted between gains and losses. Crude oil tipped above $42 a barrel.

Holiday spending, including on cars, is expected to color Street action, but trading could be limited ahead of back-loaded events this week (see the full economic calendar below). The potential newsmakers include Thursday’s European Central Bank (ECB) policy decision, Friday’s release of November job-market data, and an OPEC meeting in Vienna.

Industry economists widely expect the ECB to extend its quantitative easing program and possibly move the deposit rate further into negative territory.

Policy expectations are different closer to home, of course. Consumer spending and the pace of hiring are two chief metrics under watch at the Federal Reserve, which meets in two weeks. Short-term Fed funds futures market traders have priced in a 78% chance that the Fed activates the first interest rate hike since 2006 when it wraps a two-day session on December 16. That’s according to pricing calculations provided on the CME Group’s FedWatch Tool.

SPX stock chart

FIGURE 1: 2100 LOOMS.

The S&P 500 (SPX), charted on the thinkorswim® platform, finished with November gains but has so far been contained below the psychologically significant 2100 line. Data source: Standard & Poor’s. For illustrative purposes only. Past performance does not guarantee future results.

China Pauses (Again). The Chinese government said Tuesday the country’s official manufacturing purchasing manager index fell to 49.6 in November from 49.8 in October. It’s the lowest reading since August 2012 and the fourth consecutive month below the benchmark level of 50. A reading above 50 indicates an expansion in activity, while a figure below that level indicates a contraction.

Flying Off the Lot? Auto sales data sprinkles in today. A WardsAuto forecast called for U.S. light-vehicle sales to reach an 18.4 million-unit seasonally adjusted annual rate in November, leading to the first three-month streak of 18 million-plus results. Barring a horrible December, that puts annual sales on pace for a record year. Industry analysts have said brisk sales are due to the long average age of existing cars on the road, cheap gasoline, relatively easy credit for car loans, and an improving job market.

Amazon, Apple Are Upbeat. Amazon.com (AMZN) said Tuesday the Thanksgiving holiday weekend marked a record sales stretch for its own devices, which it said jumped more than three times compared with the Thanksgiving period last year. Amazon’s Fire devices were the best-selling products across its platforms, with the tablet, TV and TV Stick among the favorites, according to a company release. Shares were modestly firmer in early action. Meanwhile, a Global Equities Research note said an expanded distribution of Apple (AAPL) products through third-party vendors looks to have helped spur sales of iPhones, Apple Watches, iPads, and Apple TV boxes. AAPL shares are up some 4.5% over the last three months, lagging a 6.7% gain for the Dow Jones Industrial Average in that time.

Good Trading,

JJ

@TDAJJKinahan

economic release calendar

FIGURE 2: ECONOMIC AGENDA.

This week’s U.S. economic report calendar. Source: Briefing.com.

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