The Ruble drops another 12+% to 72 RUB / USD. It just broke 60 yesterday and today its through 70, at one point breaking above 80, ... not a positive trend. The Russian central bank hiked its key interest rate to 17% from 10.5%. The yield on ten-year Russia government bonds jumped over 300 bps to 16.5%.
State-side, we had the release of housing starts. The numbers were mixed after factoring in the positive revisions of last months numbers. The S&P was indicated as low as -0.9%, but has subsequently recovered to down only -0.2%. I am now expecting the FOMC to be dovish given the recent turmoil in oil and the Ruble. The strong IP number yesterday was driven by autos and energy, but we know energy is weakening, so this number should be discounted.
Empire State Manufacturing Survey indicates business activity for New York manufacturers declined. The index printed -3.6 versus an expectation of +12.0. These regional surveys are often volatile, but this report is the first negative reading in the past 2 years. More importantly, the Federal Reserve will release its Industrial Production report at 9:15 ET.
Spain, up 1.0%, is the strongest market in Europe today. Notably, WTI has also regained its footing around $58 / bbl. Today will be interesting to see how large of a bounce the market can muster. Of course, it will be crucial to see this bounce hold.
Big week of insider buying last week. Econintersect.com reports insiders buying $190 million of stock last week versus $40 million the previous week. Insiders sold $1.34 billion last week versus $1.47 the previous week.
The Russian Ruble is down another -3.8% today to 60.5 RUB / USD. The damage to the Ruble is shocking. A 50% decline in less than one year is staggering. Scary to think of the potential aftershocks of this devaluation.
This interactive article from the Washington Post is depressing. Median income peaked for 81% of U.S. counties.
Dubai stock market down -7.6% today (yes, they are open on Sunday). Saudi Arabian equities down -3.3% and Abu Dhabi down -3.6%. More talk today out of OPEC that there will be no production cutback and the market will correct on its own. Translation: someone else is going to cut back.... who ever feels the most pain first!. Where is the pain going to be felt first? Based on this nifty little chart published by businessinsider.com, it looks like Canada and then the U.S.
The semiconductor industry remains one of the stronger parts of the economy, and Altera (ALTR) released their 2015 guidance last Wednesday AOC. The guidance includes gross margin expansion to the 67%-69% range from the current gross margin around 66%-67%. Altera also guided down R&D and SG&A expenses and capital expenditures. The stock had a positive reaction Thursday, but was taken down in the market selloff Friday. Keep an eye on ALTR, because if 2015 pans out as management forecasts, this stock should move higher.
I am excited to use my new website / blog design. Global launch today in 144 countries and 14 languages!
The market had a terrible week this week, closing on a particularly bad note. The last hour of trade on Friday was a straight shot down -1%. What took the market down? Energy the culprit again. This oil selloff has been swift and painful.
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The economic data was pretty good this past week, particularly retail sales on Thursday. The market didn't care though. The only thing that matters to stocks right now is the price of oil. Rig counts came down a bit this week as measured by the Baker Hughes Rig Count. This is the first week of lower rigs. The drop was almost entirely in the vertical trajectory. This makes sense because oil & gas companies have stated the first capital expenditures to be cut will be early stage exploration. Vertical trajectory drills are mainly used in exploration while horizontal drilling is used to increase production of an existing well.
Monday will be interesting, but I'm not counting on a quick market rebound. The santa claus rally looks less and less likely with each percent the market drops. The S&P is only down -3% from its peak, 2074 to 2012. That's nothing compared to the energy sector. The XLE is down 27% from its high in June! Take a look at the chart of XLE; that's a nasty selloff!
Michael Grove, CFA