Your Thursday Market Blip 11/12/15

Your Thursday Market Blip 11/12/15

Rate hike and falling commodity concerns pushed stocks lower today as the Dow retreated 254 points to 17,448. Trading volume spiked indicating the big boys were taking money off the table. The S&P 500 slipped into the red again for the year.
Yesterday, Macy’s Department store reported disappointing numbers which highlighted the fact that consumer sales have weakened and inventories at department stores are on the rise. This signals some retailers could have a tough holiday selling season but conversely it also signals that consumers might see lots of deals when companies try to work down inventory. For reasons that are currently unknown, the US consumer seems to be in hiding even though prices of gasoline are down and people are paying less at the pump. One reason for the lack of consumer strength might be correlated to falling oil and material prices and the ripple effects of slowdowns in these areas. For instance Alcoa Aluminum recently announced a curtailment of smelting operations due to low prices and global dumping by China and other EM nations. Here in Washington State, Alcoa will idle its Intalco and Wenatchee primary aluminum smelters. This was announced just recently and consumers in cities like Wenatchee might pull in the reins as a result. This same scenario is being played out in places like Peoria, Ill where Cat is laying off and Shelton, WA where sawmills are being shuttered. Offsetting these cuts is hiring by tech firms like Amazon and Facebook and in home construction related businesses as housing continues to recover. On average the economy is doing ok but the average seems to be just a measure of extremes.
The current oil glut continues to push prices lower. WTI crude fell today as stockpiles added another 6.3 million barrels and news that Iraq is shipping 19 million barrels of crude to US ports. WTI crude today fell over 3% to close below $42 per barrel. Barclay’s Bank issued a research report about the pending US interest rate hike and in it they suggested the price of North Sea Brent oil could rise to $70 per barrel from its current level of $45. This goes counter to a recent IEA report saying oil prices could stay low for another 5 years due to a supply demand imbalance.
In Europe the ECB indicated that core inflation pressures are easing which raises the specter of another round of QE in the EU. Central bankers in Europe are on “deflation” watch.