Stocks did not do much on Tuesday, and ended up slightly higher, even after futures dipped in pre-market trading amid worrying geo-political news out of the Middle East.
First, the scoreboard:
- Dow: 17,830.96, +38.28, (0.22%)
- S&P 500: 2,091.42, +4.83, (0.23%)
- Nasdaq: 5,104.51, +2.03, (0.04%)
And now, the top stories:
- The big news story today was the downing of a Russian warplane by Turkey on the Syrian border. Russian president Vladimir Putin described the incident as “a stab in the back delivered to us by accomplices of terrorists”. Stock futures lost some ground pre-market, and West Texas Intermediate crude futures in New York spiked by as much as 3% to about $43.45 per barrel. Gold also rallied, in a risk-off trade, from a nearly six-year low to about $1,080.50 an ounce.
- The data calendar was packed: The second estimate of third-quarter gross domestic product (GDP) was 2.1%, in line with expectations, and improved from the advance estimate of 1.5%. Inventories swelled by $100.6 billion, and the drawdown was smaller than had previously been reported. Economic growth was also boosted by personal consumption (up 3%), government spending, and nonresidential fixed investment. Corporate spending fell 4.7%, the biggest drop since 2009.
- American consumers are losing confidence in the labour market. The Conference Board’s consumer confidence index for November was weaker than expected, mostly because of the bleak outlook on employment. The headline index was 90.4, a 14-month low, missing the forecast for 99.5. “While weaker consumer expectations pose downside risks for consumption growth, confidence surveys can be noisy from month to month,” Barclays economists noted to clients.
- Home prices rose more than expected in September. The S&P/Case-Shiller home price report showed a 0.6% rise month-on-month (0.3% forecast), and 5.5% year-on-year (5.10% expected).”The Case-Shiller indices continued to grow at a consistent pace as the summer came to a close, and in line with more recent data that continues to show stabilisation, if not quite normalization, in the U.S. housing market,” Zillow chief economist Svenja Gudell said in a statement.
- Today’s flattish stock-market action is exactly what the whole of 2016 could look like, if Goldman Sachs’ outlook unfolds.”Our year-end 2016 target of 2100 represents a 1% price gain from the current index level (2089), which itself is just 1% above the year-end 2014 level of 2059,” wrote the firm’s David Kostin and team in their year-ahead outlook. It would be “déjà vu all over again”, as the S&P 500 is up just 1.5% year-to-date.
- Bank of America Merrill Lynch also put out its outlook, but with a much further horizon. The bank sees the S&P 500 at 3,500 by 2025. Against a backdrop of slow growth and shrinking liquidity, 8% [compounded annual returns over the next 10 years] is compelling in our view,” Savita Subramanian and team wrote to clients. “With a 2% dividend yield, we think the S&P 500 will reach 3,500 over the next 10 years, implying annual price returns of 6% per year.”
- The Federal Reserve announced it is updated how it regulates and supervises the big banks. A ProPublica story last year detailed the story of Carmen Segarra, a Fed staffer who was fired after she raised concerns about the Fed’s oversight of Goldman Sachs. A Fed review found that 95% of staff felt they could raise conflicting views, although there was no formal process to do so. The Fed says that next year, it would create policies to encourage staff to speak up, and ways they can be responded to.
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