Securities Markets

Instructions: 1. An individual whose livelihood depends on knowledge and understanding of developments in U.S. securities markets has approached you at 8:00 am on Friday, January 20. For some reason, she has been away from her job and is totally unaware of anything that has transpired in those markets since they closed on Friday, December 30. Using a font size no smaller than 11, margins no less than 0.8”, and one side of an 8½ x11” sheet of paper, bring her up to date. [Note: Your summary should address (i) the direction, magnitude, volatility, and significance of the changes in stock prices and Treasury bond yields during the period, (ii) major news (e.g., earnings reports, macroeconomic reports, government policy changes, international events) that has affected the markets, and (iii) overhanging concerns for the securities markets in the weeks ahead.]#1

Economics 334                                                                                                                  Professor Kenney

Securities Markets Briefing                                                                                               January 20, 2016

 

U.S. Equity Market Indices and Treasury Market Yields, 12/31/2015 – 1/19/2016

Volatility of equity prices—5 ‘up’ days in DJIA and S&P500 but sharp ↓ on 6 trading days (3 days > 1% and 3 days > 2% (3% for NASDAQ)) b/c of ↓ oil price, upheaval in Chinese equity market and fears of slowing global growth

Treasury yield curve ↑ ~10 bp at very low end (1-3-mo maturities) b/c of recent Fed action, but ↓ ~15 bp at 6mo-2yr  and ↓ ~20-25 bp at long end (3yr-30yr) b/c of safe haven flight and reports of zero inflation

 

Macroeconomic indicators/news :

l-t-e overall retail sales; Commerce Dept reports [1/15] retail sales ↓ 0.1% in Dec (w/ & w/o autos)—overall 2.1% ↑ in 2015, appreciably slower than in 2014; preliminary Jan reading [1/15] of UMich index of consumer sentiment →  consumer spending will continue at moderate pace

 

Bellwether earnings/revenue guidance & significant company news :

 

Overhanging Concerns for Markets :  Continuation of recent rapid decline in equity prices and price of oil; sustainability of earnings growth b/c of slowing global growth (e.g., China) and impact of stronger dollar on exports and emerging market debt

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