Last Week in Brief: 12/22

December 22, 2014

Markets rocketed higher last week after the uncertainty of crashing oil prices had caused markets to plummet.
Crude oil plummeted beneath $58 a barrel. The first time at these depths since May 2009. For the week, crude fell 12 percent. So continuing an oil-price decline the likes of which we've not seen since the 2008 financial crisis.

Investors were not prepared for the recent pullback. Nor its rapid rebound. Of course, they never are. Two weeks ago, the Dow was flirting with the 18,000 level for the first time ever. That, following an excellent November jobs report. Further, the drop in oil was going to provide a bit of manna to would-be holiday shoppers. And with December historically representing the best month of the year for stocks, investors were already putting their feet up, sipping some eggnog, and waiting for their Santa Claus Rally to kick in.
Still, don't get all Grinchy on us. The S&P 500 briefly pulled back, scarring nervous investors. Yet, following that retrenchment, it established a the set up for what appears to be a year-end rally. Or, perhaps a beginning-of-the-year rally. One that could be significant.
The Good
The Keystone Pipeline has a decent shot at bi-partisan passage in the new Senate session next year... The Fed remained dovish on its interest rate comments... Confidence in the economy is rising... Relations with Cuba are normalizing... Leading economic indicators strengthened... ISM surveys were strong, corresponding to economic growth of 5.1%... Declining oil prices provide benefit to consumers and a long-term boost to stocks prices... Investor sentiment has turned more negative - a contrarian bullish signal... Chinese stocks are strengthening... Employment gains continue to improve...
The Bad
Junk bonds were crushed on energy sector fears, hurting the banks that hold and underwrite them... Fed policy was more hawkish than the Street understands... Lower oil prices threaten weaker U.S. fracking concerns... The Ford F-150 pickup, often cited as an indicator for construction and small business, has seen sales decline recently... Factory orders have recently decelerated...
The Ugly
Congress is back in session! We all wish to avoid a government shutdown. Yet, the GOP is emboldened, and Democrats are seething. As evidenced by the release of the so-called "Senate Torture Report." We'll likely see failed compromises, unrealistic proposals and underhanded deals. Something to look forward to, I guess. Stay tuned!
Weekly Results
Major markets finished mixed last week. The DJIA rose 3.03%, the S&P 500 gained 3.41%, and the Nasdaq declined 2.48%. Small cap stocks rose 3.78%. And the 10-year Treasury bond yield rose 8 basis points to 2.16%. Gold fell 26.15 per ounce, or 2.14%.

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