Stock Crash In Slow Motion?
Business Insider today in a report entitled “STOCKS TANK, OIL PLUNGES, BONDS SURGE: Here’s What You Need To Know”  paints a slightly chilling image of the week we just had, economically speaking. Written by journalist Myles Udland, he discuss how this week was the worst week in over three years, why the oil prices are plunging (and why that is a very, very bad thing), and how bonds are surging.
Are we on the brink of yet another stock crash or are we merely witnessing one in slow motion? Udland writes:
Stocks tanked, the price of oil fell, and bonds rallied on Friday. For the week, the Dow Jones lost 3.7%, the blue-chip index’s worst week since November 2011. The S&P 500 lost 3.5%, its worst week since May 2012, and the Nasdaq lost 2.7% during the week.
First, the scoreboard:
Dow: 17,280.8, -315.5, (-1.8%)
S&P 500: 2,002.3, -33, (-1.6%)
Nasdaq: 4,653.6, -54.5, (-1.1%)
And now, the top stories on Friday:
1. Oil was the big story again on Friday. West Texas Intermediate crude oil futures fell below $58 a barrel for the first time since May 2009 as crude oil continues to tumble. After starting the week at around $65 a barrel, WTI fell more than $7 over the course of the week. Brent crude oil, the international benchmark, also made new lows, falling below $62 a barrel.
2. As oil sold off and stocks fell, US Treasury bonds, seen as one of the safest investments an investor can make, continued to rally, with long-date bonds the big winners. The yield on the 10-year Treasury bond fell below 2.1% on Friday and settled at a new low of 2.08% for the year. The 30-year bond also rallied, falling to 2.74%, the lowest yield in over two years.
3. Bond yields around the world are falling, with German bond yields going negative for durations out to four years and the 10-year bond making a new record low of 0.623% on Friday.
4. On Friday, the University of Michigan’s preliminary reading on consumer confidence for the month of December came in at a nearly eight-year high of 93.8, blowing away expectations for an 89.5 reading. Following the report, Paul Dales at Capital Economics said that coupled with Thursday’s better-than-expected retail sales report, the holiday shopping season looks like it could be the strongest in nine years. Deutsche Bank’s Torsten Slok also circulated a chart showing that those in the lowest third of household incomes had the biggest rise in confidence this month, bolstering prospects for a strong holiday season.
5. Producer prices in November fell more than expected, declining 0.2% against expectations for a 0.1% decline. According to the Bureau of Labor Statistics, 60% of the decline in prices for final demand goods can be attributed to the index for gasoline, which dropped 6.3%.
6. In Federal Reserve news, noted dove Narayana Kocherlakota announced that he will stepping down from his post as president of the Minneapolis Federal Reserve in 2016. Kocherlakota has recently been a dissenter at Federal Open Market Committee meetings, urging the FOMC to favor a more accommodative policy than it has currently pursued. The Fed will hold its last meeting of the year next week, making its final monetary policy announcement of 2014 on Wednesday.
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