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Investors Still Gobbling Up Shares—Weekly Market Review

Jerry Webman, Ph.D., CFA

Chief Economist

The great rally of 2013 continued last week, with the S&P 500 Index notching its third consecutive month of gains. Trading was relatively light, with U.S. markets shuttered on Thanksgiving and closed early on Friday. If nothing else, the early close gave investors (and everyone else) the opportunity to attend to that unique American tradition: Seeking out Black Friday deals.

The malls were generally crowded with an estimated 140 million Americans visiting retail stores over the past four days. The National Retail Federation expects retail sales to be up nearly 4% to $602 billion during the last two months of the year, higher than last year's growth, but below the pace seen before the recession.

If the crowds at the malls appeared a little less dense than usual, the record $1 billion of online sales completed on Thanksgiving day may be the reason, as retailers pulled demand forward from Black Friday and the weekend by opening doors on Thursday. Final numbers will show whether the controversial step of opening the doors early only pulled demand forward rather than actually creating additional receipts.

Thanksgiving, of course, is fundamentally about something more than shopping, and I hope my readers all had a chance to spend some quality time with friends and family. With 2013 nearing an end, I wrote a blog post last week highlighting what I’m thankful for. Last week’s economic data bore on the second item on my list, a gradually improving economy—both the “gradually” and “improving” parts, in fact. We continue to see evidence of what we’re calling “NILE,” non-inflationary, lackluster, expansion in the U.S., but growth nonetheless.

Mixed U.S. Data

With mortgage rates higher, improvement in the housing market has slowed since last spring, but tight supply continues to support prices. The S&P/Case-Shiller 20-City Index showed home prices rising 13.3% year over year through September, the biggest annual gain since the financial crisis. According to a separate report released last week, permits for new construction rose a solid 6.2% in October, with significantly greater strength seen in the multi-family component—a trend we’ve been seeing all year. Not all housing indicators are pointing up, however. The National Association of Realtors’ Pending Home Sales Index dropped for a fifth consecutive month in October, after having risen sharply since mid-2010.

Last week also brought some fresh data on manufacturing, including a solid November read for the Chicago Purchasing Managers’ Index (PMI). At 63.0, the index was lower than it was in the preceding month, which saw the biggest monthly increase in over 30 years. Although it’s a regional report, its strength bodes well for national-level PMIs, which have a decent record of capturing inflections in the economy and have been trending higher for much of the year. As with the housing market data, however, not all was rosy in manufacturing. Orders for durable goods fell 2.0% in October, perhaps reflecting a degree of hesitancy among companies amid the government shutdown drama. Nondefense capital goods orders excluding the volatile aircraft segment, a proxy for capital spending, fell 1.2% in October after having declined by 1.4% in September. The second half of this year has seen something of a divergence in survey reports of spending plans, and actual spending (a similar trend also holds between hiring plans and actual hiring). Animal spirits have yet to emerge in force, and we’ll need to see a greater willingness by businesses to take the risk of hiring and investing before growth really picks up speed.

On the consumer front, last week brought mixed messages on consumer sentiment from two different surveys, but both confirm that consumers’ outlook took a hit in the fall, likely due, in part, to the shenanigans in Washington, D.C. Hiring remains fairly lackluster, but lower energy prices continue to ease pressure on consumers’ pocketbooks. In fact, Americans will have tens of billions of dollars at their disposal this year that otherwise would have gone into the gas tank. Time will tell if a meaningful portion of these savings is finding its way to retailers this holiday shopping season. But don’t look for me in the mall.


The S&P 500 Index is a market capitalization weighted index designed to measure the performance of 500 domestic large cap stocks in the United States.

The S&P/Case-Shiller 20-City Home Price Index is designed to measure housing prices in major U.S. cities.

Indices are unmanaged and cannot be purchased directly by investors. Index performance is shown for illustrative purposes only and does not predict or depict the performance of any fund. Past performance does not guarantee future results.

Special risks: Mutual funds are subject to market risk and volatility. Diversification does not guarantee a profit or protect against loss.

These views represent the opinions of OppenheimerFunds and are not intended as investment advice or to predict or depict performance of any investment. These views are as of the open of business on December 2, 2013 and are subject to change based on subsequent developments.


Shares of Oppenheimer funds are not deposits or obligations of any bank, are not guaranteed by any bank, are not insured by the FDIC or any other agency, and involve investment risks, including the possible loss of the principal amount invested.

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