It’s been a particularly bad start to the first full week of 2015 on Wall Street, at the major indexes were pummeled Monday in the wake of further drops in oil prices.
The Dow Jones Average was down 331 points—nearly a full 2 percent—as oil continued its freefall, falling more than 5% and ending the day below the $50 per barrel benchmark set by many experts. Major producers such as Exxon Mobil and Chevron saw their stock prices fall with the price of crude oil.
The Chicago Board Options Exchange (CBOE) Volatility Index, a measure of investor uncertainty, was up nearly 20 percent.
Even positive reports from U.S. automakers weren’t enough to help stocks recover, as the major indexes went into the later part of the afternoon hoping to stop the bleeding.
The next-to-last-day of 2014 was a tumultuous one on Wall Street, as low volume trading led to a decline of almost 2% in the utilities sector.
Overall, 2014 has been a positive year for utilities, which are up more than 25%. That’s why many experts were caught off guard by Tuesday’s struggles.
In fact, it was a bad day for stocks worldwide on Tuesday, as continued worries over the Russian economy were joined by a new concern in Europe. Greece failed to elect a president Monday, leading to increased speculation that the nation could ultimately depart from the European Union. Most major European and Asian indexes lost 1% or more Tuesday.
The Consumer Confidence Index—one of the few pieces of data expected this week—came in this morning at a lower-than-expected 92.6.
Wednesday was a short, quiet day on Wall Street as the markets closed at 1 p.m. in observation of the Christmas Eve holiday.
During the brief trading day, most investors chose to focus on the weekly jobs report, where claims fell below 300,000 to bring some holiday cheer to the employment market. Pharmaceutical companies experienced a slight bounce, after the biotechnology sector was hit hard on Tuesday in the wake of concerns over prescription costs in the coming year.
The big stories remained the ongoing plummet of oil prices, coupled with further declines in the Russian economy—this time based off news of the country’s credit rating falling to near-junk status.
The market will remain closed tomorrow for Christmas Day before re-opening Friday.
Here were the final numbers from Wall Street on Wednesday:
The crisis in Russia worsened Tuesday when Standard and Poor’s (S&P) placed the nation on negative credit watch.
In a statement, S&P said that the move “stems from what we view as a rapid deterioration of Russia’s monetary flexibility and the impact of the weakening economy on its financial system.”
The organization added that there is at least a 50 percent chance that Russian credit will be reassigned to junk status within 90 days.
Russia’s rating was dropped to a BBB-, which is the lowest possible rating a country can receive while still being considered ‘investment-level’. The next step down would be ‘BB+’ or ‘BB’, which would place Russia in the oxymoronic category of ‘highest speculative grade credit rating.’
Ratings begin at AAA, which is considered to be an extremely strong capacity to meet credit obligations. From there, the scale slides to AA and A before moving into ‘BBB’, which is considered somewhat of a danger zone for a nation being dropped below investment grade.
(The above grades can also have +/- distinctions added to them—for example ‘AA+’—for the purpose of indicating what direction the credit rating is trending.)
Placing Russia on negative credit watch serves as a warning to investors that the rating is likely to be lowered in the near future. As the world’s largest single exporter of energy, Russia has felt the brunt of lowered oil prices. Continued sanctions related to the conflict in Ukraine and most recently, the implosion of the ruble, have only furthered the nation’s economic crisis.
Last month, the Russian government admitted that the country was on the verge of entering a recession at some point in 2015. As the statement from S&P mentioned, the next 90 days will go a long way towards determining whether Russia is in for another long year.
Most reports tout the economic prosperity of the past five years. The stock market has rebounded from the 2007/2008 collapse, the unemployment rate has fallen to historical lows, and even housing prices have recently started to come back after years in decline.
But the biggest economic problem still lingers—these supposed turn-arounds and recoveries aren’t being reflected in the bank accounts or paychecks of the average American. The latest piece of evidence came in a recent study from the Center for Retirement Research at Boston College, who found that the retirement preparedness of Americans is at high risk. More specifically, the figures haven’t really improved since the last study in 2010.
The National Retirement Risk Index (NRRI) compares the projected rate of income replacement to the ‘target’ rate in order to calculate the percentage of American households at risk of falling short in retirement. The most recent figures show 52 percent of American households are currently at risk of not having sufficient income to maintain their pre-retirement standard of living.
The report is based off data compiled every three years—so while the most recent report was just released by the Center for Retirement Research, the findings are based off 2013 data.
The figure has been steadily rising since the first calculation of the NRRI in 1983. That first study found that 31 percent of households were at risk. The highest risk rate came in 2010, when 53 percent of households were found to be at risk. Yet despite the supposed prosperity of the past few years, this measure shows very little improvement from 2010—the aftermath of the financial crisis.
According to the Center for Retirement Research, some of the main factors that contributed to the high number of unprepared households were:
Increase in the Full Retirement Age: In 1983, more than half of working households could claim full Social Security benefits at age 65. Now, almost all households are waiting until age 67 to receive those benefits. This has a particular effect on low-income households whose inhabitants are highly dependent on Social Security for a majority of their income.
Reverse Mortgage Reform: Last year, the government lowered the percentage of house value that borrowers could receive in the form of a reverse mortgage.
Lower Interest Rates: Obviously, lower interest rates have an impact on account balances on 401K/IRAs.
But perhaps the most frightening indicator was the statistic showing that 45 percent of households ages 50-59 are ‘at risk’—suggesting that the next several NRRI reports will feature similarly gloomy numbers.
The atmosphere for retirement in this country is ever-changing. This recent data shows that many Americans need to change likewise in order to protect their golden years.
The Dow and S&P 500 inched ahead on Monday to start what was widely expected to be the quietest week on the market in some time.
With the markets closing early on Wednesday for Christmas Eve—and staying closed until Friday in recognition of Christmas Day—experts predicted many traders would stay silent this week. Monday saw the major indexes advance thanks to a strong day in the technology sector, with companies like Intel leading the way.
Most of the market news was provided by economic data related to currency and consumer behavior. The Euro rebounded some from two-year lows against the dollar, but that was largely due to the dollar’s struggle in light of some poor data on U.S. home sales—the worst in six months. Tuesday’s reports will include the final GDP numbers from the 3rd quarter, along with home prices and inflation data.
Monday stocks saw great volatility, starting the day up more than 100 points in the morning before beginning a slow decline that would last the rest of the day. Once again, uncertainty over oil prices was the culprit, and the Dow finished the day down 99 points.
Tuesday stocks started down again following news of the crumbling of Russian currency—known as the Ruble. But as oil prices began to fluctuate, stocks did the same. Volatility was the story as the Dow started the day down as much as 80 points, rebounded to a point where they were up 220 points by noon… but then turned south yet again! When all was said and done, the Dow ended down 111 points on the day.
Wednesdaystocks rebounded early thanks in large part to a Consumer Price Index that reached its lowest rate in almost six years—meaning Americans are paying less for everyday goods. Investors were also banking on the Fed continuing to keep interest rates low, which they did by sticking to the “considerable time” phrasing, as related to an eventual interest rate hike. For the day, the Dow finished up 288 points.
Thursday stocks started out hot again, as the Dow went up by 200+ points in the first hour of trading off continued good feelings from the previous day’s Fed statement. After shedding nearly 1,000 points earlier in the month, the Dow rebounded with its strongest day of 2014, gaining 421 points on the day.
Friday saw the markets stabilize early, but as oil prices went up later in the day, the Dow followed. Wall Street continued to show concern over retail figures, as Nike posted disappointing figures for future orders. After the roller-coaster ride earlier this week, Friday turned out to be relatively quiet. By the end of the day, the Dow closed up 26 points.
Here were the final numbers on Wall Street for Friday, along with the percentage figures for the week:
This week’s approval of H.R. 83, the $1.1 trillion ‘Cromnibus’ spending bill that will fund the federal government for 2015, did serious damage to the Dodd-Frank Act.
Language in the bill re-permits trading in swaps and derivatives by FDIC-insured banks—a practice the Dodd-Frank Act eliminated when it was signed back in 2010.
But in the hours leading up to the bill’s approval, Senator Elizabeth Warren (D-MA) saw to it that everyone on the Senate floor knew exactly who was responsible for eradicating the financial reforms the Dodd-Frank sought to ensure.
“In recent years, many Wall Street institutions have exerted extraordinary influence in Washington’s corridors of power,” Sen. Warren told her colleagues.
Senator Warren singled out Citigroup individually, referencing the ‘revolving door’ that has seen many Citigroup executives take prestigious positions on Capitol Hill—or vice versa. Warren said that these former bankers are notorious for lobbying in favor of Wall Street-friendly policies upon reaching Washington, D.C.
Click Player Above to Watch Phil Cannella Interview the SEC Inspector General about the Revolving Door
“There’s a lot of talk coming from Citigroup about how Dodd-Frank isn’t perfect,” said Senator Warren. “Let me say this to anyone who is listening at Citi: I agree with you. Dodd-Frank isn’t perfect—it should have broken you into pieces.”
The almost-immediate impact of Warren’s speech can’t be denied. As of Friday morning, the speech had garnered almost 570,000 views on You Tube, and received accolades from publications such as The Huffington Post, who called the 10-minute diatribe “the speech that could make Elizabeth Warren the next President of the United States.”
“[The speech] catapulted Warren from a potential nuisance to Hillary Clinton’s coronation as the Democratic nominee to someone who could foreseeably win the nomination and even the Presidency,” wrote Miles Mogulescu of The Huffington Post.
Warren’s passion reached Citigroup in a literal sense on Thursday, when a group of protestors gathered near the financial giant’s Manhattan headquarters, wielding signs with slogans such as “Break Up The Big Banks” or “No More Too Big To Fail.”
Big banks have been in Senator Warren’s crosshairs since 2008, when she took office in the aftermath of the financial crisis that ravaged many a retirement account. The crisis and collapse of several financial institutions began with risky derivative bets—the same taxpayer-backed gambles that the ‘Cromnibus’ bill re-legislated this week.
For their part, Citigroup executives and investors expressed little concern over Senator Warren’s statements, attributing the remarks to her own political ambitions. But if those ambitions include a run for the White House in 2016, big banks and Wall Street in general might look quite different in the next several years.
The previous two weeks saw the Dow shed almost 1,000 points from its all-time high, but the market’s regained more than half of it in the past two days.
Wall Street continued its momentum from Wednesday’s Federal Reserve statement, in which Chairperson Janet Yellen stressed that the central bank would show ‘patience’ in moving interest rates off their current near-zero level.
On the downside, however, oil resumed its freefall, losing all of the ground it made up on Wednesday–and then some. By the close of the day, oil was trading below $55 a barrel—a level unseen in more than five years. On the flip side, however, Americans are paying less than $2.50 per gallon of gas on average for the first time in that same five-year period.
The market still sits a little more than 200 points off of its all-time high achieved on December 5. In that time, however, markets have experienced a swing of over 1,600 points! With two consecutive holiday-shortened weeks on the horizon, it will be interesting to see if the volatility continues for the rest of 2014.
Here were the final numbers from Wall Street on Thursday:
The stock market finally ended its losing streak on Wednesday, as investors happily grabbed a hold of any good news they could find.
This morning it was oil rallying for the first time in days—up by over 3.5 percent at one point. Energy producers, in turn, led Wall Street gains. As the day went on, however, those gains slowed and oil fell back to almost even.
So by the afternoon, Wall Street turned its attention to a statement from the Federal Reserve, in which the central bank opted to keep the “considerable time” phrase in their statement regarding rising interest rates.
For months, the Fed has maintained that it would be a “considerable period of time” before they would move interest rates from near zero. With quantitative easing concluded and 2014 nearing a close, many investors thought December was the perfect time to remove that language and set the stage for a 2015 interest rate hike.
Instead, the Fed kept the phrase in its monthly statement, but expressed more of a “wait and see” approach than they had previously shared:
Based on its current assessment, the Committee judges that it can be patient in beginning to normalize the stance of monetary policy. The Committee sees this guidance as consistent with its previous statement that it likely will be appropriate to maintain the 0 to 1/4 percent target range for the federal funds rate for a considerable time following the end of its asset purchase program in October, especially if projected inflation continues to run below the Committee’s 2 percent longer-run goal, and provided that longer-term inflation expectations remain well anchored.
Here were the final numbers from Wall Street on Wednesday:
