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The Markets This Week

January 5, 2016 | Weekly Commentary

When the whistle blew at the close of trading Thursday, New Year’s Eve, the stock market finished a disappointing week and year, with both posting a nearly 1% loss. In light of the optimism that rang in 2015, there was little joy on Wall Street.

The annual drop was the first since 2008. So much, too, for the traditional Santa Claus rally: Stocks fell 1.8% in December. In quiet, holiday-shortened trading last week, equities moved in lockstep with oil prices. Oil ended at $37.04 a barrel, down 3%, and off 31% for the year, not far from seven-year lows. The Dow Jones Industrial Average lost 0.7%, or 127 points, to 17,425.03 on the week. In 2015, the Dow limped to a negative 2.2% finish. The Nasdaq Composite Index, replete with strong tech stocks, fell 0.8% last week to 5007.41. For 2015, it finished in the black, up 5.7%.

Given the problems faced over the past 12 months—weak corporate earnings, declining commodity prices, and slow global growth—the fact “that the market finished essentially flat is a testament to its resilience,” avers Douglas Coté, chief market strategist at Voya Investments.

Energy was “the” story in 2015, according to Jonathan Golub, chief equity strategist at RBC Capital Markets. The price of oil “significantly affected both its own sector and the rest of the market.” It’s no coincidence, he adds, that the market’s poor 2015 performance reflected weak growth in the S&P 500 index’s earnings per share.

In 2015, stock gains weren’t shared evenly. The market-cap-weighted S&P 500 index was boosted disproportionately by a handful of successful big caps. Jessica Binder Graham, a Goldman Sachs analyst, identified how many points these performers contributed to the S&P 500 index level of 2044: Amazon (AMZN), 15.8; Alphabet (GOOGL/GOOG), formerly Google, 15.8; Microsoft (MSFT), 8; Facebook (FB), 6.5 points. If you exclude these names, along with four other big-cap gainers, the S&P 500 would have been down 4%.

The average S&P 500 index stock was down almost 4%, according to Bespoke Investment Group. The narrowness of 2015 gives pause for this year.

(Source: Barrons Online)

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