Closing Recap 4:05PM EST

Wednesday, December 31, 14

Index

Up/Down

Last

DJ Industrials

-159.87

0.89%

17,823

S&P 500

-21.46

1.03%

2,058

Nasdaq

-41.39

0.87%

4,736

Russell 2000

-6.57

0.54%

1,206

Equity Market Recap

Equity markets struggled on this final trading day of the year, but it was still a very good year for
those with a Bullish stance, as the DJIA ends higher by about 7.6% YTD, the S&P 500 up 11.8%
(3rd straight year of double digit gains), and the Nasdaq Composite up about 13.5% YTD. Markets
have risen this year, bolstered by an accommodative Fed, which has kept rates near zero for the
6th straight year to lift spending/help the economy. The S&P 500 closed at a record 53 times this
year, overcame five separate declines of 4% or more in 2014, while stocks have never once
declined more than three straight times (which has never before happened).
Some of the top stories this year that U.S. equities managed to overcome included: 1)
Russia/Ukraine tensions (still ongoing), 2) European weakened economies (Central Banks still
easing), 3) Ebola fears that sunk markets nearly 10% in October before surging the following
month, 4) Of course the +40% drop in energy prices , 5) North Korea tensions.
Top things to watch for 2015: 1) Will the FOMC raises rates by mid next year, tail end of 15, or
not at all, given the low inflation factor (as per the Fed), saying moves will be data dependent, 2)
How much further will oil fall? And what impacts will it have on credit markets and jobs? 3) How
much more positive an impact will it have for consumers? Spending continue to rise? 4) Will
Housing market cool if/when rates start rising? 5) Will the dollar continue its outperformance vs.
other currencies and will commodities/materials continue to underperform?
Chinas Shanghai Index closed up 49% for 2014 (best year for Index since 2009); Commodity
Index down for a record 4th straight year, lower energy main culprit; silver -17% YTD; Utility Index
scored new record highs into year end, while Transports were less than 1% away from record
highs (led by airlines). Energy and Materials were among the year top losers. The Russell 2000
Index, which lagged other indices this year, hit a fresh intraday all-time high earlier today.

Commodities
U.S. WTI crude futures fall, ending the final day of 2014 lower, dropping 1.57% to settle at
$53.27 per barrel, and end 2014 with a (-46%) decline. Feb. Brent declined -57c to $57.33 on ICE;
front month ended session at lowest level since May 2009. Natural gas prices ended the year on
a sour note, falling after inventory data today and momentum selling the last week on warmer
temps natural gas prices fell over 5.5% today to $2.91 mln Btu

 Gold prices fell -$16.30, or 1.4% to settle at $1,184.10 an ounce, ending the year lower by (-1.5%)
and falling more than (-14%) from its 2014 highs of $1,381. Silver futures ended 2014 with a
decline of (-19.5%). Prices touched a four-year low last month ($1,141 an ounce) as the dollar
strengthened and investors speculated the Federal Reserve is preparing to raise interest rates

Currencies
The U.S. dollar ending on a strong note, with the index (DXY) up 0.29 to 90.28, near highs of the
day (and at fresh 8-year highs), as the euro falls to lowest level since July 2012 (drops below 1.21
to downside). It has been a good year for the dollar on a stronger US economy, while Central
banks in Asia/Europe continue to ease into the New Year to try and bolster their lagging
economies. The dollar rises to around the 120 level against the yen.

Bond Market
Bond markets rise, as the 10-year yield touched its lowest level in more than a week (2.16%),
falling in what has been a market defying move, as bonds have climbed throughout 2014 (biggest
gains since 2011), despite the FOMC ending its bond-purchase stimulus program a few months
back, and as the U.S. economy has improved (GDP 5% last quarter, several 200+ job gains and
unemployment rate down at 5.8%). The 10-yr yield dropped 0.857 percentage point over the
course of the year, marking the largest one-year drop since 2011. The strength in bonds have
come as European bond yields have touched record lows this year, making U.S. bonds more
attractive globally

Economic Data
Weekly jobless claims rose 17K to 298K, above est. for 290k, while the prior week was revised
slightly higher to 281k from 280k; continuing claims fell 53k to 2.353m in the week ending Dec.
20; the 4-week moving avg. at 290.8k
The Chicago Purchasing Managers Index (PMI) for Dec fell to 58.3 (lowest since July) from 60.8
last month (below est. 60.0); it was the first reading below 60 in over 6-months
Pending home sales rose up 0.8% in Nov from Oct, and above est. for a rise of 0.5%; Midwest
only region to decline, with gains in Northeast, South and West

Macro

Up/Down

Last

WTI Crude

-0.85

53.27

Brent

-0.57

57.33

Gold

-16.30

1,184.10

EUR/USD

-0.0056

1.2100

JPY/USD

0.41

119.89

-0.019

2.171%

10-Year Note

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