A free-fall in petroleum stocks was the most striking element of an otherwise lackluster week on Wall Street.
All three indices finished higher for the holiday-shortened week, although the gains in both the Dow and S&P 500 were modest. Markets were closed on Thursday for the Thanksgiving Day holiday and closed three hours early on Friday.
The Dow tacked on 18.18 points (0.1 percent) at 17,828.24, while the S&P 500 rose 4.06 (0.2 percent) to 2,067.56. The tech-rich NASDAQ Composite Index jumped 78.66 (1.67 percent) to 4,791.63.
Photo: Reuters
For November as a whole, the Dow rose 2.52 percent, the S&P 500 2.45 percent and the NASDAQ 3.47 percent.
Petroleum stocks were on the defensive most of the week as investors warily awaited the OPEC meeting on Thursday in Vienna.
OPEC had not been expected to respond aggressively to a roughly 35 percent drop in oil prices since June, but the cartel did even less than many experts predicted, opting not even to promise to stop pumping above its current 30 million barrels per day production ceiling.
“OPEC is clearly signaling that it will no longer bear the burden of market adjustment alone and this decision puts the onus on other producers, especially US tight oil to adjust as well,” Barclays said.
On Friday, Dow members Exxon-Mobil and Chevron fell by 4.5 percent and 5.5 percent, respectively. Oil services companies like Halliburton and Nabors Industries also declined by 10.9 percent and 12.9 percent respectively, along with shale producers Continental Resources (down 19.9 percent) and EOG Resources (down 7.8 percent).
However, the oil price drop had an upside, as airline stocks gained on expectations of lower fuel costs and retailers were lifted as the start of the annual holiday shopping season coincided with an OPEC decision that many analysts see as a boost to consumers’ disposable income.
“Lower gasoline prices are assisting in making holiday spending and confidence rather elevated. Even though consumer spending on gasoline is slightly less than 3 percent of disposable income, it plays a more significant role on consumer mood,” Chris Christopher of IHS Global Insight said.
The US National Retail Federation has predicted that holiday sales this year would rise to US$616.9 billion, up 4.1 percent from last year’s level. Holiday sales accounted for about a fifth of the retail industry’s annual sales last year.
Key factors behind the better outlook include a lengthier holiday shopping season compared with last year, when Thanksgiving fell late in the calendar, and better overall economic data.
In terms of last week’s economic reports, the biggest positive surprise was the US Department of Commerce’s second estimate of third-quarter economic growth, which was revised to an annual rate of 3.9 percent from 3.5 percent. Analysts had expected a downward revision to the initial estimate.
Other reports were mixed. Data for last month showed a slight increase in US consumer spending, a dip in consumer confidence, a rise in durable goods orders and a modest increase in new-home sales. The reports, while somewhat disappointing, “weren’t terrible,” said Michael James, managing director of equity trading at Wedbush Securities.
“Nothing about the data was enough to alter the view that the US economy remains the strongest economy in the world and that US equities remain the best option among worldwide equity markets,” he said.
Next week’s calendar includes the US Federal Reserve’s “Beige Book” of economic conditions and this month’s car sales and jobs report.
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