Stocks ended the week in the green, but the volatility from last week continued. Tuesday saw the Dow gain over 2%, while yesterday declined almost 1.5%. Everyday featured large swings up and down throughout the day. While last week’s sharp sell-off is still on investor minds, a strong start to earnings season has provided positive push back. Johnson & Johnson, Netflix, Proctor & Gamble and Paypal all impressed investors this week. Over the next two weeks we’ll get earnings reports from most of the large companies in the US and that will likely set the tone heading into the end of the year. For the week, the Dow increased 0.4% while the S&P 500 was essentially flat.
Famous retailer Sears filed for bankruptcy protection earlier this week. This was a long time coming as Sears has struggled for years with excessive debt and falling sales. Sears hasn’t made a profit since 2010. At its peak, Sears operated over 3,500 stores in the United States under the Sears and Kmart brands. Today, it operates around 700 and plans to close almost 150 more in the coming months. The company’s business has been under pressure for years, but it owned a lot of valuable real estate. Real estate sales over the past few years propped the chain up as long as it could though. It’s unclear at this point if the stores will continue operating with a new ownership structure or shutdown altogether. This bankruptcy highlights the concept of ‘creative destruction’ that is central to any free-market, capitalist society. Businesses ebb and flow. When a business is no longer able to meet the needs of its customers, it will cease to exist. This happens in every industry and I view it as a healthy part of a vibrant economy. It’s always sad to see well-known companies fail, but Sears wasn’t able to adapt to the changing retail market in the age of Amazon and internet shopping. Read More
Oil decreased this week, declining 3.2% to close at $69.28/barrel, breaking a four-week streak of oil closing above $70/barrel. The yield on the 10-yr Treasury moved higher, closing at 3.19% from 3.15% last week. The average rate on a 30-yr fixed rate mortgage retreated to 4.85%, from 4.90% last week.