Where Did the IPOs Go?

While the larger economy continued to gain traction, this past year was a surprisingly slow one in the IPO market. Initial public offerings in 2016 were at their lowest level since 2009, and proceeds from those IPOs were at their lowest total since 2003, according to data from research firm Renaissance Capital.

Only 105 companies went public in 2016, down from 170 in 2015, and 275 in 2014. The proceeds from these deals fell to only $18.8 billion; that's the lowest for this figure since IPOs raised $15.2 billion in 2003.

One bright spot: The median deal size this year was $95 million, up slightly from $94 million last year. But that's still down from $100 million in 2014.

Thoughts for Christmas

“Christmas is the season for kindling the fire of hospitality in the hall, the genial flame of charity in the heart.” ― Washington Irving

“I truly believe that if we keep telling the Christmas story, singing the Christmas songs, and living the Christmas spirit, we can bring joy and happiness and peace to this world.” ― Norman Vincent Peale

“My idea of Christmas, whether old-fashioned or modern, is very simple: loving others. Come to think of it, why do we have to wait for Christmas to do that?” ― Bob Hope

An Even Stronger Third Quarter

The Commerce Department now thinks that U.S. economy grew faster than previously thought in the third quarter. Buoyed by stronger consumer spending, the economy posted its best performance in two years between July and September.

The revised 3.5 percent rate of GDP growth in the third quarter was higher than the prior estimate of 3.2 percent. What changed?

• Consumer spending rose at a 3 percent annual rate, up from the prior estimate of 2.8 percent.
• Business investments rose at a revised 1.4 percent rate, much stronger than the previous estimate of  0.1 percent.
• Exports rose by 10 percent, helped by a temporary boom in U.S. soybean shipments.

The Sleepy Dow

The Dow Jones industrial average is closing in on the hallowed 20,000 milestone, but it's sleepwalking on its way there. Yesterday, the Dow marked its narrowest daily trading range in more than two years, moving less than 45 points between its highest and lowest levels of the day.

These things tend to happen around the holidays, when trading volume is low. Yesterday's move was the smallest fluctuation since November 26, 2014, the day before Thanksgiving that year.

Individual stocks showed almost no movement on the day. Nike was the Dow’s best performer but it climbed less than 1 percent. Merck & Co., the biggest laggard, fell 1.8 percent.

Buybacks on the Decline

S&P 500 firms repurchased $115.6 billion worth of their own stock in the third quarter of this year, down 28 percent from the same quarter a year earlier, according to FactSet. That’s the largest year-over-year decline since 2009, and follows on the heels of a sharp drop-off in the second quarter as well.

Buybacks fell across the S&P sectors that typically buy back the most shares, such as information technology and financials. Tech firms did remain the biggest buyers, accounting for $27 billion worth of buybacks, but that represents a drop of more than 40 percent. Financials came in second, purchasing $25 billion.

Why has this been happening? One theory is that companies are too nervous about the economic outlook to spend heavily on buyback programs, especially at a time when their valuations were climbing and buybacks were getting more costly.

The Falling Correlations

S&P 500 stock-correlation readings last week fell to their lowest levels in nearly a decade. The rolling 65-day correlation for S&P 500 stocks ended last week at 40 percent, the lowest absolute reading since 2007.

Correlation between individual stocks is a measure of their tendency to move up and down in unison regardless of their underlying fundamentals. Correlation is measured on a scale of 0 to 100 percent, where 0 means there is no relationship and 100 percent means they move together perfectly. The average correlation since 2009 is 60 percent.

When stocks are not highly correlated, that opens up opportunities for individual stock pickers to thrive. For example, just since the election, financial stocks on the S&P 500 have climbed 17 percent, while utilities are down by more than 1 percent.

The Force Is Strong

How much can the rollout of a single product affect a company's stock price? If the company in question is Disney, and the product in question is the new Star Wars movie Rogue One, the answer is "a lot."

Rogue One opened at theaters on Friday, and pulled in $155 million at the box office over the weekend in the United States - a mark that's second only to that recorded by The Force Awakens, last year's Star Wars movie. Globally, the new movie earned an astonishing $290 million.

When the markets opened this morning, Disney stock jumped by 2 percent at the opening bell. That means Disney's market capitalization expanded by more than a billion and a half dollars in a single weekend.