What I’m Watching This Week – 16 February 2021

The Markets (as of market close February 12, 2021)

Increasing prospects that a massive fiscal stimulus bill is around the corner helped drive stocks to record highs last Monday. With fourth-quarter corporate earnings season at the halfway mark, 83% of the reporting companies have surpassed most estimates, a clear sign that the economy is slowly turning the corner toward recovery. The S&P 500 jumped 0.7% to a record high, while the small caps of the Russell 2000 climbed 2.5%. The Global Dow advanced 1.1%, the Nasdaq gained 1.0%, and the Dow added 0.8%. Energy continued to soar, gaining 4.2%, followed by financials and information technology as the only other sectors increasing by at least 1.0%. Crude oil prices continued to advance, surging ahead by 2.1%, driven higher by growing economic optimism, the likelihood of additional stimulus, and President Biden’s reluctance to relax sanctions on Iran. Treasury yields fell as bond prices climbed. The dollar was mixed against a basket of currencies.

Stocks were mixed last Tuesday with the large caps of the Dow and the S&P 500 slipping for the first time in six sessions, while the Russell 2000, the Global Dow, and the Nasdaq posted gains. The market sectors were split with communication services, financials, health care, industrials, utilities, and real estate advancing, while consumer discretionary, consumer staples, energy, information technology, and materials fell. Crude oil prices are nearing $60 per barrel after rising again last Tuesday. Treasury yields and the dollar declined.

For the second consecutive day, stocks were mixed last Wednesday. The Dow gained 0.2% and the Global Dow jumped 0.4%. The S&P 500 was flat, while the Russell 2000 (-0.7%) and the Nasdaq (-0.3%) fell. Among the sectors, energy, communication services, real estate, utilities, and health care advanced. The yield on 10-year Treasuries declined, the dollar was mixed, and crude oil prices inched up 0.1%.

Last Thursday saw equities perform better. Information technology drove the Nasdaq up 0.4%, followed by the S&P 500 (0.2%) and the Russell 2000 (0.1%). The Global Dow dipped 0.1% and the Dow was flat. Treasury yields climbed over 2.0% and the dollar was mixed. Crude oil prices fell for the first time in quite a while, falling 1.2%. Most of the sectors lost value, led by energy, which dropped 1.6%.

Stocks closed the week on a high note last Friday. Each of the benchmark indexes gained value, led by the Nasdaq and the S&P 500, which each climbed 0.5%. The Global Dow advanced 0.4% on the day, followed by the Russell 2000 (0.2%) and the Dow (0.1%). Among the market sectors, only real estate and utilities fell. Energy and materials each advanced over 1.0% to lead the remaining sectors. Treasury yields jumped more than 3.6%, crude oil prices regained momentum, while the dollar was flat.

Overall, last week saw each of the benchmark indexes listed here advance by at least 1.0%. The Russell 2000 led the way, followed by the Global Dow, the Nasdaq, the S&P 500, and the Dow. Energy led the market sectors after climbing 4.4%, followed by information technology (2.3%) and financials (2.0%). Utilities (-1.8%), communication services (-1.4%), and consumer discretionary (-1.2%) fared poorly for the week. The Russell 2000 and the Nasdaq remained ahead of the remaining benchmarks year to date. Crude oil climbed 4.6% for the week and has increased 22.9% in 2021.

The national average retail price for regular gasoline was $2.461 per gallon on February 8, $0.052 per gallon over the prior week’s price and $0.042 higher than a year ago. Crude oil refinery inputs averaged 14.8 million barrels per day during the week ended February 5, which was 152,000 barrels per day more than the previous week’s average. Refineries operated at 83.0% of their operable capacity last week.

Stock Market Indexes

Market/Index2020 ClosePrior WeekAs of 2/12Weekly ChangeYTD Change
DJIA30,606.4831,148.2431,458.401.00%2.78%
Nasdaq12,888.2813,856.3014,095.471.73%9.37%
S&P 5003,756.073,886.833,934.831.23%4.76%
Russell 20001,974.862,233.332,289.362.51%15.93%
Global Dow3,487.523,626.573,695.601.90%5.97%
Fed. Funds target rate0.00%-0.25%0.00%-0.25%0.00%-0.25%0 bps0 bps
10-year Treasuries0.91%1.17%1.20%3 bps29 bps
US Dollar-DXY89.8491.0190.45-0.62%0.68%
Crude Oil-CL=F$48.52$56.97$59.614.63%22.86%
Gold-GC=F$1,893.10$1,811.20$1,822.400.62%-3.73%

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

Last Week’s Economic News

  • According to the latest Job Openings and Labor Turnover Summary, there were 6.6 million job openings in December, little changed from November’s total. The number of hires fell from 5.9 million in November to 5.5 million in December. Total separations in December, at 5.5 million, were essentially the same as in November.
  • The Consumer Price Index increased 0.3% in January, however the index less food and energy was unchanged from the previous month. Driving the CPI was a 7.4% rise in gasoline prices in January. Food prices inched up 0.1%. The CPI rose 1.4% for the 12 months ended in January. The index increased 1.6% in 2020. Prices for new motor vehicles and used cars and trucks fell 0.5% and 0.9%, respectively. Prices for apparel rose 2.2% last month.
  • The federal budget deficit was $162.8 billion in January, nearly five times greater than the deficit for January 2020. Last month, government receipts totaled $384.7 billion ($372.3 billion in January 2020), while the government spent $547.5 billion ($404.9 billion in January 2020). Through the first four months of the current fiscal year, the deficit sits at $735.7 billion, 89% higher than the deficit over the same period in the last fiscal year. Economic Impact Payments authorized by the Consolidated Appropriations Act of 2021 were a significant factor in the January deficit.
  • For the week ended February 6, there were 793,000 new claims for unemployment insurance, a decrease of 19,000 from the previous week’s level, which was revised up by 33,000. According to the Department of Labor, the advance rate for insured unemployment claims was 3.2% for the week ended January 30, a decrease of 0.1 percentage point from the prior week’s revised rate. For comparison, during the same period last year, there were 204,000 initial claims for unemployment insurance, and the insured unemployment claims rate was 1.2%. The advance number of those receiving unemployment insurance benefits during the week ended January 30 was 4,545,000, a decrease of 145,000 from the prior week’s level, which was revised up by 98,000. States and territories with the highest insured unemployment rates in the week ended January 23 were in Pennsylvania (6.8%), Alaska (6.4%), Kansas (6.1%), Nevada (6.1%), Rhode Island (5.6%), Illinois (5.5%), Connecticut (5.4%), the Virgin Islands (5.4%), Massachusetts (5.3%), and New Mexico (5.2%). The largest increases in initial claims for the week ended January 30 were in California (+51,025), New York (+11,140), Florida (+6,322), Rhode Island (+4,684), and Pennsylvania (+3,844), while the largest decreases were in Illinois (-55,473), Kansas (-7,496), Mississippi (-3,107), Ohio (-2,181), and New Jersey (-2,156).

Eye on the Week Ahead

There’s plenty of relevant economic data out this week. The Producer Price Index and the retail sales report for January are available at the beginning of the week. Producer prices advanced 0.3% in December and increased only 0.8% in 2020. Retail sales are expected to rebound in January after falling 0.7% in December. The housing sector has been strong for several months and should show continued moxie in January.

What I’m Watching This Week – 8 February 2021

The Markets (as of market close February 5, 2021)

Stocks had their best day in several weeks last Monday, recovering some of the losses following the prior week’s sell-off. Tech stocks and retail shares led both the Nasdaq and the Russell 2000 to gains of 2.5%. The S&P 500 advanced 1.6%, followed by the Dow (0.8%) and the Global Dow (0.7%). The yield on 10-year Treasuries fell 1.5%, while crude oil prices jumped 2.8%. The dollar gained 0.5% on the day. Consumer discretionary, information technology, and real estate were the best-performing sectors.

Stocks pushed higher for the second day in a row last Tuesday. Several companies posted solid fourth-quarter earnings, while the retail-trading frenzy of the past several weeks may have cooled down. Each of the benchmark indexes listed here closed the day ahead, led by solid gains of 1.6% for both the Dow and the Nasdaq, followed by the S&P 500 (1.4%), the Global Dow (1.4%), and the Russell 2000 (1.2%). Crude oil prices continued to climb, gaining more than 2.4%. Treasury yields and the dollar also advanced. Each of the market sectors increased, led by financials, industrials, and consumer discretionary shares.

Equities closed higher for the third consecutive session last Wednesday. The Global Dow posted the largest gain, climbing 0.9%, followed by the Russell 2000, which advanced 0.4%. Both the Dow and the S&P 500 inched up 0.1%. The Nasdaq broke even on the day. Treasury yields climbed higher, as did crude oil prices. The dollar fell less than 0.1 percentage point. Energy stocks were the big movers, gaining 4.3%. Communication services added 2.1%. The remaining sectors were mixed.

Last Thursday’s trading led to another solid day for stocks. More strong earnings reports, coupled with a reduction in the number of people claiming unemployment benefits, provided encouragement for investors. Financials, information technology, energy, and industrials were the strongest-performing sectors on the day. Among the benchmark indexes, the Russell 2000 led the way, gaining 2.0%, followed by the Nasdaq (1.2%), the Dow (1.1%), the S&P 500 (1.1%), and the Global Dow (1.0%). Crude oil prices, the dollar, and Treasury yields all advanced.

Stocks finished last week on a high note as each of the indexes posted notable gains last Friday. The Russell 2000 advanced 1.4%, followed by the Global Dow (0.9%), the Nasdaq (0.6%), the S&P 500 (0.4%), and the Dow (0.3%). Materials, communication services, consumer discretionary, and energy led the sectors. The yield on 10-year Treasuries climbed nearly 3.0% last Friday, and crude oil prices increased 1.3%. The dollar fell 0.6% on the day.

By the close of trading last week, each of the benchmark indexes listed here posted solid gains following the previous week’s sell-offs. Strong earnings reports, encouraging employment data, and hopes for more economic stimulus bolstered investors’ confidence. The Russell 2000 resumed its 2021 surge, gaining 7.7%. The Nasdaq advanced 6.0%, followed by the Global Dow, the S&P 500, and the Dow. Bond prices slid, pushing Treasury yields higher. Crude oil prices continued to climb, increasing by 9.0% on the week. Crude oil prices are already up nearly 17.5% year to date. The dollar crept higher while gold prices continued to fall. The national average retail price for regular gasoline was $2.409 per gallon on February 1, $0.017 higher than the prior week’s price but $0.046 less than a year ago. For the week ended January 29, domestic production of crude oil was 10.9 million barrels per day, the same amount as the previous week but 2.0 million barrels less than a year ago.

Stock Market Indexes

Market/Index2020 ClosePrior WeekAs of 2/5Weekly ChangeYTD Change
DJIA30,606.4829,982.6231,148.243.89%1.77%
Nasdaq12,888.2813,070.6913,856.306.01%7.51%
S&P 5003,756.073,714.243,886.834.65%3.48%
Russell 20001,974.862,073.642,233.337.70%13.09%
Global Dow3,487.523,455.843,626.574.94%3.99%
Fed. Funds target rate0.00%-0.25%0.00%-0.25%0.00%-0.25%0 bps0 bps
10-year Treasuries0.91%1.09%1.17%8 bps26 bps
US Dollar-DXY89.8490.5791.010.49%1.30%
Crude Oil-CL=F$48.52$52.17$56.979.20%17.42%
Gold-GC=F$1,893.10$1,847.30$1,811.20-1.95%-4.33%

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

Last Week’s Economic News

  • While January’s employment figures were better than December’s, the labor market continued to reflect the impact of the pandemic. Only 49,000 new jobs were added in January after losing a whopping 227,000 jobs in December. The unemployment rate dropped 0.4 percentage point to 6.3%, and the number of unemployed persons declined by 606,000 to 10.1 million. Although both measures are much lower than their April 2020 highs, they remain well above their pre-pandemic levels in February 2020 of 3.5% and 5.7 million, respectively. January saw 3.5 million people lose their jobs permanently, which is 2.2 million higher than in February 2020. In January, the percentage of employed persons who teleworked because of the pandemic edged down to 23.2%. In January, 14.8 million persons reported that they had been unable to work because their employer closed or lost business due to the pandemic — 1.1 million fewer than in December. The employment-population ratio inched ahead 0.1 percentage point to 57.5%, while the labor participation rate dipped 0.1 percentage point to 61.4%. Average hourly earnings increased by $0.06 to $29.96. For the 12 months ended in January, average hourly earnings have increased 5.4%. The average work week increased by 0.3 hour to 35.0 hours in January.
  • Manufacturing slowed in January, according to the latest Manufacturing ISM® Report On Business®. The January purchasing managers’ index fell from 60.5% in December to 58.7% in January. The new orders index dropped 6.4 percentage points last month, the production index declined 4 percentage points, and the exports index dipped 2.6 percentage points. The employment index inched up 0.9 percentage point, the price index rose 4.5 percentage points, and the imports index increased 2.2 percentage points.
  • According to the Services ISM® Report On Business®, the services sector expanded in January. The services purchasing managers’ index registered 58.7%, 1.0 percentage point higher than the December reading and the highest reading since February 2019. Supplier deliveries, employment, new orders, and imports all advanced last month. Prices, business activity/production, inventories, and exports each slowed in January from their respective December 2020 totals.
  • Data on the international trade in goods and services deficit for December 2020 was released on February 5. The trade deficit declined 3.5% to $66.6 billion. Exports increased 3.4% to $190.0 billion, and imports advanced 1.5% to $256.6 billion. For 2020, the goods and services deficit increased $101.9 billion, or 17.7%, from 2019. Exports decreased $396.4 billion, or 15.7%. Imports decreased $294.5 billion, or 9.5%.
  • For the week ended January 30, there were 779,000 new claims for unemployment insurance, a decrease of 33,000 from the previous week’s level, which was revised down by 35,000. According to the Department of Labor, the advance rate for insured unemployment claims was 3.2% for the week ended January 23, a decrease of 0.2 percentage point from the prior week’s revised rate. For comparison, during the same period last year, there were 201,000 initial claims for unemployment insurance, and the insured unemployment claims rate was 1.2%. The advance number of those receiving unemployment insurance benefits during the week ended January 23 was 4,881,750, a decrease of 120,000 from the prior week’s level, which was revised up by 3,750. States and territories with the highest insured unemployment rates in the week ended January 16 were in Alaska (6.4%), Pennsylvania (6.4%), Nevada (6.1%), Illinois (5.7%), Kansas (5.7%), Connecticut (5.4%), New Mexico (5.4%), Rhode Island (5.2%), Massachusetts (5.0%), and New York (4.9%). The largest increases in initial claims for the week ended January 23 were in Florida (+23,592), Ohio (+7,002), New York (+4,065), Maryland (+2,450), and Arizona (+1,028), while the largest decreases were in California (-59,016), Kansas (-8,495), Georgia (-7,896), Pennsylvania (-6,341), and Tennessee (-6,016).

Eye on the Week Ahead

The January edition of the Consumer Price Index is available this week. The index rose 0.4% in December but only 1.4% in 2020, as inflation remained muted. The Treasury budget statement for January is also out this week. The December deficit was $144 billion, significantly higher than the December 2019 deficit of $13 billion.

Monthly Market Review – January 2021

The Markets (as of market close January 29, 2021)

Stocks were able to weather the storm of events that occurred throughout January, despite investors having numerous reasons to move away from equities.

The month began on a somewhat positive note as the availability of COVID vaccines increased throughout the country. Nevertheless, investors were concerned as the number of reported virus cases continued to increase.

Despite numerous challenges, the certification of the 2020 presidential election was to take place on January 6. However, protestors sieged the United States Capitol, disrupting the certification process and forcing members of Congress to shelter. Following a restoration of order, Congress ultimately certified the results of the election.

On January 13, the House of Representatives voted to impeach President Donald Trump a second time, charging him with “incitement of insurrection” against the United States government, alleging that he incited the storming of the Capitol.

The inauguration of President Joe Biden ultimately took place, as scheduled, on January 20. However, the event was held amidst a period of extreme political and civil unrest, concerns over the escalation of COVID-19 cases, increased restrictions in response to the pandemic, increasing unemployment, and curtailed economic recovery.

The fourth-quarter gross domestic product grew at an annualized rate of 4.0%. Job growth stymied, and the number of those receiving unemployment benefits exceeded 4.7 million. The Federal Reserve continued its accommodative measures and warned that the economy is still reeling from the effects of the pandemic.

Stocks ended the month with mixed returns. The large caps of the Dow and the S&P 500 lost value, and the Global Dow fell less than 1.0%. On the other hand, the Nasdaq finished ahead but trailed the small caps of the Russell 2000, which gained 5.0% over its December 2020 closing value.

The majority of the market sectors finished ahead, led by energy, which gained nearly 7.0% for the month. Consumer staples and industrials lagged.

The price of crude oil increased by more than 7.5%. The dollar climbed nearly 1.0%, while gold fell 2.4%. The national average retail price for regular gasoline was $2.392 on January 25, $0.149 higher than the December 28 selling price of $2.243, but $0.114 less than a year ago. The price of gold sank last month, closing at $1,847.30 on January 29, down from its December 31 closing price of $1,893.10.

Stock Market Indexes

Market/Index2020 ClosePrior MonthAs of January 29Monthly ChangeYTD Change
DJIA30,606.4830,606.4829,982.62-2.04%-2.04%
Nasdaq12,888.2812,888.2813,070.691.42%1.42%
S&P 5003,756.073,756.073,714.24-1.11%-1.11%
Russell 20001,974.861,974.862,073.645.00%5.00%
Global Dow3,487.523,487.523,455.84-0.91%-0.91%
Fed. Funds target rate0.00%-0.25%0.00%-0.25%0.00%-0.25%0 bps0 bps
10-year Treasuries0.91%0.91%1.09%18 bps18 bps
US Dollar-DXY89.8489.8490.570.81%0.81%
Crude Oil-CL=F$48.52$48.52$52.177.52%7.52%
Gold-GC=F$1,893.10$1,893.10$1,847.30-2.42%-2.42%

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

Last Month’s Economic News

  • Employment: Employment reversed course in December as total employment declined by 140,000, well below the total for November, which saw 245,000 new jobs added. In December, the unemployment rate and the number of unemployed persons were unchanged at 6.7% and 10.7 million, respectively. Although both measures are much lower than their April highs, they are nearly twice their pre-pandemic levels in February (3.5% and 5.7 million, respectively). The decline in payroll employment reflects the recent increase in coronavirus (COVID-19) cases and efforts to contain the pandemic. The number of permanent job losses declined by 348,000 to 3.4 million in December but is up by 2.1 million since February. In December, the number of persons not in the labor force who currently want a job, at 7.3 million, was little changed over the month but is 2.3 million higher than in February. In December, 23.7% of employed persons teleworked because of the coronavirus pandemic, up from 21.8% in November. In December, 15.8 million persons reported that they had been unable to work because their employer closed or lost business due to the pandemic. This measure is 1.0 million higher than in November. The labor force participation rate and the employment-population ratio were both unchanged over the month, at 61.5% and 57.4%, respectively. These measures are up from their April lows but are lower than in February by 1.8 percentage points and 3.7 percentage points, respectively. Average hourly earnings increased by $0.23 to $29.81 in December and are up 5.1% from a year ago. The average work week declined by 0.1 hour to 34.7 hours in December.
  • Claims for unemployment insurance continued to drop in January. According to the latest weekly totals, as of January 16, there were 4,771,000 workers receiving unemployment insurance benefits, down from the December 19 total of 5,219,000. The insured unemployment rate fell 0.2 percentage point to 3.4%. During the week ended January 9, Extended Benefits were available in 19 states; 50 states reported 7,334,193 continued weekly claims for Pandemic Unemployment Assistance benefits, and 50 states reported 3,863,548 continued claims for Pandemic Emergency Unemployment Compensation benefits.
  • FOMC/interest rates: The Federal Open Market Committee met in January and scaled back its assessment of the economy and employment from December. Noting that the pace of economic activity and employment has moderated in recent months, the Committee decided to keep the target range for the federal funds rate at 0.00%-0.25%, which it expects to maintain until employment improves and inflation reaches or exceeds 2.0%. In addition, the Committee will continue to increase its holdings of Treasury securities by at least $80 billion per month and of agency mortgage-backed securities by at least $40 billion per month.
  • ·         GDP/budget: The gross domestic product advanced at an annual rate of 4.0% in the fourth quarter of 2020. The GDP increased 33.4% in the third quarter after contracting 31.4% in the second quarter. Consumer spending, as measured by personal consumption expenditures, increased 2.5% in the fourth quarter after surging 41.0% in the third quarter. Nonresidential (business) fixed investment climbed 13.8% following a 22.9% increase in the third quarter; residential fixed investment continued to advance, increasing 33.5% in the fourth quarter after soaring 63.0% in the prior quarter. Exports advanced 22.0% in the fourth quarter (59.6% in the third quarter), and imports increased 29.5% in the fourth quarter (93.1% in the third quarter). Federal nondefense government expenditures decreased 8.4% in the fourth quarter following a third-quarter decline of 18.3% in the third quarter as federal stimulus payments and aid lessened. From the fourth quarter of 2019 to the fourth quarter of 2020, the GDP fell 2.5%; personal consumption expenditures dropped 2.6%; nonresidential fixed investment declined 1.3%; residential fixed investment rose 13.7%; exports dropped 11.0%; imports declined 0.6%; and nondefense government spending rose 1.8%.
  • The federal budget deficit in December came in at $143.6 billion, nearly 11 times higher than the December 2019 deficit of $13.3 billion. The deficit for the first three months of fiscal year 2021, at $572.9 billion, is $216.3 billion, or nearly 61% higher than the first three months of the previous fiscal year. Through December, government outlays increased $213.2 billion, or 18%, while receipts fell $3.1 billion. In December, the largest government expenditure was for Social Security, at $117 billion, followed by payments for income security ($77 billion), Medicare ($75 billion), health ($72 billion), and national defense ($70 billion). Individual income tax and social insurance and retirement receipts, at $144 billion and $115 billion, respectively, were the largest sources of government receipts in December. Corporate income taxes totaled $63 billion in December.
  • Inflation/consumer spending: According to the latest Personal Income and Outlays report, both personal income and disposable personal income advanced 0.6% in December after decreasing 1.3% and 1.5%, respectively, in November. Consumer spending fell 0.2% in December after falling 0.7% the previous month. Inflationary pressures remained somewhat muted as consumer prices edged up 0.4% in December after being unchanged in November and October. Consumer prices increased 1.3% in 2020.
  • The Consumer Price Index climbed 0.4% in December after advancing 0.2% in November. Over the 12 months ended in December, the CPI rose 1.4%. The increase in the index was driven by an 8.4% increase in the gasoline index, which accounted for more than 60% of the overall increase. The food index rose in December, as prices for both food at home and food away from home increased 0.4%. The CPI less food and energy prices increased a mere 0.1% in December. Prices for apparel rose 1.4%, while prices for used cars and trucks dropped 1.2% in December.
  • Prices that producers receive for goods and services rose 0.3% in December after increasing 0.1% in November and 0.3% in October. Producer prices increased 0.8% for 2020 after climbing 1.4% in 2019. Producer prices less foods, energy, and trade services rose for the eighth consecutive month after advancing 0.4% in December. For 2020, prices less foods, energy, and trade services moved up 1.1% after rising 1.5% in 2019. Goods prices jumped 1.1% in December, pushed higher by a 5.5% increase in energy prices.
  • Housing: The housing sector soared in December. Sales of existing homes rose 0.7% in December after falling 2.5% in November. Existing home sales in 2020 climbed 22.2%, reaching their highest level since 2006. The median existing-home price was $309,800 in December ($310,800 in November), up 12.9% from December 2019. Unsold inventory of existing homes fell 16.4% from November and represents a 1.9-month supply at the current sales pace, a record low. Sales of existing single-family homes also increased, climbing 1.4% in December after falling 2.4% in November. In 2020, sales of existing single-family homes rose 17.7%. The median existing single-family home price was $272,200 in December, down from $315,500 in November.
  • New single-family home sales also advanced, climbing 1.6% in December after falling 11.0% in November. Sales of new single-family homes increased 15.5% in 2020. The median sales price of new single-family houses sold in December was $355,900 ($335,300 in November). The December average sales price was $394,900 ($390,100 in November). The inventory of new single-family homes for sale in December represents a supply of 4.3 months at the current sales pace, up from the November estimate of 4.1 months.
  • Manufacturing: Industrial production advanced 1.6% in December, with gains of 0.9% for manufacturing, 1.6% for mining, and 6.2% for utilities. The increase for utilities resulted from a rebound in demand for heating after unseasonably warm weather in November. Total industrial production in December was 3.6% lower than it was a year earlier and 3.3% below its pre-pandemic February reading. The index for motor vehicles and parts declined 1.6% in December but was nevertheless 3.6% higher than its year-earlier level. Excluding the motor vehicle sector, factory output moved up 1.1% as most manufacturing industries posted gains. The production of durable goods, other than motor vehicles and parts, rose 1.5%, and nondurable goods production increased 0.9%.
  • For the eighth consecutive month, new orders for durable goods increased in December, climbing 0.2% following a 1.2% jump in November. Despite the trend of monthly increases, new orders for manufactured durable goods were 7.0% lower in 2020 than the prior year. Excluding transportation, new orders increased 0.7% in December (0.8% in November). Excluding defense, new orders increased 0.5% in December (1.2% in November). Machinery, also up eight straight months, led the increase, climbing 2.4% in December. New orders for motor vehicles and parts advanced 1.4% in December following a 2.8% jump in November. New orders for capital goods fell 2.5% in December, pulled lower by a 2.0% drop in nondefense capital goods.
  • Imports and exports: Both import and export prices rose higher in December. Import prices climbed 0.9% following a 0.2% increase the prior month. The December increase was the largest monthly advance since August. Despite the recent increases, prices for imports decreased 0.3% for 2020. Import fuel prices rose 7.8% in December following a 4.8% increase in November. The December advance in import fuel prices was the largest rise since a 15.2% increase in July 2020. Export prices advanced 1.1% in December after advancing 0.7% in November. The December increase in export prices was the largest single-month price increase since June 2020. Overall, export prices rose 0.2% in 2020. Agricultural export prices climbed 0.6% in December after rising 3.5% in November. Nonagricultural prices rose 1.3% in December, but fell 0.2% in 2020.
  • The international trade in goods deficit fell in December but rose in 2020. The December trade in goods deficit was $82.5 billion, 3.5% below the November deficit but 19.1% above the 2019 figure. Exports rose by 4.6% in December, but fell 2.6% in 2020 from the prior year. Imports advanced 1.4% in December and increased 4.7% over 2019.
  • The latest information on international trade in goods and services, out January 7, is for November and shows that the goods and services trade deficit was $68.1 billion, an 8.0% increase over the October deficit. November exports were $184.2 billion, or 1.2%, more than October exports. November imports were $252.3 billion, or 2.9%, more than October imports. Year to date, the goods and services deficit increased $73.6 billion, or 13.9%, from the same period in 2019. Exports decreased $372.3 billion, or 16.1%. Imports decreased $298.7 billion, or 10.5%.
  • International markets: The European Central Bank maintained its record-low policy rate as efforts continue to revive the European economy, still ravaged by the effects of the COVID pandemic. Vaccination delays in Europe coupled with the emergence of a deadlier strain of the virus have kept expectations low for economic recovery any time soon. In Japan, deflation is trending as consumer prices continue to drop. On the other hand, China’s fourth-quarter gross domestic product expanded by an annualized rate of 6.5%. Industrial production has benefitted from strong exports, although retail sales in China continue to lag. For January, China’s Shanghai Composite Index edged up 1.0%; the Eurozone’s Euronext 100 fell 1.3%; and the United Kingdom’s FTSE 100 Index dropped nearly 2.0%.
  • Consumer confidence: The Conference Board Consumer Confidence Index® improved in January after falling in December. The index stands at 89.3, up from 87.1 in December. However, the Present Situation Index, based on consumers’ assessment of current business and labor market conditions, decreased from December’s 87.2 to 84.4 in January. The Expectations Index, based on consumers’ short-term outlook for income, business, and labor market conditions, increased from 87.0 in December to 92.5 in January.

Eye on the Month Ahead

February brings with it continued hope in the fight against the COVID-19 pandemic. The economy showed signs of recovery in January, which should continue in February. The stock market is expected to maintain its resilience this month, particularly as more economic stimulus becomes available.

What I’m Watching This Week – 1 February 2021

The Markets (as of market close January 29, 2021)

Equities were mixed to begin last week. The Global Dow (-0.6%), the Russell 2000 (-0.3%), and the Dow (-0.1%) lost value. The S&P 500 advanced 0.4% on the day, and the Nasdaq closed up 0.7% to reach a record high. Treasury yields fell, while crude oil prices and the dollar rose. Technology, consumer staples, real estate, and utilities led the sectors. Investors may have pulled away from stocks following uncertainty over President Biden’s stimulus plan; news of a new, aggressive COVID-19 strain; foreign travel restrictions into the United States; and word that a major pharmaceutical company had stopped working on its COVID vaccine program.

Only the Global Dow edged higher last Tuesday, a day that saw investors take profits from record-setting equities. Small caps, which had been soaring, fell back, pulling the Russell 2000 down 0.6%. The S&P 500 dropped 0.2%, while both the Nasdaq and the Dow inched down 0.1%. Crude oil prices and the dollar gave back Monday’s gains, while the yield on 10-year Treasuries was unchanged. Among the sectors, real estate, consumer staples, and communication services fared the best, while energy, materials, financials, and industrials fell.

A less-than-optimistic assessment from the Federal Reserve sent stocks reeling last Wednesday. Each of the benchmark indexes fell sharply, led by the Nasdaq and the S&P 500, which each lost 2.6%, while the Dow fell 2.1%. The Russell 2000 and the Global Dow each dropped 1.9%. Prices for Treasury notes spiked, pulling yields lower by 2.5%. Crude oil prices and the dollar gained. All of the sectors fell, with communication services, health care, and materials the hardest hit.

Investors looked for value buys last Thursday, taking advantage of lower stock prices following Wednesday’s sell-off. The large caps of the Dow and the S&P 500 both rose 1.0%, while the Nasdaq and the Global Dow each advanced 0.5%. The small caps of the Russell 2000 edged down 0.1%. Industrials, health care, communication services, financials, and materials performed well last Thursday. Treasury yields climbed 4.2%, while crude oil prices and the dollar fell.

The week saw a new type of market risk due to “cyberbulling” — a scenario where retail investors acting together online agree to buy certain stocks, which can create extreme volatility in certain stocks and sectors. Ultimately, the week closed on a sour note for stocks as each of the benchmark indexes lost value last Friday. The Dow, the Nasdaq, and the Global Dow each fell 2.0%. The S&P 500 finished down 1.9%, and the Russell 2000 dropped 1.6%. Treasury yields and the dollar closed up, while crude oil prices dropped. All of the market sectors finished the day in the red, led by energy, which plunged 3.4%.

Each of the benchmark indexes listed here lost significant value last week. The Russell 2000, which had gotten off to a very positive start to the new year, suffered the largest drop, falling 4.4%, followed by the Global Dow, the Nasdaq, the S&P 500, and the Dow. The dollar and crude oil prices closed slightly ahead, while gold prices dipped lower. For the third consecutive week, 10-year Treasury yields ended the week where they began. Year to date, the Russell 2000 and the Nasdaq are the only indexes still in the black.

The national average retail price for regular gasoline was $2.392 per gallon on January 25, $0.013 higher than the prior week’s price but $0.114 less than a year ago. Crude oil imports into the United States averaged 5.1 million barrels per day for the week ended January 22, a decrease of 1.0 million barrels per day from the previous week.

Stock Market Indexes

Market/Index2020 ClosePrior WeekAs of 1/29Weekly ChangeYTD Change
DJIA30,606.4830,996.9829,982.62-3.27%-2.04%
Nasdaq12,888.2813,543.0613,070.69-3.49%1.42%
S&P 5003,756.073,841.473,714.24-3.31%-1.11%
Russell 20001,974.862,168.762,073.64-4.39%5.00%
Global Dow3,487.523,598.293,455.84-3.96%-0.91%
Fed. Funds target rate0.00%-0.25%0.00%-0.25%0.00%-0.25%0 bps0 bps
10-year Treasuries0.91%1.09%1.09%0 bps18 bps
US Dollar-DXY89.8490.2290.570.39%0.81%
Crude Oil-CL=F$48.52$52.09$52.170.15%7.52%
Gold-GC=F$1,893.10$1,853.50$1,847.30-0.33%-2.42%

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

Last Week’s Economic News

  • The Federal Open Market Committee met last week and decided to keep the target range for the federal funds rate at 0.00%-0.25%. The Committee indicated that it expects to maintain that target range until labor market conditions have reached levels consistent with the Committee’s assessments of maximum employment, and inflation has risen to 2.0% and is on track to moderately exceed 2% for some time. In addition, the Federal Reserve will continue to increase its holdings of Treasury securities by at least $80 billion per month and of agency mortgage-backed securities by at least $40 billion per month. The Committee indicated that the pace of economic activity and employment has moderated, with weakness concentrated in the sectors most adversely affected by the pandemic. This assessment is scaled back from December, when the Committee noted that economic activity and employment had continued to recover.
  • The economy grew at an annual rate of 4.0% in the fourth quarter, according to the initial, or advance, estimate of the gross domestic product. The GDP increased 33.4% in the third quarter after declining 31.4% in the second quarter. Consumer spending rose by 2.5% in the fourth quarter following a 41.0% surge in the third quarter. Consumer prices increased 1.5% in the fourth quarter, compared with an increase of 3.7% in the third quarter. Nonresidential fixed investment (what businesses spend on physical structures and equipment) climbed 13.8%, while residential fixed investment rose 33.5%. In the fourth quarter, exports advanced 22.0% and imports increased 29.5%.
  • Consumer prices edged up 0.4% in December. Both personal income and disposable personal income increased 0.6% in December. Consumer spending fell 0.2% in December. For 2020, consumer prices rose 1.3%; personal income increased 6.3%; disposable personal income climbed 7.2%; and personal consumption expenditures (consumer spending) fell 2.7%.
  • Durable goods orders increased for the eighth consecutive month in December. New orders advanced 0.2% following a 1.2% increase in November. Machinery, also up eight consecutive months, drove the increase, climbing 2.4% in December. Shipments of manufactured durable goods in December, up seven of the last eight months, increased 1.4%. This followed a 0.4% November increase. Unfilled orders for manufactured durable goods in December, down nine of the last ten months, decreased 0.3%. Inventories of manufactured durable goods in December, down following three consecutive monthly increases, decreased 0.2%. Nondefense new orders for capital goods in December decreased 2.0%.
  • Sales of new, single-family homes increased 1.6% in December and finished 2020 up 15.2%. The median sales price of new houses sold in December 2020 was $355,900. The average sales price was $394,900. The estimate of new houses for sale at the end of December was 302,000. This represents a supply of 4.3 months at the current sales rate.
  • The international trade in goods deficit was $82.5 billion in December, down 3.5% from November. Exports of goods for December were $133.4 billion, 4.6% more than November exports. Imports of goods for December were $215.9 billion, 1.4% more than November imports. In 2020, the trade in goods deficit increased by $13.2 billion, or 19.1%. Exports fell $3.5 billion, or -2.6%. Imports rose $9.7 billion, or 4.7%.
  • For the week ended January 23, there were 847,000 new claims for unemployment insurance, a decrease of 67,000 from the previous week’s level, which was revised up by 14,000. According to the Department of Labor, the advance rate for insured unemployment claims was 3.4% for the week ended January 16, a decrease of 0.1 percentage point from the prior week’s revised rate. For comparison, during the same period last year, there were 212,000 initial claims for unemployment insurance, and the insured unemployment claims rate was 1.2%. The advance number of those receiving unemployment insurance benefits during the week ended January 16 was 4,771,000, a decrease of 203,000 from the prior week’s level, which was revised down by 80,000. States and territories with the highest insured unemployment rates in the week ended January 9 were in Kansas (7.7%), Pennsylvania (7.0%), the Virgin Islands (6.9%), Alaska (6.4%), Nevada (6.1%), Michigan (5.6%), Puerto Rico (5.6%), Illinois (5.5%), New Mexico (5.5%), and Connecticut (5.4%). The largest increases in initial claims for the week ended January 16 were in Florida (+8,643), Maryland (+7,935), Kansas (+6,746), Ohio (+5,665), and Rhode Island (+2,998), while the largest decreases were in California (-65,383), New York (-10,936), Texas (-9,170), Pennsylvania (-8,503), and Washington (-7,877).

Eye on the Week Ahead

The latest information on the employment situation for January is the most noteworthy report out this week. December saw the number of jobs decrease by 140,000, while the unemployment rate was 6.7% — figures directly tied to a spike in COVID-19 cases.

What I’m Watching This Week – 25 January 2021

The Markets (as of market close January 22, 2021)

The markets were closed last Monday in observance of Martin Luther King, Jr., Day. However, stocks enjoyed a good start to the week last Tuesday as equities rebounded from the prior Friday’s sell-off. Investors were encouraged by Treasury Secretary nominee Janet Yellen, who pushed for more stimulus during her confirmation hearing. By the close of trading, tech stocks and small caps flourished, driving the Nasdaq (1.5%) and the Russell 2000 (1.3%) higher. The S&P 500 climbed 0.8% on the day, followed by the Global Dow (0.5%) and the Dow (0.4%). Treasury yields fell along with the dollar, while crude oil prices advanced. Energy, communication services, and information technology led the market sectors.

Stocks rose to record highs last Wednesday on hopes of more stimulus and COVID vaccine availability following the inauguration of Joe Biden as the 46th president of the United States. Nearly all of the market sectors gained, with communication services, consumer discretionary, and information technology all climbing more than 2.0%. Among the market indexes, the Nasdaq and the S&P 500 led the way, gaining 2.0% and 1.4%, respectively. The Global Dow advanced 0.7%, followed by the Dow at 0.8%, and the Russell 2000, which rose 0.4%. The yield on 10-year Treasuries slid, as did the dollar, while crude oil prices advanced 0.6%.

Tech shares drove the Nasdaq higher last Thursday on a day that otherwise saw mixed market results. The S&P 500 eked out a minimal gain, while the Dow, the Russell 2000, and the Global Dow each lost value. Treasury yields advanced, while crude oil prices and the dollar dropped. Performance among the sectors was mixed, with energy falling nearly 3.5%.

Last Friday was another day of mixed trading on the market. The Russell 2000 climbed 1.3% and the Nasdaq ticked up 0.1%. The Global Dow (-0.9%), the Dow (-0.6%), and the S&P 500 (-0.3%) all lost value. Treasury yields and crude oil prices plunged, while the dollar advanced. Only utilities, real estate, and communication services gained ground among the sectors.

Inauguration week was a good one for equities. Each of the major indexes posted solid to impressive gains, led by the Nasdaq and followed by the Russell 2000, the S&P 500, and the Dow. The Global Dow changed little from the prior week. The yield on 10-year Treasuries had a bumpy ride during the week, ultimately closing where it began. The dollar and crude oil prices fell last week, while gold prices gained more than 1.5%. Investors may have been a little cautious last week in anticipation of the upcoming Federal Reserve meeting and quarterly earnings reports due for some major corporations.

The national average retail price for regular gasoline was $2.379 per gallon on January 18, $0.062 higher than the prior week’s price but $0.158 less than a year ago. The highest regular gas prices on January 18 were in California ($3.213), New York ($2.370), and Massachusetts ($2.334).

Stock Market Indexes

Market/Index2020 ClosePrior WeekAs of 1/22Weekly ChangeYTD Change
DJIA30,606.4830,814.2630,996.980.59%1.28%
Nasdaq12,888.2812,998.5013,543.064.19%5.08%
S&P 5003,756.073,768.253,841.471.94%2.27%
Russell 20001,974.862,123.202,168.762.15%9.82%
Global Dow3,487.523,599.133,598.29-0.02%3.18%
Fed. Funds target rate0.00%-0.25%0.00%-0.25%0.00%-0.25%0 bps0 bps
10-year Treasuries0.91%1.09%1.09%0 bps18 bps
US Dollar-DXY89.8490.7890.22-0.62%0.42%
Crude Oil-CL=F$48.52$52.17$52.09-0.15%7.36%
Gold-GC=F$1,893.10$1,825.90$1,853.501.51%-2.09%

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

Last Week’s Economic News

  • The housing sector looks to have rebounded in December from the prior month. The number of building permits issued advanced 4.5% last month and is 17.3% above the December 2019 rate. Permits issued for single-family construction were 7.8% higher in December than in November. The number of housing starts in December was 5.8% above the November total. Single-family housing starts increased by 12.0%. Housing completions last month were 15.9% above the prior month’s estimate. The number of single-family housing completions was 10.2% above the November total.
  • According to the National Association of Realtors®, existing-home sales rose 0.7% in December and increased 22.2% in 2020, reaching the highest number of total sales since 2006. The median existing-home price for all housing types in December was $309,800 ($310,800 in November), up 12.9% from December 2019. Total housing inventory at the end of December sat at a supply of only of 1.9 months at the current sales pace, an all-time low. Seventy percent of the homes sold in December were on the market for less than a month. Sales of existing single-family homes also rose 0.7% last month and are up 22.8% from December 2019. The median existing single-family home price was $314,300, down from November’s median price of $315,500.
  • For the week ended January 16, there were 900,000 new claims for unemployment insurance, a decrease of 26,000 from the previous week’s level, which was revised down by 39,000. According to the Department of Labor, the advance rate for insured unemployment claims was 3.6% for the week ended January 9, unchanged from the prior week’s revised rate. For comparison, during the same period last year, there were 220,000 initial claims for unemployment insurance, and the insured unemployment claims rate was 1.2%. The advance number of those receiving unemployment insurance benefits during the week ended January 9 was 5,054,000, a decrease of 127,000 from the prior week’s level, which was revised down by 90,000. States and territories with the highest insured unemployment rates in the week ended January 2 were in Kansas (7.5%), Pennsylvania (7.2%), Alaska (6.6%), Illinois (6.1%), Nevada (5.9%), California (5.8%), Puerto Rico (5.8%), New Mexico (5.7%), Colorado (5.6%), and Minnesota (5.5%). The largest increases in initial claims for the week ended January 9 were in Illinois (+49,557), Kansas (+22,128), California (+21,636), Texas (+18,732), and New York (+16,204), while the largest decreases were in Colorado (-10,996), Michigan (-5,802), Kentucky (-5,542), Louisiana (-4,868), and Washington (-2,573).

Eye on the Week Ahead

This week is a busy one for economic reports. The first estimate of the fourth-quarter gross domestic product is available this week. The GDP increased at an annual rate of 33.4% in the third quarter. The December report on durable goods orders is also out this week. New orders for long-lasting goods rose by 0.9% in November. The Federal Open Market Committee meets this week. Based on statements from the chairman and other FOMC members, interest rates and quantitative easing are expected to remain unchanged. The December report on personal income and outlays is also released this week. Personal income dropped 1.1% in November, while consumer prices were unchanged from the month before, indicating that inflationary pressures remained muted.

What I’m Watching This Week – 19 January 2021

The Markets (as of market close January 15, 2021)

Last Monday, the major benchmark indexes pulled back from record highs reached the prior week. Tech stocks took the biggest hit, dragging the Nasdaq down by 1.3%. The S&P 500 lost 0.7%, followed by the Global Dow (-0.5%) and the Dow (-0.3%). The Russell 2000 closed the day where it began. Treasury yields and the dollar pushed higher, while crude oil prices fell marginally. Investors were confronted with several states reporting record-high COVID-19 cases. Growing pandemic worries, plus concerns over inflated stock valuations, drove stocks lower. Among the sectors, energy posted a solid 1.6% gain, followed by health care and financials. The remaining market sectors sank, led by consumer discretionary (-1.9%), communication services (-1.8%), and real estate (-1.7%).

Stocks rebounded last Tuesday, driven higher by a surge in several sectors including energy, consumer discretionary, industrials, materials, and financials. The dollar fell, Treasury yields advanced, and crude oil prices reached an 11-month high. Among the major indexes, the Russell 2000 posted the highest return (1.8%), followed by the Global Dow (0.7%), the Nasdaq (0.3%), the Dow (0.2%), and the S&P 500, which essentially broke even.

Equities were mixed last Wednesday, with the Nasdaq, the S&P 500, and the Global Dow posting modest gains, while the Dow and the Russell 2000 lost value. Utilities, information technology, and real estate outperformed among the sectors. Treasury yields dropped for the first time in several trading sessions. Crude oil prices sank more than half a percent, while the dollar advanced.

Stock returns were mixed last Thursday as the anticipation of additional stimulus was muted by disappointing unemployment figures. The small caps of the Russell 2000 surged by 2.1% and the Global Dow gained 0.5%. Otherwise, the S&P 500 (-0.4%), the Dow (-0.2%), and the Nasdaq (-0.1%) lost value. Yields on 10-year Treasuries climbed by nearly 4.0%, crude oil prices rebounded, and the dollar slipped. Energy advanced by more than 3.0%, far ahead of real estate, industrials, and financials, which were the only other sectors to gain ground.

Bank and energy shares tumbled last Friday, pulling stocks lower on the day. Each of the benchmark indexes listed here lost value, headed by the Russell 2000, which lost 1.5%, followed by the Global Dow (-1.3%), the Nasdaq (-0.9%), the S&P 500 (-0.7%), and the Dow (-0.6%). Demand pushed Treasury bond prices higher, dragging yields lower. Crude oil prices sank 2.6% on the day, while the dollar advanced. Real estate, utilities, health care, and communication services were the only sectors to gain. Energy plunged 4.0%.

For the week, only the small caps of the Russell 2000 posted a gain, as the remaining indexes fell. The yield on 10-year Treasuries ended the week about where it began, while prices for crude oil and gold sank. The dollar gained against a basket of currencies. President-elect Biden rolled out his economic stimulus plan earlier in the week and pledged to step up efforts to increase the availability of COVID vaccines. However, the number of reported virus cases continued to rise, as did the number of unemployment claims. Year to date, each of the benchmarks remained in the black, led by the Russell 2000, followed by the Global Dow, the Nasdaq, the Dow, and the S&P 500.

The national average retail price for regular gasoline was $2.317 per gallon on January 11, $0.068 higher than the prior week’s price but $0.253 less than a year ago. The highest regular gas prices on January 11 were in California ($3.145) and Massachusetts (2.268).

Stock Market Indexes

Market/Index2020 ClosePrior WeekAs of 1/15Weekly ChangeYTD Change
DJIA30,606.4831,097.9730,814.26-0.91%0.68%
Nasdaq12,888.2813,201.9812,998.50-1.54%0.86%
S&P 5003,756.073,824.683,768.25-1.48%0.32%
Russell 20001,974.862,091.662,123.201.51%7.51%
Global Dow3,487.523,614.953,599.13-0.44%3.20%
Fed. Funds target rate0.00%-0.25%0.00%-0.25%0.00%-0.25%0 bps0 bps
10-year Treasuries0.91%1.10%1.09%-1 bps18 bps
US Dollar-DXY89.8490.0790.780.79%1.05%
Crude Oil-CL=F$48.52$52.73$52.17-1.06%7.52%
Gold-GC=F$1,893.10$1,847.00$1,825.90-1.14%-3.55%

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

Last Week’s Economic News

  • Consumer prices rose 0.4% in December after advancing 0.2% in November, according to the latest information from the Bureau of Labor Statistics. Over the last 12 months, consumer prices have increased 1.4%. More than 60% of the December price increase was attributable to a 10.0% increase in fuel oil prices and an 8.4% jump in gasoline prices. Food prices rose 0.4% in December and are up 3.9% over the last 12 months. New vehicle prices climbed 0.4%, but used car and truck prices dropped 1.2% last month. Prices for apparel increased 1.4% in December, and shelter prices inched up 0.1%.
  • Producer prices increased 0.3% in December following a 0.1% rise in November. Producer prices advanced a mere 0.8% in 2020 after climbing 1.4% in 2019. The December price increase was attributable to a rise in prices for goods. Prices for services actually edged down 0.1%. Driving the increase in prices for goods was a 5.5% jump in energy prices, within which gasoline prices surged 16.1%.
  • Despite December being the holiday shopping month, sales at the retail level fell 0.7% from the previous month and rose only 0.6% in 2020. Businesses that saw retail sales increase last month include motor vehicle and parts dealers (1.1%); building material and garden equipment and supplies dealers (14.0%); food and beverage stores (11.5%); health and personal care stores (1.7%); sporting goods, hobby, musical instrument, and book stores (5.7%); general merchandise stores (2.7%); and online retailers (22.1%). Businesses that did not fare well in December include furniture and home furniture stores (-5.4%), electronics and appliance stores (-14.6%), gasoline stations (-15.9%), clothing and clothing accessories stores (-26.4%), food services and drinking places (-19.5%), and miscellaneous store retailers (-1.2%).
  • Industrial production advanced 1.6% in December, with gains of 0.9% for manufacturing, 1.6% for mining, and 6.2% for utilities. Total industrial production in December was 3.6% lower than it was a year earlier and 3.3% below its pre-pandemic February reading.
  • The federal government budget deficit was $143.6 billion in December. Over the first three months of fiscal year 2021, the deficit sits at $572.9 billion, nearly 38% higher than the comparable period for fiscal year 2020. In December, government receipts totaled $346.1 billion and government expenditures reached $489.7 billion. Compared to fiscal year 2020, total receipts are down by about $3.0 billion, while outlays are more than $200.0 billion higher in fiscal year 2021.
  • Prices for imports advanced 0.9% in December following a 0.2% increase in November. Fuel import prices rose 7.8%, marking the largest increase since July 2020. Excluding fuel, import prices rose 0.4%. For the 12 months ended in December, import prices fell 0.3%. Export prices increased 1.1% last month following a 0.7% jump in November. The December advance is the largest increase in export prices since June 2020. Agricultural exports rose 0.6% last month, far below the 3.5% increase in November. Nonagricultural export prices rose 1.3% in December, the largest one-month advance since June 2020. Export prices have risen 0.2% since December 2019.
  • According to the latest Job Openings and Labor Turnover report from the Bureau of Labor Statistics, the number and rate of job openings were little changed at 6.5 million and 4.4%, respectively, on the last business day of November. Hires were little changed at 6.0 million, while total separations increased to 5.4 million. Over the year, the number of job openings decreased in a number of industries, with the largest decreases in accommodation and food services; transportation, warehousing, and utilities; and information. The job openings increased in nondurable goods manufacturing and in other services. The number and rate of layoffs and discharges increased to 2.0 million (+295,000) and 1.4%, respectively, in November. Over the 12 months ended in November, hires totaled 70.7 million and separations totaled 75.9 million, yielding a net employment loss of 5.2 million.
  • For the week ended January 9, there were 965,000 new claims for unemployment insurance, an increase of 181,000 from the previous week’s level, which was revised down by 3,000. According to the Department of Labor, the advance rate for insured unemployment claims was 3.7% for the week ended January 2, an increase of 0.2 percentage point from the prior week’s rate. For comparison, during the same period last year, there were 207,000 initial claims for unemployment insurance, and the insured unemployment claims rate was 1.2%. The advance number of those receiving unemployment insurance benefits during the week ended January 2 was 5,271,000, an increase of 199,000 from the prior week’s level. States and territories with the highest insured unemployment rates in the week ended December 26 were in Pennsylvania (6.6%), Alaska (6.5%), Kansas (6.4%), New Mexico (5.9%), Illinois (5.6%), Washington (5.6%), Nevada (5.5%), the Virgin Islands (5.3%), Minnesota (5.2%), and California (5.0%). The largest increases in initial claims for the week ended January 2 were in Louisiana (+17,119), Kansas (+15,400), Texas (+14,541), Georgia (+12,498), and Washington (+10,950), while the largest decreases were in Illinois (-65,099), California (-7,743), Maryland (-2,088), and Florida (-1,836).

Eye on the Week Ahead This week will be a memorable one with the inauguration of President-elect Joe Biden. This week also includes important information on the housing sector. The December report on housing starts is available this week. November saw building permits and housing starts increase, while housing completions fell. Also out this week is the most recent report on existing home sales. In November, sales of existing housing units dropped by 2.5% from the prior month. Sales of single-family existing homes also decreased in November.

What I’m Watching This Week – 11 January 2021

The Markets (as of market close January 8, 2021)

Last Monday, stocks began the new year down on worries over the Georgia runoff elections, a surge in COVID-19 cases, and evidence that a new strain of the virus has entered the country. The S&P 500, the Nasdaq, and the Russell 2000 each fell 1.5%. The Dow declined 1.3% and the Global Dow dropped 0.5%. Treasury yields and the dollar were mixed, and crude oil prices fell. Some sectors took heavy losses last Monday, including real estate, utilities, industrials, information technology, communication services, and financials.

Stocks recovered last Tuesday, spurred by cyclicals and small caps. The Russell 2000 led the surge, advancing 1.7%, followed by the Nasdaq (1.0%), the Global Dow (0.9%), the S&P 500 (0.7%), and the Dow (0.6%). Treasury yields and crude oil prices rose, while the dollar slipped. Most of the market sectors gained, with energy posting the largest advance, climbing 4.5% on the day.

Wednesday was a day that will be remembered for the violence that took place at the United States Capitol and interrupted certification of the presidential election. Nevertheless, equities posted solid gains by day’s end, led by the small caps of the Russell 2000, which vaulted 4.0% on the heels of a 1.7% jump the prior day. Only the Nasdaq lost ground, falling 0.6% as tech shares lagged. The Global Dow advanced 2.1%, the Dow climbed 1.4%, and the S&P 500 rose 0.6%. The 10-year Treasury yield surpassed 1.0% for the first time since last March. Crude oil prices rose above $50 per barrel, while the dollar was mixed.

Last Thursday, stocks continued to advance, apparently unaffected by the events of the prior day. Investors pinned their hopes of a speedier economic recovery on additional stimulus and increased vaccines. The tech stocks of the Nasdaq recovered from Wednesday’s losses to post a solid 2.6% gain last Thursday. The small caps of the Russell 2000 continued to surge, advancing 1.9%, followed by the S&P 500 (1.5%), the Global Dow (1.0%), and the Dow (0.7%). The yields on 10-year Treasuries rose last Thursday, as did crude oil prices and the dollar. Information technology, consumer discretionary, energy, financials, and communication services were the top-performing sectors by the end of the day.

Last Friday proved to be another banner day for equities as each of the benchmark indexes posted gains, except for the small caps of the Russell 2000, which fell 0.3%. The Nasdaq jumped 1.0%, followed by the S&P 500 (0.6%), the Global Dow (0.3%), and the Dow (0.2%). Treasury yields, crude oil prices, and the dollar advanced. Consumer discretionary and real estate led the sectors.

Stocks climbed to all-time highs last week as investors latched on to President-elect Joe Biden’s statement that he’d push for trillions of dollars in further aid and stimulus. The market’s strong performance came despite a poor jobs report for December (see below), which highlighted the impact of surging COVID-19 cases while adding incentive for more stimulus. By the end of last week, the Russell 2000 gained nearly 6.0%, followed by the Global Dow, the Nasdaq, the S&P 500, and the Dow. Crude oil prices pushed above $50 per barrel after climbing more than 8.5% for the week. The dollar inched up by a quarter of a percent, while gold prices fell by the end of the week.

The national average retail price for regular gasoline was $2.249 per gallon on January 4, $0.006 higher than the prior week’s price but $0.329 less than a year ago. The highest regular gas prices on January 4 were in California ($3.10), Massachusetts ($2.22), and New York ($2.21).

Stock Market Indexes

Market/Index2020 ClosePrior WeekAs of 1/8Weekly ChangeYTD Change
DJIA30,606.4830,606.4831,097.971.61%1.61%
Nasdaq12,888.2812,888.2813,201.982.43%2.43%
S&P 5003,756.073,756.073,824.681.83%1.83%
Russell 20001,974.861,974.862,091.665.91%5.91%
Global Dow3,487.523,487.523,614.953.65%3.65%
Fed. Funds target rate0.00%-0.25%0.00%-0.25%0.00%-0.25%0 bps0 bps
10-year Treasuries0.91%0.91%1.10%19 bps19 bps
US Dollar-DXY89.8489.8490.070.26%0.26%
Crude Oil-CL=F$48.52$48.52$52.738.68%8.68%
Gold-GC=F$1,893.10$1,893.10$1,847.00-2.44%-2.44%

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

Last Week’s Economic News

  • For the first time since April, employment decreased in December. According to the Bureau of Labor Statistics, total employment declined by 140,000 last month. Both the unemployment rate, at 6.7%, and the total number of unemployed persons, at 10.7 million, remained unchanged. The decline in employment reflects the recent increase in COVID-19 cases and efforts to contain the pandemic. Although both measures are much lower than their April highs, they are nearly twice their pre-pandemic levels in February (3.5% and 5.7 million, respectively). The labor force participation rate and the employment-population ratio were both unchanged over the month, at 61.5% and 57.4%, respectively. These measures are up from their April lows but are lower than in February by 1.8 percentage points and 3.7 percentage points, respectively. In December, the number of persons not in the labor force who currently want a job, at 7.3 million, was little changed over the month but is 2.3 million higher than in February. Last month, 23.7% of employed persons teleworked because of the pandemic, up from 21.8% in November. December also saw 15.8 million persons report that they had been unable to work because their employer closed or lost business due to the pandemic. The average work week declined by 0.1 hour to 34.7 hours in December. Average hourly earnings increased by $0.23 to $29.81 last month. Average hourly wages increased 5.1%, or $1.44 since December 2019.
  • According to the latest Manufacturing ISM® Report On Business®, manufacturing increased in December. The purchasing managers’ index registered 60.7% last month, 3.2 percentage points above the November reading. The December PMI® indicates expansion in the overall economy for the eighth month in a row after contracting in March, April, and May. Also advancing in December were new orders, production, employment, and prices. New export orders and imports decreased last month.
  • Economic activity in the services sector also expanded in December, according to the latest Services ISM® Report On Business®. The purchasing managers’ index for services increased by 1.3% in December over November, marking the seventh consecutive monthly increase. Supplier deliveries, business activity and production, new orders, and inventories all increased last month. Employment and prices declined in December.
  • According to the latest information from the Census Bureau, the international trade deficit rose by 8.0% in November, sitting at $68.1 billion. Exports were $184.2 billion in November, up 1.2% from the prior month. Imports were $252.3 billion, an increase of 2.9% in November over October. Year to date, the goods and services deficit increased $73.6 billion, or 13.9%, from the same period in 2019. Exports decreased $372.3 billion, or 16.1%. Imports decreased $298.7 billion, or 10.5%.
  • For the week ended January 2, there were 787,000 new claims for unemployment insurance, a decrease of 3,000 from the previous week’s level, which was revised up by 3,000. According to the Department of Labor, the advance rate for insured unemployment claims was 3.5% for the week ended December 26, unchanged from the prior week’s rate. For comparison, during the same period last year, there were 212,000 initial claims for unemployment insurance, and the insured unemployment claims rate was 1.2%. The advance number of those receiving unemployment insurance benefits during the week ended December 26 was 5,072,000, a decrease of 126,000 from the prior week’s level, which was revised down by 21,000. States and territories with the highest insured unemployment rates in the week ended December 19 were in Puerto Rico (7.8%), Alaska (6.4%), California (6.0%), Kansas (5.9%), Nevada (5.6%), Illinois (5.5%), New Mexico (5.5%), Pennsylvania (5.2%),Washington (5.1%), and the District of Columbia (4.6%). The largest increases in initial claims for the week ended December 26 were in New York (+10,318), California (+10,071), Kentucky (+4,341), Missouri (+4,105), and New Jersey (+2,851), while the largest decreases were in Illinois (-34,568), Pennsylvania (-9,026), Georgia (-7,713), Kansas (-3,710), and Texas (-3,531).

Eye on the Week Ahead

December’s inflation indicators are out this week. The Consumer Price Index, which advanced 1.2% in 2020, isn’t expected to advance more than the November rate of 0.2%. Producer prices rose by only 0.8% last year and 0.1% last November. The retail sales report for December is also available this week. November saw retail sales fall 1.1%. However, the holiday shopping season should push retail sales up in December.

Annual Market Review – 2020

Overview

Over the past 12 months, we have endured a global pandemic resulting in numerous deaths and hospitalizations, mass layoffs, a sinking economy, and a contentious presidential election. Our lives and lifestyles changed, where working and learning from home became the “new normal,” and in-person communication was replaced by virtual meetings. In short, 2020 was a very memorable year that tested our resolve, patience, and courage.

The year began with news of a SARS-like virus spreading in China. Little did we know the impact this contagion would impart on our health, politics, and economy. Late in January, the very first known case of COVID-19 in the United States involved a Washington state victim who had traveled from the city of Wuhan, China. By February, the growing number of reported cases of the virus prompted travel restrictions, stay-at-home orders, and shutting down of businesses both domestically and around the world. Aside from concern caused by the virus, we were consumed by the impeachment in February of President Trump, who was eventually acquitted by the Senate.

In March, the World Health Organization declared a global pandemic as the spread of the virus reached more than 100 countries, with more than 100,000 reported cases. By mid-March, President Trump declared a state of national emergency. World economies and stock markets were rocked by the spread of the COVID-19 virus. leading to major market sell-offs, plunging stocks well below their 2019 values. The U.S. first-quarter gross domestic product decelerated at a rate of -5%, only to be outdone by a second-quarter deceleration of -31.4%. Fear became the motivating factor in our lives — fear of contracting the virus, fear of losing a loved one to the virus, fear of job loss, fear of economic failure, and fear of losing our money.

In response to the economic turmoil caused by the pandemic, several pieces of legislation were passed, including the Coronavirus Preparedness and Response Supplemental Appropriations Act, the Families First Coronavirus Response Act, and the massive COVID-19 rescue package, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), which included the Paycheck Protection Program and distribution of stimulus checks to qualifying individuals. In May, focus shifted to the death of George Floyd, which sparked protests and confrontations across the country.

The summer months saw a slight lull in the number of reported virus cases. Economies began to marginally recover, some businesses began to reopen, and travel restrictions were relaxed. However, as the availability of testing for the virus increased, so did the number of reported cases. Following the Democratic and Republican national conventions, the campaign for the presidential election captured the focus of most Americans for the rest of the year, although COVID-19 seemed to cast a shadow over almost every aspect of our lives.

The November presidential election resulted in the defeat of President Donald Trump by former Vice President Joe Biden, with the post-election period dominated by attempts to overturn the results through federal courts and state legislatures. Nevertheless, some positive news came at the end of the year with the development and initial dissemination of COVID-19 vaccines and additional legislation that provided $900 billion in pandemic-related stimulus.

The new year brings with it a sense of hope: hope that the virus will be controlled; hope for a return to some form of normalcy in our daily lives; hope for economic prosperity and job security; and hope for peace, both here and around the world — and a good riddance to 2020.

Market/Index2019 CloseAs of 9/302020 CloseMonth ChangeQ4 Change2020 Change
DJIA28,538.4427,781.7030,606.483.27%10.17%7.25%
Nasdaq8,972.6011,167.5112,888.285.65%15.41%43.64%
S&P 5003,230.783,363.003,756.073.71%11.69%16.26%
Russell 20001,668.471,507.691,974.868.52%30.99%18.36%
Global Dow3,251.242,960.933,487.524.15%17.78%7.27%
Fed. Funds1.50%-1.75%0.00%-0.25%0.00%-0.25%0 bps0 bps-150 bps
10-year Treasuries1.91%0.67%0.91%7 bps24 bps-100 bps

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

Snapshot 2020

The Markets

  • Equities: As with almost every aspect of 2020, the pandemic impacted the stock market throughout the year. Investors began hearing of the possible spread of the virus in January, creating uncertainty and trepidation. By the end of February, investors sold more equities than they purchased, driving values down. By the end of March, the spread of COVID-19 throughout much of the world and within the United States prompted a major market sell-off. The first quarter saw each of the benchmark indexes fall far below its 2019 closing value. Fiscal stimulus measures in April, coupled with value buying, drove stocks to their best month since 1987. The possibility of a COVID-19 vaccine, a brief slowdown in the number of reported virus cases, and the onset of the summer season provided enough encouragement for investors to stay in the market. Throughout the rest of the year, despite a resurgence in the number of reported COVID-19 cases and deaths, an historic number of unemployment claims, delays in the long-awaited vaccine, and additional stimulus, investors saw hope that the economy would turn the corner and that the virus would be contained. Those factors, coupled with the low interest-rate environment, made stocks a viable option.
  • On the last day of the year, the Dow and the S&P 500 ended at all-time highs. In fact, the fourth quarter was robust for stocks, with each of the major indexes posting double-digit gains, headed by the small caps of the Russell 2000, which surged to a gain of 31.3% over the prior quarter. Despite the turmoil and early-year losses, all of the benchmark indexes listed here closed 2020 well ahead of their 2019 closing marks. The tech stocks of the Nasdaq, which gained more than 43.0%, led the way, followed by the Russell 2000, the S&P 500, the Dow, and the Global Dow.
  • Bonds: U.S. Treasury yields generally trended lower in 2020, never reaching their 2019 year-end high of 1.91%. Muted inflation and low interest rates drove bond prices up and yields down. Ten-year Treasuries hit an all-time low of 0.3% in March as investors ran from stocks in favor of bonds. The impact of COVID-19 kept investors on edge as the economy drifted toward a recession. As parts of the economy began to slowly recover, investors again moved toward stocks and away from bonds, pushing yields higher. The yield on 10-year Treasuries ultimately closed 2020 at 91.0%, down 100 basis points from where it began the year.
  • Oil: Oil prices began 2020 at $63.05 per barrel, only to slump throughout the rest of the year. Oil demand declined drastically following COVID-19-related lockdowns and travel restrictions. An all-out oil price war in March and part of April drove prices below $20.00 per barrel. An agreement in mid-April to cut petroleum output helped stabilize prices. For the year, crude oil prices averaged about $39.00 per barrel, ultimately closing at $48.44 per barrel on December 31.
  • FOMC/interest rates: The Federal Open Market Committee lowered interest rates dramatically in 2020 while instituting new and drastic measures in response to the economic turmoil caused by COVID-19. The year began with the target range for the federal funds rate at 1.50%-1.75%. However, due to the negative effects of COVID-19, the Federal Reserve cut the federal funds rate by 150 basis points to a range of 0.00%-0.25% in March. In addition, the Fed instituted a policy of unlimited bond buying, including the purchase of corporate bonds; $300 billion in new financing; and the establishment of two new facilities, the Term Asset-Backed Securities Loan Facility to enable the issuance of asset-backed securities, and a Main Street Business Lending Program to support lending to eligible small and medium-sized businesses. The target range for the federal funds rate stayed at 0.00%-0.25% through December and will likely remain there for most of 2021. The Fed also committed to continue increasing its holdings of Treasuries and mortgage-backed securities.
  • Currencies:The United States Dollar Index (DX-Y.NYB), which measures the U.S. dollar against the currencies of several other countries, hit a high of $102.99 in March. It closed at $89.91 on December 31, having fallen nearly 9.0% since the beginning of the year. The huge expansion of the national debt coupled with the continued impact of COVID-19 could keep the dollar from gaining upward momentum for quite some time.
  • Gold: Gold prices began the year at $1,524.50 and closed 2020 at $1,901.70, an increase of nearly 25.0%. During the year, gold fell to $1,450.90 in March, only to surge to $2,089.20 in mid-August. Investors turned to gold amid the growing uncertainty of COVID-19. A depreciating dollar and receding bond yields added to the appeal of gold for investors.

Last Month’s Economic News

  • Employment: Employment slowed in November with the addition of 245,000 new jobs, well below the totals for October (638,000) and September (661,000). The unemployment rate inched down 0.2 percentage point to 6.7% in November as the number of unemployed persons dipped from 11.1 million in October to 10.7 million in November. Despite the reduction in the number of unemployed persons, that figure is still 4.9 million higher than in February. Among the unemployed, the number of persons on temporary layoff decreased by 441,000 in November to 2.8 million. This measure is down considerably from the high of 18.1 million in April but is 2.0 million higher than its February level. In November, the number of persons not in the labor force who currently want a job increased by 448,000 to 7.1 million; this measure is 2.2 million higher than in February. In November, 21.8% of employed persons teleworked because of COVID-19, up from 21.2% in October. The labor force participation rate edged down to 61.5% in November; this is 1.9 percentage points below its February level. The employment-population ratio, at 57.3%, changed little over the month but is 3.8 percentage points lower than in February. Average hourly earnings increased by $0.09 to $29.58 in November and are up 4.4% from a year ago. The average workweek remained unchanged at 34.8 hours in November.
  • Claims for unemployment insurance continued to drop in December. According to the latest weekly totals, as of December 19, there were 5,219,000 workers receiving unemployment insurance, down from the November 14 total of 6,071,000. The insured unemployment rate fell 0.5 percentage point to 3.6%. During the week ended December 12, Extended Benefits were available in 24 states; 51 states reported 8,459,647 continued weekly claims for Pandemic Unemployment Assistance benefits, and 51 states reported 4,772,853 continued claims for Pandemic Emergency Unemployment Compensation benefits.
  • FOMC/interest rates: The Federal Open Market Committee met in December. The FOMC decided to maintain the target range for the federal funds rate at 0.00%-0.25% and expects to maintain this range for the foreseeable future until employment and inflation meet standards set by the Committee. In a statement released following its meeting, the Committee stressed that the COVID-19 pandemic is causing tremendous human and economic hardship across the United States and around the world. While economic activity and employment have continued to recover, those measures remain well below their levels at the beginning of the year. The Committee noted that weaker demand and earlier declines in oil prices have been holding down consumer price inflation. The FOMC also submitted its projections of the most likely outcomes for gross domestic product, the unemployment rate, and inflation for each year from 2020 to 2023 and over the longer-run. The projected longer-run change in GDP is 1.6%-2.2%. The projected unemployment rate is 3.5%-4.5% over the longer range, and inflation is projected to run at 2.0%. The longer-range projection of the federal funds rate is 2.0%-3.0%.
  • GDP/budget: In contrast to the second-quarter gross domestic product, which fell 31.4%, the third-quarter GDP shows the economy advanced at an annual rate of 33.4%, as the country continued to rebound from the economic effects of the COVID-19 virus. Consumer spending, as measured by personal consumption expenditures, increased 41.0% in the third quarter, in contrast to a 33.2% decline in the second quarter. The increase in PCE accounted for 25.44% of the change in GDP. Nonresidential (business) investment vaulted 22.9% (-27.2% in the second quarter); residential fixed investment soared 63.0% after falling 35.6% in the prior quarter. Exports advanced 59.6% (-64.4% in the second quarter), and imports increased 93.1% (-54.1% in the second quarter). Federal non-defense government expenditures decreased 18.3% in the third quarter as federal stimulus payments and aid lessened.
  • November saw the federal budget deficit come in at a smaller-than-expected $145.3 billion, down roughly 30% from November 2019. However, the deficit for the first two months of fiscal year 2021, at $429.3 billion, is 25% higher than the first two months of the previous fiscal year. Through November, government outlays rose 9.0%, while receipts fell 3.0%. The rise in government expenditures for fiscal year 2021 is attributable to a 67% increase in outlays for income security, an 18% jump in outlays for health, and a 214% climb in community and regional development payments. Medicare outlays fell about 15% compared to the same period last year.
  • Inflation/consumer spending: The COVID-19 pandemic clearly impacted personal income and spending in November. According to the latest Personal Income and Outlays report, personal income and disposable personal income decreased 1.1% and 1.2%, respectively, after decreasing 0.6% and 0.7% in October. Consumer spending fell 0.4% in November after increasing 0.3% the previous month. Inflation remained muted as consumer prices were unchanged in November and October. Consumer prices have increased by a mere 1.1% over the last 12 months ended in November.
  • The Consumer Price Index climbed 0.2% in November after being unchanged in October. Over the 12 months ended in November, the CPI rose 1.2%. The prices for lodging away from home, household furnishings and operations, recreation, apparel, airline fares, and motor vehicle insurance increased in November. Prices for used cars and trucks, medical care, and new vehicles declined over the month. Increases in shelter and energy were major factors in the CPI increase. Core prices (less food and energy) increased 0.2% in November and are up 1.6% over the 12 months ended in November.
  • Prices that producers receive for goods and services rose 0.1% in November following a 0.3% October jump. Producer prices increased 0.8% for the 12 months ended in November, the largest advance since moving up 1.1% for the 12 months ended in February. Producer prices less foods, energy, and trade services rose for the seventh consecutive month after advancing 0.1% in November. For the 12 months ended in November, prices less foods, energy, and trade services moved up 0.9%, the largest rise since a 1.0% increase for the 12 months ended in March.
  • Housing: Sales of existing homes fell in November after advancing in each of the previous five months. Existing home sales dropped 2.5% in November but are up 25.8% from a year ago. The median existing-home price was $310,800 in November ($313,000 in October). Unsold inventory of existing homes represents a 2.3-month supply at the current sales pace, a record low. Sales of existing single-family homes fell 2.4% in November following a 4.1% jump in October. Over the last 12 months, sales of existing single-family homes are up 25.6%. The median existing single-family home price was $315,500 in November, down from $317,700 in October.
  • New single-family home sales continued to slide, dropping 11.0% in November after falling 0.3% in October. The median sales price of new single-family houses sold in November was $335,300 ($330,600 in October). The November average sales price was $390,100 ($386,200 in October). The inventory of new single-family homes for sale in November represents a supply of 4.1 months at the current sales pace, up from the October estimate of 3.6 months.
  • Manufacturing: Industrial production has risen to within 5.0% of its pre-pandemic (February) level after increasing 0.4% in November. By comparison, industrial production in April was 16.5% below its February level. Manufacturing output rose 0.8% in November, marking the seventh consecutive month of gains. An increase of 5.3% for motor vehicles and parts contributed significantly to the gain in factory production; excluding motor vehicles and parts, manufacturing output moved up 0.4%. In November, utilities declined 4.2% as unusually warm temperatures reduced demand. Mining production increased 2.3% in November after falling 0.7% in October. In November, total industrial production was 5.5% lower than a year earlier.
  • For the seventh consecutive month, new orders for durable goods increased in November, climbing 0.9% following a 1.8% jump in October. Despite the trend of monthly increases, new orders for manufactured durable goods were 8.0% lower than a year ago. Excluding transportation, new orders increased 0.4% in November (+1.3% in October). Excluding defense, new orders increased 0.7% in November (+0.2% in October). Transportation equipment, up in six of the last seven months, led the increase, climbing 1.9% in November (+1.5% in October).
  • Imports and exports: Both import and export prices inched higher in November. Import prices rose 0.1% after falling 0.1% in the prior month, an increase largely driven by higher fuel prices. Import prices excluding fuel dropped 0.3% in November. Despite the recent increases, prices for imports decreased 1.0% from November 2019 to November 2020. Export prices advanced 0.2% in November after declining 0.1% in October. Overall, export prices dipped 1.3% over the past year. Agricultural export prices rose 2.2% in November, while nonagricultural prices for items such as consumer goods, automobiles, and industrial supplies and materials were unchanged, but are down 1.6% during the 12 months ended in November.
  • The international trade in goods deficit was $84.8 billion in November, up $4.4 billion, or 5.25%, from October. Exports of goods were $127.2 billion in November, $1.1 billion, or 0.8%, more than in October. Imports of goods were $212.0 billion in November, $5.5 billion, or 2.6%, more than in October. Driving exports higher in November were foods, feeds, and beverages (4.3%), and industrial supplies (1.5%). After increasing 5.9% in October, exports of consumer goods inched up 0.8% in November. Imports of industrial supplies (2.9%), consumer goods (6.7%), and other goods (4.0%) pushed total imports higher in November. Imports of automotive vehicles fell 3.2% in November after rising 3.2% in October.
  • The latest information on international trade in goods and services, out December 4, is for October and shows that the goods and services trade deficit was $63.1 billion, an increase of nearly $1.0 billion, or 1.7%, over the September deficit. October exports were $182.0 billion, or 2.2%, more than September exports. October imports were $245.1 billion, or 2.1%, more than September imports. Year to date, the goods, and services deficit increased $46.6 billion, or 9.5%, from the same period in 2019. Exports decreased $345.9 billion, or 16.4%. Imports fell $299.4 billion, or 11.5%.
  • International markets: A mutant strain of COVID spread rapidly though parts of Europe late in the year, sending stocks reeling as several affected countries tightened restrictions. This latest development will likely stall what had been a recovering European economy. Industrial production and retail sales had been approaching pre-pandemic levels in several European nations. The United Kingdom and the European Union reached a trade agreement as Brexit nears its final stages. In China, the third-quarter GDP advanced 2.7% and is 4.9% higher year-over-year.
  • Consumer confidence: The Conference Board Consumer Confidence Index® declined in December for the third consecutive month. The index stands at 88.6, down from 92.9 in November. The Present Situation Index, based on consumers’ assessment of current business and labor market conditions, decreased sharply from 105.9 to 90.3. However, the Expectations Index — based on consumers’ short-term outlook for income, business, and labor market conditions — increased from 84.3 in November to 87.5 in December.

Eye on the Year Ahead

The year 2021 should bring continued economic recovery. As the United States and the world inch slowly toward normalcy following the battle against the COVID-19 pandemic, stock markets, employment, and production should also advance.

What I’m Watching This Week – 4 January 2021

The Markets (as of market close December 31, 2020)

Stocks jumped to record highs last Monday after President Trump signed a pandemic relief package into law. The S&P 500, the Dow, and the Nasdaq closed the day at record highs as investors saw the stimulus relief as a boost to economic recovery. Only the small caps of the Russell 2000 failed to advance, ending the day down 0.4%. Treasury yields rose, crude oil prices fell, and the dollar was mixed. Several market sectors climbed higher, led by communication services, consumer discretionary, and information technology.

Equity indexes gave up early gains last Tuesday, ultimately closing lower. The Russell 2000 fell 1.9%, followed by the Nasdaq (-0.4%). The Dow and the S&P 500 dropped 0.2%. The Global Dow gained 0.4% on the heels of last week’s trade deal between the United Kingdom and the European Union. Crude oil prices and Treasury yields advanced, while the dollar declined. Consumer discretionary and health care were the only major market sectors to post gains on the day.

Investors reacted positively to the passage of the latest round of fiscal stimulus in the hopes that it will give the economy a boost entering 2021. Each of the benchmark indexes posted gains last Wednesday, with the small caps of the Russell 2000 outperforming large caps and tech stocks. Treasury yields fell as did the dollar, while crude oil prices advanced. Among sectors, energy, industrials, financials, and materials performed the best, while communication services fell.

The last day of the month and year saw both the S&P 500 and the Dow close at record highs. Utilities, financials, real estate, and health care all gained more than 1.0% on the day. Treasury yields, crude oil prices, and the dollar closed up by the end of trading last Thursday.

The last week of December and 2020 was generally a good one for stocks. Only the small caps of the Russell 2000 failed to post a gain. The remaining benchmark indexes closed ahead, led by the S&P 500, followed by the Dow, the Global Dow, and the tech stocks of the Nasdaq. Stocks recovered in fine fashion from their COVID-impacted drop, as each of the indexes listed here closed well ahead of their 2019 year-end value, led by the Nasdaq, the Russell 2000, the S&P 500, the Global Dow, and the Dow.

Crude oil prices ended the last week of the month and year slightly higher, closing at $48.43 per barrel by Thursday afternoon, up from the prior week’s price of $48.23 per barrel. The price of gold (COMEX) closed last week at $1,901.70, up from the prior week’s price of $1,883.20. The national average retail price for regular gasoline was $2.243 per gallon on December 28, $0.019 higher than the prior week’s price but $0.328 less than a year ago.

Stock Market Indexes

Market/Index2019 ClosePrior WeekAs of 12/31Weekly ChangeYTD Change
DJIA28,538.4430,199.8730,606.481.35%7.25%
Nasdaq8,972.6012,804.7312,888.280.65%43.64%
S&P 5003,230.783,703.063,756.071.43%16.26%
Russell 20001,668.472,003.951,974.86-1.45%18.36%
Global Dow3,251.243,447.693,487.521.16%7.27%
Fed. Funds target rate1.50%-1.75%0.00%-0.25%0.00%-0.25%0 bps-150 bps
10-year Treasuries1.91%0.92%0.91%-1 bps-100 bps

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

Last Week’s Economic News

  • The international trade in goods deficit was $84.8 billion in November, up 5.5% from the October total. Exports of goods for November were $127.2 billion, 0.8% higher then October. Imports of goods for November were $212.0 billion, up 2.6% over October imports.
  • For the week ended December 26, there were 787,000 new claims for unemployment insurance, a decrease of 19,000 from the previous week’s level, which was revised up by 3,000. According to the Department of Labor, the advance rate for insured unemployment claims was 3.6% for the week ended December 19, unchanged from the prior week’s rate. For comparison, during the same period last year, there were 220,000 initial claims for unemployment insurance, and the insured unemployment claims rate was 1.2%. The advance number of those receiving unemployment insurance benefits during the week ended December 19 was 5,219,000, a decrease of 103,000 from the prior week’s level, which was revised down by 15,000. States and territories with the highest insured unemployment rates in the week ended December 12 were in Puerto Rico (7.5%), the Virgin Islands (6.8%), Alaska (6.5%), Nevada (6.2%), New Mexico (6.2%), California (5.8%), Kansas (5.8%), Pennsylvania (5.8%), Illinois (5.7%), and Hawaii (5.2%). The largest increases in initial claims for the week ended December 19 were in Pennsylvania (+8,047), Illinois (+6,695), Colorado (+4,544), Georgia (+2,971), and Florida (+2,591), while the largest decreases were in California (-45,727), New York (-17,047), Ohio (-7,209), Kansas (-4,290), and Texas (-3,666).

Eye on the Week Ahead

The employment figures for December are out this week. There were 245,000 new jobs added in November, well below the October and September totals. Also out this week are the December purchasing managers’ surveys for manufacturing and services. Growth slowed in both manufacturing and services sectors in November.

What I’m Watching This Week – 28 December 2020

The Markets (as of market close December 24, 2020)

Stocks rallied by the end of the day last Monday, paring losses from a morning plunge. Strength in bank stocks and financials helped stem the tide as the other major market sectors generally sank. Investors were hit with news that a new strain of the COVID virus was moving rapidly through the United Kingdom, prompting a major sell-off in European stocks. Crude oil prices and Treasury yields fell, while the dollar advanced.

The Nasdaq reached another record high last Tuesday and the Russell 2000 gained 1.0%, but the remaining benchmark indexes ended the day in the red. The Dow closed down 0.7%, the Global Dow dropped 0.4%, and the S&P 500 lost 0.2%. Information technology and real estate were the only sectors to post gains. Similar to the previous day, Treasury yields and crude oil prices decreased, while the dollar rose.

Energy and financials drove the market higher last Wednesday. The S&P 500 ended a three-day losing streak, but just barely, eking out a 0.1% gain. The Global Dow climbed 1.0% after an outline of a post-Brexit trade deal was reached. The Russell 2000 advanced 0.9% and the Dow closed 0.4% higher. The Nasdaq fell 0.3% on the day. Treasury yields and crude oil prices gained, while the dollar fell.

The stock market closed early last Thursday in observance of Friday’s holiday. Equities were mixed on the day, with the S&P 500, the Nasdaq, the Dow, and the Global Dow posting gains, while the Russell 2000 lost value. Crude oil prices advanced, while Treasury yields and the dollar dropped. Utilities, real estate, materials, and information technology were the only sectors that gained more than 0.5%.

Christmas week resulted in mixed returns for stocks. The Russell 2000 led the way, followed by the Nasdaq and the Dow. The S&P 500 and the Global Dow dipped. Overall, investors continued to stay with stocks, despite rising COVID-19 cases and stalled developments on the latest stimulus package. The Nasdaq continued to climb past last year’s closing mark, trailed by the Russell 2000, the S&P 500, the Global Dow, and the Dow.

Crude oil prices ended the holiday-shortened week lower, closing at $48.23 per barrel by Thursday afternoon, down from the prior week’s price of $49.05 per barrel. The price of gold (COMEX) closed last week at $1,883.20, down from the prior week’s price of $1,886.30. The national average retail price for regular gasoline was $2.224 per gallon on December 21, $0.066 higher than the prior week’s price but $0.308 less than a year ago.

Stock Market Indexes

Market/Index2019 ClosePrior WeekAs of 12/24Weekly ChangeYTD Change
DJIA28,538.4430,179.0530,199.870.07%5.82%
Nasdaq8,972.6012,755.6412,804.730.38%42.71%
S&P 5003,230.783,709.413,703.06-0.17%14.62%
Russell 20001,668.471,969.992,003.951.72%20.11%
Global Dow3,251.243,479.613,447.69-0.92%6.04%
Fed. Funds target rate1.50%-1.75%0.00%-0.25%0.00%-0.25%0 bps-150 bps
10-year Treasuries1.91%0.94%0.92%-2 bps-99 bps

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

Last Week’s Economic News

  • The economy advanced at an annualized rate of 33.4%, according to the third and final estimate for third-quarter gross domestic product. In the second quarter, GDP decreased 31.4%. The increase in third-quarter GDP reflected continued efforts to reopen businesses and resume activities that were postponed or restricted due to COVID-19. The gain in GDP reflected increases in personal consumption expenditures, private inventory investment, exports, nonresidential fixed investment, and residential fixed investment that were partially offset by decreases in federal government spending, state and local government spending, and imports, which are a subtraction in the calculation of GDP. The personal consumption expenditures price index increased 3.7% in the third quarter, in contrast to a decrease of 1.6% in the second quarter. Excluding food and energy prices, the PCE price index increased 3.4%, in contrast to a decrease of 0.8% in the second quarter.
  • Inflationary pressures have been nonexistent over the past few months. According to the latest report from the Bureau of Economic Analysis, the personal consumption price index (a measure of inflationary trends relied upon by the Federal Reserve) showed no movement in both October and November. Consumer prices are up only 1.1% over the past 12 months ended in November. Personal income fell 1.1% in November, while disposable (after-tax) personal income dropped 1.2%. Consumer spending, as measured by personal consumption expenditures, also decreased 0.4% in November. The November estimate for personal income and outlays was impacted by the response to the COVID-19 virus. Pandemic-related assistance programs continued to wind down, which affected consumer income and spending to some extent.
  • New orders for manufactured durable goods in November increased 0.9%, according to the latest report from the U.S. Census Bureau. This increase, up seven consecutive months, followed a 1.8% October increase. Excluding transportation, new orders increased 0.4%. Excluding defense, new orders increased 0.7%. Transportation equipment, up six of the last seven months, led the increase, climbing 1.9%. Shipments of manufactured durable goods in November, up six of the last seven months, increased 0.3%. This followed a 1.5% October increase. Unfilled orders for manufactured durable goods in November, down eight of the last nine months, decreased 0.1%. This followed a 0.2% October decrease. Inventories of manufactured durable goods in November, up three consecutive months, increased 0.9%. This followed a 0.3% October increase.
  • The housing sector slowed in November. Sales of existing homes decreased 2.5% in November, ending a streak of five consecutive monthly increases. Year over year, existing home sales are up 25.8%. The median existing home price in November was $310,800, 0.7% below October’s price but 14.6% ahead of the November 2019 median price. Total housing inventory in November sat at an all-time low of 2.3 months. Sales of existing single-family homes also fell in November, down 2.4% from the previous month’s total. The median existing single-family home price was $315,500 in November, down from $317,700 in October but up 15.1% from November 2019.
  • Sales of new single-family houses in November fell 11.0% but are up 20.8% over the November 2019 pace. The median sales price of new houses sold in November 2020 was $335,300. The average sales price was $390,100. There is an inventory supply of 4.1 months at the current sales pace.
  • For the week ended December 19, there were 803,000 new claims for unemployment insurance, a decrease of 89,000 from the previous week’s level, which was revised up by 7,000. According to the Department of Labor, the advance rate for insured unemployment claims was 3.6% for the week ended December 12, a decrease of 0.2 percentage point from the prior week’s rate. For comparison, during the same period last year, there were 218,000 initial claims for unemployment insurance, and the insured unemployment claims rate was 1.2%. The advance number of those receiving unemployment insurance benefits during the week ended December 12 was 5,337,000, a decrease of 170,000 from the prior week’s level, which was revised down by 1,000. States and territories with the highest insured unemployment rates in the week ended December 5 were in the Virgin Islands (8.3%), Alaska (6.6%), California (6.6%), New Mexico (6.5%), Nevada (6.1%), Hawaii (5.6%), Illinois (5.6%), Pennsylvania (5.4%), Puerto Rico (5.2%), and Kansas (5.0%). The largest increases in initial claims for the week ended December 12 were in Illinois (+30,743), California (+25,664), Kansas (+5,637), Delaware (+2,355), and Ohio (+1,996), while the largest decreases were in Georgia (-9,301), Minnesota (-9,158), Texas (-8,876), Indiana (-7,920), and Wisconsin (-7,038).

Eye on the Week Ahead The week between Christmas and New Year’ Day offers very little in terms of economic reports, with only the international trade in goods report for November available. However, the week will be full of news about the ongoing dissemination of the COVID-19 vaccine and the latest stimulus package passed by Congress last week.