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.

What I’m Watching This Week – 21 December 2020

The Markets (as of market close December 18, 2020)

Tech stocks and consumer shares opened last week on an upswing. Unfortunately, the rest of the market lagged. Investors faced the prospect of more stringent restrictions as COVID-19 cases continued to surge. The Nasdaq (0.5%) and the Russell 2000 (0.1%) posted gains, while the Dow (-0.6%), the S&P 500 (-0.4%), and the Global Dow (-0.2%) fell. Crude oil prices rose, although the energy sector dropped more than 3.5%. The dollar and 10-year Treasury yields declined. On the positive side, vaccines were rolled out in parts of the United States last Monday.

Stocks rebounded last Tuesday on news of the approval of a second virus vaccine and positive developments on additional fiscal stimulus. Each of the benchmark indexes listed here gained value, led by the Russell 2000 (2.4%), followed by the S&P 500 (1.3%), the Nasdaq (1.3%), the Dow (1.1%), and the Global Dow (1.0%). Treasury yields jumped higher as did crude oil prices. The dollar lost value. All of the major market sectors posted gains, with utilities, energy, and materials leading the way.

Investors got more encouraging news on movement toward a fiscal stimulus package as congressional leaders continued to negotiate last Wednesday. Mega-caps, retail, and information technology drove stocks higher as the Nasdaq (0.5%), the S&P 500 (0.2%), and the Global Dow (0.4%) advanced. The Russell 2000 (-0.3%) and the Dow (-0.2%) fell. Treasury yields dropped as bond prices rose. Crude oil prices advanced for the third consecutive day, while the dollar mostly declined.

Investors continued to ride the wave of hope for a new stimulus package before the end of the year. Both the S&P 500 and the Nasdaq reached record highs by the close of trading last Thursday, while the Russell 2000 (1.3%), the Global Dow (0.5%), and the Dow (0.5%) posted solid gains. Crude oil prices and Treasury yields rose, while the dollar fell. Among the sectors, real estate, materials, health care, and utilities led the way, while communication services and energy lagged.

Last week ended on a sour note as more congressional haggling over a fiscal stimulus package dominated the day’s news. Stocks closed lower on the day with the Global Dow falling 0.5%, followed by the Dow and the Russell 2000, each of which dropped 0.4%. The S&P 500 and the Nasdaq came down from their record highs, losing 0.4% and 0.1%, respectively. Materials, health care, industrials, and consumer staples were the only market sectors to gain ground last Friday, but only marginally. Crude oil prices, the dollar, and Treasury yields all closed higher.

Despite the ongoing negotiations over additional fiscal stimulus, investors continued to see value in stocks, pushing each of the benchmark indexes higher last week. The Nasdaq and the Russell 2000 enjoyed solid gains, followed by the S&P 500, the Global Dow, and the Dow. Barring a major downturn, all of the indexes will close the year ahead of their 2019 marks, with the Nasdaq nearly 45.0% higher, followed by the Russell 2000, the S&P 500, the Global Dow, and the Dow.

Crude oil prices advanced for the third consecutive week, closing at $49.05 per barrel by late Friday afternoon, up from the prior week’s price of $46.58 per barrel. The price of gold (COMEX) closed at $1,886.30 last week, up from the prior week’s price of $1,842.90. The national average retail price for regular gasoline was $2.158 per gallon on December 14, $0.002 higher than the prior week’s price but $0.378 less than a year ago.

Stock Market Indexes

Market/Index2019 ClosePrior WeekAs of 12/18Weekly ChangeYTD Change
DJIA28,538.4430,046.3730,179.050.44%5.75%
Nasdaq8,972.6012,377.8712,755.643.05%42.16%
S&P 5003,230.783,663.463,709.411.25%14.81%
Russell 20001,668.471,911.701,969.993.05%18.07%
Global Dow3,251.243,447.973,479.610.92%7.02%
Fed. Funds target rate1.50%-1.75%0.00%-0.25%0.00%-0.25%0 bps-150 bps
10-year Treasuries1.91%0.89%0.94%5 bps-97 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

  • Following its meeting last week, the Federal Open Market Committee decided to keep the target range for the federal funds rate at 0.00%-0.25%. The Committee expects it will maintain this 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 2.0% for some time. The Committee will also continue to increase its holdings of Treasury securities and mortgage-backed securities at the current pace.
  • Prices for U.S. imports ticked up 0.1% in November after edging down 0.1% in October. Higher fuel prices in November (4.3%) more than offset lower nonfuel prices. Despite the recent increases, prices for imports decreased 1.0% from November 2019 to November 2020. Export prices also rose in November, increasing 0.6% following advances of 0.2% in October. Export prices fell 1.1% from November 2019 to November 2020, despite increases in each of the last six months.
  • Retail sales stepped back in November, falling 1.1% behind their October pace. However, retail sales are 4.1% ahead of last November’s totals. Retail trade sales were down 0.8% from October, but 7.1% above last year. Nonstore (online) retailers were up 0.2% in November and are 29.2% ahead of November 2019. While overall sales at the retail level have been impacted by the pandemic, particularly hard hit were sales at food services and drinking places (-4.0%), clothing and clothing accessories stores (-6.8%), motor vehicle and parts dealers (-1.7%), electronics and appliance stores (-3.5%), and gasoline stations (-2.4%).
  • Industrial production continued to accelerate in November, increasing 0.4% from October. After falling 16.5% between February and April, industrial production has risen to within 5% of its pre-pandemic (February) level. In November, manufacturing output advanced 0.8% for its seventh consecutive monthly gain. Manufacturing of motor vehicles and parts increased 5.3% last month, contributing significantly to the gain in factory production. The output of utilities declined 4.3% as warmer-than-usual temperatures reduced the demand for heating. Mining production increased 2.3% after decreasing 0.7% in October. Overall, total industrial production was 5.5% lower in November than it was a year earlier.
  • The housing sector continued to show strength in November. The number of residential building permits issued grew by 6.2% over October’s rate. Single-family authorizations in November were 1.3% above the October figure. Housing starts increased 1.2% in November over October. Single-family housing starts in November were 0.4% above the October number. Privately-owned housing completions in November were 12.1% below the October estimate. Single-family housing completions in November were 0.6% below the October rate.
  • For the week ended December 12, there were 885,000 new claims for unemployment insurance, an increase of 23,000 from the previous week’s level, which was revised up by 9,000. According to the Department of Labor, the advance rate for insured unemployment claims was 3.8% for the week ended December 5, a decrease of 0.1 percentage point from the prior week’s rate. For comparison, during the same period last year, there were 229,000 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 5 was 5,508,000, a decrease of 273,000 from the prior week’s level, which was revised up by 24,000. States and territories with the highest insured unemployment rates in the week ended November 28 were California (7.0%), New Mexico (6.7%), Alaska (6.6%), Hawaii (6.5%), Nevada (6.1%), Illinois (5.6%), Puerto Rico (5.6%), Pennsylvania (5.5%), Massachusetts (5.4%), and the Virgin Islands (5.4%). The largest increases in initial claims for the week ended December 5 were in California (+48,341), Illinois (+33,485), Texas (+22,729), Pennsylvania (+16,955), and New York (+16,814), while the largest decreases were in Louisiana (-2,666), Kentucky (-1,151), New Mexico (-378), and North Dakota (96).

Eye on the Week Ahead

Christmas week brings with it plenty of economic reports. The final estimate of the third-quarter gross domestic product is available. The second estimate showed that the economy advanced at an annual rate of 33.1% in the third quarter. That figure is not likely to change in the third and last estimate. Also out this week is the November report on personal income and spending. Personal income fell 0.7% in October, while consumer spending increased 0.5%. Prices for consumer goods and services were unchanged in October and have risen only 1.2% over the last 12 months, indicative of muted inflationary trends.

What I’m Watching This Week – 14 December 2020

The Markets (as of market close December 11, 2020)

The Nasdaq opened the week by reaching a new high last Monday after climbing for the ninth straight day. Otherwise, stocks tumbled, as the rapid rise in COVID-19 cases had investors worried that more restrictions might be forthcoming. The Global Dow and the Dow each fell 0.5%, followed by the S&P 500 (-0.2%) and the Russell 2000 (-0.1%). Communication, technology, and utilities were the only sectors to gain ground. Treasury yields and crude oil prices declined, while the dollar was mostly higher.

Positive news on fiscal stimulus talks and COVID-19 vaccines helped drive stocks higher last Tuesday. The Russell 2000 notched a gain of 1.4% on the day, followed by the Nasdaq (0.5%), the Dow (0.35%), and the S&P 500 (0.3%). The Global Dow fell 0.2%. Crude oil prices and the dollar rose, while Treasury yields sank. Sectors driving the market higher included energy, consumer staples, health care, and materials.

The promising rhetoric on fiscal stimulus that helped drive stocks higher last Tuesday was replaced by an apparent deadlock among lawmakers on Wednesday. Several of the largest tech companies saw their stock plunge following a massive sell-off by investors. The Nasdaq, which fell nearly 2.0%, suffered its worst day in a month. The S&P 500 and the Russell 2000 lost nearly 1.0% on the day, while the Dow dropped 0.4%. The Global Dow avoided a tumble, gaining 0.1%. Treasury bond prices fell driving yields higher. Crude oil prices dipped, while the dollar advanced.

Stocks were mixed last Thursday with the Nasdaq and the Russell 2000 posting gains, while the Dow and the S&P 500 fell. The Global Dow broke even by the end of the day’s trading. A spike in the number of jobless claims didn’t help investor confidence. Among the sectors, energy surged, with financials and information technology eking out minimal gains. Crude oil prices rose, while Treasury yields and the dollar fell.

Equities closed generally lower last Friday with only the Dow posting a modest 0.2% gain. The Global Dow (-0.7%), the Russell 2000 (-0.6%), the Nasdaq (-0.2%), and the S&P 500 (-0.1%) each lost value by the close of Friday’s trading. Crude oil prices and Treasury yields fell, while the dollar was mixed. A few of the market sectors advanced led by communication services (1.2%), consumer staples (0.3%), industrials (0.2%), and utilities (0.2%). Energy and financials fell nearly 1.0%.

Stocks closed generally lower for the week, led by the Global Dow, followed by the S&P 500, the Nasdaq, and the Dow. The small caps of the Russell 2000 posted a notable gain of more than 1.0% for the week. Investors got mixed messages on progress toward more fiscal stimulus, and concerns about the availability of a COVID-19 vaccine weighed on investors. Year to date, the Nasdaq remains well ahead of last year’s pace, followed by the Russell 2000, the S&P 500, the Global Dow, and the Dow.

Crude oil prices advanced again last week, closing at $46.58 per barrel by late Friday afternoon, up from the prior week’s price of $46.04 per barrel. The price of gold (COMEX) closed at $1,842.90 last week, up from the prior week’s price of $1,840.40. The national average retail price for regular gasoline was $2.156 per gallon on December 7, $0.036 higher than the prior week’s price but $0.405 less than a year ago.

Stock Market Indexes

Market/Index2019 ClosePrior WeekAs of 12/11Weekly ChangeYTD Change
DJIA28,538.4430,218.2630,046.37-0.57%5.28%
Nasdaq8,972.6012,464.2312,377.87-0.69%37.95%
S&P 5003,230.783,699.123,663.46-0.96%13.39%
Russell 20001,668.471,892.451,911.701.02%14.58%
Global Dow3,251.243,489.983,447.97-1.20%6.05%
Fed. Funds target rate1.50%-1.75%0.00%-0.25%0.00%-0.25%0 bps-150 bps
10-year Treasuries1.91%0.96%0.89%-7 bps-102 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 Consumer Price Index increased 0.2% in November after being unchanged in October. Over the past 12 months, the CPI increased 1.2%. Last month, food prices fell 0.1%, and prices for used cars and trucks dipped 1.3%. Energy prices rose for the sixth consecutive month, after climbing 0.4% in November. Energy prices were driven by a 3.6% surge in fuel oil prices. Also climbing higher were prices for utility (piped) gas service (3.1%), transportation services (1.8%), apparel (0.9%), and electricity (0.5%).
  • Prices that producers received for goods and services advanced 0.1% in November after climbing 0.3% in October. Producer prices increased 0.8% for the 12 months ended in November, the largest increase since moving up 1.1% for the 12 months ended in February. Prices less foods, energy, and trade services advanced 0.1% in November, the seventh consecutive monthly increase. 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. In November, prices for goods rose 0.4%, driven by a 1.2% increase in energy prices. Producer prices for services were unchanged in November.
  • The government deficit came in at a lower-than-expected $145 billion in November, well below the November 2019 deficit of $209 billion. However, the deficit for the first two months of the 2021 fiscal year is 25% greater than the same period last fiscal year. Government expenditures for fiscal year 2021 were 9% higher, while receipts were 3% lower than last year’s totals.
  • There were 6.7 million job openings in October, according to the latest Job Openings and Labor Turnover Summary. This represents an increase of 200,000 job openings from September’s total. Job openings increased in health care and social assistance, and state and local government education. Job openings decreased in a number of industries, with the largest decreases in retail trade, accommodation and food services, and finance and insurance. The number of hires in October, at 5.8 million, was little changed from the previous month. The number of total separations increased by roughly 300,000 to 5.1 million in October. Over the 12 months ended in October, hires totaled 70.4 million and separations totaled 76.1 million, yielding a net employment loss of 5.7 million.
  • For the week ended December 5, there were 853,000 new claims for unemployment insurance, an increase of 137,000 from the previous week’s level, which was revised up by 4,000. According to the Department of Labor, the advance rate for insured unemployment claims was 3.9% for the week ended November 28, an increase of 0.1 percentage point from the prior week’s rate. For comparison, during the same period last year, there were 237,000 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 November 28 was 5,757,000, an increase of 230,000 from the prior week’s level, which was revised up by 7,000. The highest insured unemployment rates in the week ended November 21 were in Alaska (6.3%), California (6.3%), New Mexico (6.1%), Nevada (6.0%), Hawaii (5.6%), Massachusetts (5.1%), the District of Columbia (5.0%), and Illinois (5.0%). The largest increases in initial claims for the week ended November 28 were in Illinois (+8,535), Oregon (+5,461), Colorado (+1,905), Indiana (+1,746), and Louisiana (+1,735), while the largest decreases were in California (-37,803), Texas (-14,123), Michigan (-10,976), Georgia (-9,905), and Washington (-7,881).

Eye on the Week Ahead

The Federal Open Market Committee meets this week. The Committee is not expected to alter the current federal funds rate range. The Federal Reserve’s report on industrial production for November is also out this week. October saw industrial production increase 1.1%, however production in total has yet to reach its pre-pandemic level from February.

What I’m Watching This Week – 7 December 2020

The Markets (as of market close December 4, 2020)

November closed on a sour note as investors took profits from stocks last Monday. The Russell 2000, which gained more than 18.0% in November, fell nearly 2.0% on the day. The Global Dow dropped 1.7%, followed by the Dow (-0.9%), the S&P 500 (-0.5%), and the Nasdaq (-0.1%). Treasuries and the dollar advanced, while crude oil prices fell. Health care and information technology were the only market sectors to post gains. Energy, financials, industrials, and utilities each dropped at least 1%.

Stocks rebounded last Tuesday to start December off with a bang. Renewed hope for a stimulus deal and the growing potential of a COVID-19 virus vaccine added to investors’ confidence. The S&P 500 and the Nasdaq reached record highs by the close of trading. Communication services, financials, real estate, and information technology led the sectors. The dollar slid to its lowest level in more than two-years. Crude oil prices fell, but Treasury yields advanced. Among the benchmark indexes, the Global Dow added 1.4%, followed by the Nasdaq (1.3%), the S&P 500 (1.1%), the Russell 2000 (0.9%), and the Dow (0.6%).

The S&P 500 hit another record last Wednesday as stocks closed generally higher for the second consecutive day. The Global Dow continued to surge, climbing 1.5%, followed by the Dow (0.2%), the S&P 500 (0.2%), and the Russell 2000 (0.1%). Only the Nasdaq ended the day slightly in the red, falling a mere 0.1%. Treasury yields and crude oil prices rose, while the dollar sank. Energy led the sectors, advancing over 3.0%. Financials and communication services each gained more than 1.0% on the day.

Stocks were mixed last Thursday as energy, industrials, and real estate advanced, while materials and utilities sunk. The Global Dow climbed 0.7%, the Russell 2000 gained 0.6%, the Dow and the Nasdaq edged up 0.3% and 0.2%, respectively. The S&P 500 declined 0.1%. Treasury yields and the dollar declined, while crude oil prices rose nearly 1.0%.

Equities closed the week as they started, posting impressive gains by the close of trading last Friday. The Russell 2000 advanced 2.3%, the Global Dow climbed 1.1%, the S&P 500 gained 0.9%, the Dow rose 0.8%, and the Nasdaq added 0.7%. Treasury yields surged, reaching their highest level in nine months. Crude oil prices climbed 0.9% but the dollar fell. Among the sectors, energy gained more than 5.0%, offsetting a drop in consumer stocks.

Stocks climbed higher for the week, as investors seem to be gambling on fiscal stimulus in the near term and a virus vaccine within the next several months. The Dow closed well above the 30,000 mark, setting a new high in the process. The S&P 500 and the Nasdaq also set new record highs last week. The Russell 2000 and the Global Dow each advanced more than 2.0% on the week. The Nasdaq is nearly 40.0% higher than its 2019 year-end closing value, and both the S&P 500 and the Russell 2000 are more than 13.0% ahead of their respective year-end marks.

Crude oil prices advanced again last week, closing at $46.04 per barrel by late Friday afternoon, up from the prior week’s price of $45.53 per barrel. The price of gold (COMEX) rebounded last week, closing at $1,840.40, up from the prior week’s price of $1,781.90. The national average retail price for regular gasoline was $2.120 per gallon on November 30, $0.018 higher than the prior week’s price but $0.455 less than a year ago.

Stock Market Indexes

Market/Index2019 ClosePrior WeekAs of 12/4Weekly ChangeYTD Change
DJIA28,538.4429,910.3730,218.261.03%5.89%
Nasdaq8,972.6012,205.8512,464.232.12%38.91%
S&P 5003,230.783,638.353,699.121.67%14.50%
Russell 20001,668.471,855.271,892.452.00%13.42%
Global Dow3,251.243,406.253,489.982.46%7.34%
Fed. Funds target rate1.50%-1.75%0.00%-0.25%0.00%-0.25%0 bps-150 bps
10-year Treasuries1.91%0.84%0.96%12 bps-95 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

  • Employment in November increased by 245,000 following monthly advances of 610,000 and 711,000 in October and September, respectively. Notable job gains occurred over the month in transportation and warehousing, professional and business services, and health care. Employment declined in government and retail trade. In November, the unemployment rate edged down to 6.7%. The rate is down by 8.0 percentage points from its recent high in April but is 3.2 percentage points higher than it was in February. The number of unemployed persons, at 10.7 million, continued to trend down in November but is 4.9 million higher than in February. The labor force participation rate edged down to 61.5% in November (61.7% in October), 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. In November, 21.8% of employed persons teleworked because of the coronavirus pandemic, up from 21.2% in October. Last month, 14.8 million persons reported that they had been unable to work because their employer closed or lost business due to the pandemic — little changed from October. The average workweek remained unchanged at 34.8 hours in November. Average hourly earnings increased by $0.09 to $29.58 and are up 4.4% from a year ago.
  • The pace of growth in the manufacturing sector slowed in November, according to the latest Manufacturing ISM® Report On Business®. The November manufacturing purchasing managers’ index registered 57.5%, down 1.8 percentage points from the October reading. New orders, production, employment, inventories, and imports declined in November. The backlog of orders, deliveries, and export orders increased last month.
  • Like the manufacturing sector, services grew in November, but at a slower pace than in October. The services purchasing managers’ index registered 55.9%, 0.7 percentage point lower than the October reading. Business activity fell 3.2%, new orders dropped 1.6%, and inventories decreased 3.8%. On the positive side, employment increased 1.4% and prices advanced 2.2%.
  • According to the latest information from the Census Bureau, the goods and services trade deficit was $63.1 billion in October, up 1.7% from the prior month’s total. October exports increased 2.2% to $182.0 billion. Imports in October were $245.1 billion, 2.1% ahead of 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 16.4%, while imports decreased 11.5%. For the third quarter, trade surpluses (in billions of dollars) were with South and Central America ($12.2), OPEC ($7.4), Hong Kong ($5.1), Brazil ($4.9), the United Kingdom ($4.3), Singapore ($3.2), Saudi Arabia ($2.6), and Canada ($2.0). Trade deficits (in billions of dollars) were recorded with China ($74.6), Mexico ($34.2), the European Union ($31.1), Germany ($14.1), Japan ($12.8), India ($8.5), Taiwan ($7.3), Italy ($6.9), France ($5.9), and South Korea ($4.3).
  • For the week ended November 28, there were 712,000 new claims for unemployment insurance, a decrease of 75,000 from the previous week’s level, which was revised up by 9,000. According to the Department of Labor, the advance rate for insured unemployment claims was 3.8% for the week ended November 21, a decrease of 0.4 percentage point from the prior week’s rate. For comparison, during the same period last year, there were 206,000 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 November 21 was 5,520,000, a decrease of 569,000 from the prior week’s level, which was revised up by 18,000. The highest insured unemployment rates in the week ended November 14 were in the Virgin Islands (7.9%), California (7.3%), Hawaii (7.1%), Nevada (6.7%), Alaska (6.4%), and Massachusetts (6.0%). The largest increases in initial claims for the week ended November 21 were in Illinois (+18,796), Michigan (+17,285), Washington (+13,499), Georgia (+9,462), and California (+9,361), while the largest decreases were in Louisiana (-33,573), Massachusetts (-22,572), New Jersey (-783), Idaho (-328), and the District of Columbia (-255).

Eye on the Week Ahead

The final estimate of gross domestic product for the third quarter is released this week. The second estimate projected that the economy expanded at a rate of 33.1% in the third quarter — a figure that’s not expected to change much in the final estimate. Also out this week is the latest report on the Consumer Price Index for November. The CPI was unchanged in October and has increased by a mere 1.2% for the year, as inflationary pressures remain muted.

Monthly Market Review – November 2020

The Markets (as of market close November 30, 2020)

Despite a downturn on the last day of the month, stocks rebounded impressively in November from a moribund performance in October. Several of the benchmark indexes reached record highs during November as investors shifted slightly from tech stocks to shares influenced by economic cycles.

While the presidential election, COVID-19, and additional fiscal stimulus dominated the news throughout the month, stocks seemed immune. Instead, investors pinned their hopes on the development of a virus vaccine and a quick economic recovery.

Gross domestic product rebounded in the third quarter and job growth continued. Personal income and consumer spending continued to climb. Inflation remained muted and below the Federal Reserve’s 2.0% target. Sales of existing homes advanced, while new home sales lagged.

The Dow enjoyed its best month since 1987, and the small caps of the Russell 2000 surged ahead by nearly 20.0%. In fact, each of the benchmark indexes posted double-digit monthly gains.

Among market sectors, energy, financials, industrials, and materials surged. Communication services and information technology posted moderate gains, and utilities fell.

Year to date, each of the indexes listed here is ahead of its respective 2019 closing value. The Nasdaq is 35.96% ahead of last year’s pace, followed by the S&P 500, the Russell 2000, the Dow, and the Global Dow.

By the close of trading on November 30, the price of crude oil (CL=F) was $45.11 per barrel, well above its October 30 price of $35.61 per barrel. The national average retail regular price for gasoline was $2.102 on November 23, $0.043 lower than the October 26 selling price, and $0.477 less than a year ago. The price of gold sank last month, closing at $1,779.00 on November 30, down from its October 30 closing price of $1,878.00.

Stock Market Indexes

Market/Index2019 ClosePrior MonthAs of November 30Monthly ChangeYTD Change
DJIA28,538.4426,501.6029,638.6411.84%3.86%
Nasdaq8,972.6010,911.5912,198.7411.80%35.96%
S&P 5003,230.783,269.963,621.6310.75%12.10%
Russell 20001,668.471,538.481,819.8218.29%9.07%
Global Dow3,251.242,886.593,348.5016.00%2.99%
Fed. Funds target rate1.50%-1.75%0.00%-0.25%0.00%-0.25%0 bps-150 bps
10-year Treasuries1.91%0.86%0.84%-2 bps-107 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.

Latest Economic Reports

  • Employment: Employment increased by 638,000 in October after adding 661,000 new jobs in September. Employment has increased for six consecutive months, but is below its February level by 10.1 million, or 5.5%. Notable job gains occurred in leisure and hospitality, professional and business services, retail trade, and construction. Employment in government declined. These improvements in the labor market reflected the continued resumption of economic activity that had been curtailed due to the COVID-19 pandemic and efforts to contain it. The unemployment rate declined by 1.0 percentage point to 6.9%, and the number of unemployed persons fell by 1.5 million to 11.1 million. Both measures have declined for six consecutive months but were higher than in February by 3.5% and 5.8 million, respectively. The number of persons not in the labor force who currently want a job, at 6.7 million in October, is 1.7 million higher than in February. In October, 21.2% of employed persons teleworked because of the COVID-19 pandemic, down from 22.7% in September. Also, 15.1 million persons reported that they had been unable to work because their employer closed or lost business due to the pandemic. This figure is down from 19.4 million in September. About 3.6 million persons not in the labor force in October were prevented from looking for work due to the pandemic. This is down from 4.5 million in September. Average hourly earnings in October rose by $0.04 to $29.50. Average hourly earnings increased by 4.5% over the last 12 months ended in October. The average work week was unchanged from September at 34.8 hours in October. The labor participation rate increased 0.3 percentage point to 61.7%. The employment-population ratio increased 0.8 percentage point to 57.4%, but is 3.7 percentage points lower than in February.
  • Claims for unemployment insurance continued to drop in November. According to the latest weekly totals, as of November 14 there were 6,071,000 workers receiving unemployment insurance, down from the October 17 total of 7,756,000. The insured unemployment rate was 4.1% (5.3% a month earlier). The highest insured unemployment rates in the week ended November 7 were in California (7.9%), Hawaii (7.1%), Nevada (6.9%), the Virgin Islands (6.9%), Alaska (6.3%), Massachusetts (6.1%), Illinois (5.9%), Georgia (5.8%), District of Columbia (5.6%), and New Mexico (5.5%).
  • FOMC/interest rates: The Federal Open Market Committee (FOMC) met in early November. In its official statement following that meeting, the FOMC noted that while the COVID-19 pandemic is causing tremendous human and economic hardship across the United States and around the world, economic activity and employment have continued to recover but remain well below their levels at the beginning of the year. The ongoing public health crisis will continue to weigh on economic activity, employment, and inflation in the near term, and poses considerable risks to the economic outlook over the medium term. The Committee expects to maintain an accommodative monetary policy stance until maximum employment and 2.0% inflation are achieved over the longer run. In lieu thereof, the FOMC decided to keep the target range for the federal funds rate at 0.0% to 0.25%.
  • GDP/budget: In contrast to the second-quarter gross domestic product, which fell 31.4%, the second estimate for the third quarter shows the economy advanced at an annual rate of 33.1%, unchanged from the first estimate. The reversal in economic growth reflects the ongoing efforts to reopen businesses and resume activities that were postponed or restricted due to the COVID-19 pandemic. Consumer spending, as measured by personal consumption expenditures, increased 40.6% in the third quarter, in contrast to a 33.2% decline in the second quarter. Nonresidential (business) investment vaulted 21.8% (-27.2% in the second quarter); residential investment soared 62.3% after falling 35.6% in the prior quarter. Exports advanced 60.5% (-64.4% in the second quarter), and imports increased 93.1% (-54.1% in the second quarter). Federal nondefense government expenditures decreased 18.1% in the third quarter as federal stimulus payments and aid lessened.
  • October marked the first month of fiscal year 2021. The monthly Treasury budget deficit for October was $284.1 billion, up 111% from the October 2019 deficit. October government outlays, at $521.8 billion, were 37% higher than a year earlier, while government receipts for the month fell 3% to $237.7 billion. Compared to October 2019, payments for income security increased by 135%, Medicare outlays rose by 72%, and veterans benefits and services payments advanced 69%.
  • Inflation/consumer spending: According to the Personal Income and Outlays report for October, personal income and disposable personal income decreased 0.7% and 0.8%, respectively, after each increased 0.7% in September. Consumer spending increased for the fifth consecutive month in October, climbing 0.5% following a 1.2% advance in September. Inflation remained somewhat muted as consumer prices were unchanged in October after increasing 0.2% in September. Consumer prices have increased by a mere 1.2% over the last 12 months.
  • The Consumer Price Index was unchanged in October after climbing 0.2% in September. Over the last 12 months ended in October, consumer prices are up 1.2%. Component indexes were mixed, with many offsetting increases and decreases. The food index advanced 0.2%, energy inched up 0.1%, and new vehicles moved up 0.4%. Apparel fell 1.2%, used cars and trucks dropped 0.1%, and medical care commodities fell 0.8%.
  • Prices that producers receive for goods and services, as measured by the Producer Price Index, rose 0.3% in October after climbing 0.4% in September. Producer prices increased 0.5% for the 12 months ended in October, the largest advance since moving up 1.1% for the 12 months ended in February. In October, nearly 60% of the rise in prices was attributable to a 0.5% increase in goods. Prices for services also moved up 0.2%. Prices less foods, energy, and trade services advanced 0.2% in October, the sixth consecutive monthly increase. For the 12 months ended in October, producer prices less foods, energy, and trade services rose 0.8%, the largest advance since moving up 1.0% for the 12 months ended in March.
  • Housing: The housing sector returned mixed results in October. Sales of existing homes advanced for the fifth consecutive month, climbing 4.3% after increasing 9.4% in September. Over the 12 months ended in October, existing home sales are up nearly 26.6%. The median existing-home price was $313,000 in October ($311,800 in September). Unsold inventory of existing homes represents a 2.5-month supply at the current sales pace, a record low. Sales of existing single-family homes increased 4.1% in October following a 9.7% jump in September. Over the last 12 months, sales of existing single-family homes are up 25.9%. The median existing single-family home price was $317,700 in October, up from $316,200 in September.
  • While existing home sales continued to increase, new home sales fell 0.3% in October for the second consecutive month, after decreasing 3.5% in September. The median sales price of new houses sold in October was $330,600 ($326,800 in September). The October average sales price was $386,200 ($405,400 in September). The inventory of new single-family homes for sale in October represents a supply of 3.3 months at the current sales pace, down from the September estimate of 3.6 months.
  • Manufacturing: Total industrial production rose 1.1% in October after falling 0.6% in September. Although industrial production has recovered most of its February to April decline, output in October was still 5.6% below its pre-pandemic February level. After edging up 0.1% in September, manufacturing output increased 1.0% in October. The output of utilities rose 3.9%, while the output at mines declined 0.6% to a level that was 14.4% below its year-earlier reading. Most major industries reversed course from September, posting increases in October. Consumer goods rose 0.8%. Production of business equipment increased 0.6%. Production of nonindustrial supplies advanced 2.0% in October after falling 0.2% in September. Overall, the level of total industrial production was 5.3% lower in October than it was a year earlier.
  • For the sixth consecutive month, new orders for durable goods increased in October, climbing 1.3% following a 1.9% jump in September. Despite the trend of monthly increases, new orders for manufactured durable goods were 9.1% lower than a year ago. Excluding transportation, new orders increased 1.3% in October. Excluding defense, new orders increased 0.2%. Defense and nondefense aircraft and parts led the October increase in new orders, advancing 79.1% and 38.8%, respectively. Nondefense new orders for capital goods fell 0.2% in October after increasing 11.5% in September.
  • Imports and exports: Prices for U.S. imports edged down 0.1% in October following a 0.2% increase in September. The October decline was driven by lower fuel prices (-1.9%), which more than offset higher nonfuel prices (+0.1%). Export prices increased 0.2% in October, continuing the upward trend of the four previous months. In October, the advance was driven by higher agricultural export prices (+3.4%); prices for nonagricultural exports were unchanged. Even with the recent increases, export prices declined 1.6% for the year ended in October.
  • The international trade in goods deficit was $80.3 billion in October, up $3.7 billion, or 1.2% up from September. Exports of goods were $126.0 billion in October, $3.4 billion, or 2.8%, more than in September. Imports of goods were $206.3 billion in October, $4.4 billion, or 2.2%, more than in September. Exports of industrial supplies, which increased 13.6% in September, fell -4.4% in October. Exports of consumer goods climbed 6.1% in October after advancing 1.3% the prior month. Imports of industrial supplies rose 3.1% in October after declining 3.5% in September. Imports of automotive vehicles rose 3.2% in October after vaulting up 11.3% in September.
  • The latest information on international trade in goods and services, out October 6, is for August and shows that the goods and services trade deficit was $67.1 billion, an increase of nearly $4.0 billion, or 5.9%, over the July deficit. August exports were $171.9 billion, or 2.2% more than July exports. August imports were $239.0 billion, or 3.2% more than July imports. Year to date, the goods and services deficit increased $22.6 billion, or 5.7%, from the same period in 2019. Exports decreased $296.1 billion, or 17.6%. Imports fell $273.5 billion, or 13.1%.
  • International markets: China’s factory production expanded at its fastest rate in three years, a further sign of the country’s economic recovery from the pandemic. Global markets also enjoyed a solid November, with European shares climbing for four consecutive weeks, buoyed by positive vaccine developments. The STOXX Europe 600 Index and Germany’s DAX Performance Index each rose nearly 13% on the month. These gains came despite several European nations, including Germany and the United Kingdom, tightening COVID-19 restrictions.
  • Consumer confidence: The Conference Board Consumer Confidence Index® declined in November for the second consecutive month. The index stands at 96.1, down from 101.4 in October. The Present Situation Index, based on consumers’ assessment of current business and labor market conditions, decreased slightly from 106.2 to 105.9. The Expectations Index, which is based on consumers’ short-term outlook for income, business, and labor market conditions, declined from 98.2 in October to 89.5 in November.

Eye on the Month Ahead

The last month of the year brings to a close a most tumultuous 2020, as the country and the world continue to recover from the effects of the COVID-19 virus. One or more vaccines should be nearing availability in the early part of 2021. The job market should trend upward, unemployment should wane, industrial production should increase, and the economy should stabilize.