Tag: inflation

What I’m Watching This Week – 20 February 2024

Published on by dredheadz

The Markets (as of market close February 16, 2024)

Rising inflation heightened investor concerns that the Federal Reserve may not consider lowering interest rates during the first half of the year. Among the benchmark indexes listed here, only the small caps of the Russell 2000 and the Global Dow were able to gain ground. The Dow snapped a five-week winning streak, while the Nasdaq and the S&P 500 also finished the week lower. With the stock market closed on Monday for President’s Day, investors will have to wait a little longer to try to begin another rally. Materials, utilities, financials, and industrials were better-performing sectors, while information technology and communication services lagged. Ten-year Treasury yields rose for the second straight week. Crude oil prices climbed higher, while the national average for regular gasoline jumped to a two-month high.

Last week began with what turned out to be a choppy day of trading. The Dow added 0.3% to hit a fresh record last Monday. The tech-heavy Nasdaq fell 0.3% and the S&P 500 dipped 0.1%. The small caps of the Russell 2000 jumped 1.8%, while the Global Dow gained 0.4%. Ten-year Treasury yields closed at 4.17%. Gold prices rose $0.17 to $77.01 per barrel. The dollar was flat while gold prices fell 0.2%.

Stocks closed sharply lower last Tuesday following a hotter-than-expected Consumer Price Index (see below). After reaching record highs, each of the benchmark indexes listed here declined. The small caps of the Russell 2000 fell 4.0%, the tech-heavy Nasdaq lost 1.8%, the Dow and the S&P 500 declined 1.4%, while the Global Dow dropped 0.9%. The latest inflation data probably prompted investors to reconsider their expectations of a rate cut by the Federal Reserve in March or May. Yields on 10-year Treasuries jumped 14.4 basis points to 4.31%. Crude oil prices advanced, gaining $0.88 to $77.80 per barrel. The dollar rose 0.7%, while gold prices decreased 1.3%.

Last Wednesday saw stocks rebound from the prior day’s selloff. The Russell 2000 gained 2.4%, followed by the Nasdaq, which added 1.3%. The S&P 500 rose 1.0%, while the Dow and the Global Dow advanced 0.4%. Ten-year Treasury yields declined 4.9 basis points to 4.26%. Crude oil prices fell $1.37 to $76.60 per barrel, The dollar and gold prices slid lower.

Stocks continued to climb higher last Thursday led by the Russell 2000, which gained 2.5%. Investors assessed a slew of favorable corporate earnings centered around information technology, consumer spending, and energy. The Dow and the Global Dow added 0.9%, while the S&P 500 rose 0.6% and the Nasdaq advanced 0.3%. Ten-year Treasury yields dipped to 4.24%. Crude oil prices rose to $78.20 per barrel, up about $1.56 from the prior day’s close. The dollar fell 0.4%, while gold prices rose 0.6%.

Most of the benchmark indexes listed here lost ground last Friday. The Global Dow proved to be the exception, eking out a 0.1% gain. The Russell 2000 fell 1.4%, the Nasdaq dropped 0.8%, the S&P 500 declined 0.5%, and the Dow slipped 0.4%. Ten-year Treasury yields added 5.5 basis points to close at 4.29%. Crude oil prices gained 1.5% to settle just shy of $80.00 per barrel. The dollar was flat, while gold prices rose 0.5%.

Stock Market Indexes

Market/Index2023 ClosePrior WeekAs of 2/16Weekly ChangeYTD Change
DJIA37,689.5438,671.6938,627.99-0.11%2.49%
Nasdaq15,011.3515,990.6615,775.65-1.34%5.09%
S&P 5004,769.835,026.615,005.57-0.42%4.94%
Russell 20002,027.072,009.992,032.741.13%0.28%
Global Dow4,355.284,406.424,443.560.84%2.03%
fed. funds target rate5.25%-5.50%5.25%-5.50%5.25%-5.50%0 bps0 bps
10-year Treasuries3.86%4.18%4.29%11 bps43 bps
US Dollar-DXY101.39104.06104.280.21%2.85%
Crude Oil-CL=F$71.30$76.55$79.253.53%11.15%
Gold-GC=F$2,072.50$2,039.50$2,025.30-0.70%-2.28%

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 rose 0.3% in January, exceeding expectations with the largest monthly gain since September 2023. Core prices, excluding food and energy, rose 0.4% in January, 0.1 percentage point higher than the December increase. Despite the January increase, the 12-month rate declined from 3.4% to 3.1%, while core prices were unchanged at 3.9%. Prices for shelter, which rose 0.6% last month, contributed more than two thirds of the overall monthly increase. Food prices advanced 0.4%, while energy prices fell 0.9%. In addition to food and shelter, other areas which saw prices increase included motor vehicle insurance and medical care. Prices for used cars and trucks and for apparel were among those that decreased over the month. For the 12 months ended in January, prices for food rose 2.6% and shelter prices advanced 6.0%. Prices for energy declined 4.6%.
  • The Producer Price Index rose 0.3% in January after falling 0.1% in December. Since January 2023, producer prices have risen 0.9%. Last month, producer prices for services advanced 0.6%, the largest increase since July 2023. Prices for goods declined 0.2%. Producer prices less foods, energy, and trade services rose 0.6% in January, the largest advance since moving up 0.6% in January 2023. For the 12 months ended January 2024, prices for final demand less foods, energy, and trade services increased 2.6%.
  • Retail sales declined 0.8% in January from the previous month but were up 0.6% from January 2023. Retail trade sales were down 1.1% from December 2023 and 0.2% below sales from a year earlier. Nonstore (online) retail sales were up 6.4% from last year, while sales at food services and drinking places were up 6.3% from January 2023.
  • Both import prices and export prices rose 0.8% in January after declining 0.7% in December. The January increase in import prices was the first monthly advance since September 2023 and was the largest monthly increase since March 2022. Despite the January increase, import prices fell 1.3% over the past year and have not risen on a 12-month basis since January 2023. Import fuel prices increased 1.2% in January following declines of 7.7% in December and 6.3% in November. The January increase in export prices was also the first monthly increase since September 2023. Over the past 12 months ended in January, export prices decreased 2.4%.
  • Industrial production edged down 0.1% in January after recording no change in December. Manufacturing output declined 0.5% last month after increasing in both November and December. Mining fell 2.3%, while an increased demand for heating drove utilities up 6.0%. Total industrial production was identical to its year-earlier level. Within the manufacturing sector, durables edged up 0.1% in January, which was more than offset by manufacturing of nondurables, which fell 1.1%.
  • The Treasury budget deficit was $22.0 billion in January, down from December’s $129.4 billion. January receipts were $477.3 billion, while expenditures were $499.3 billion. Through the first four months of the current fiscal year, the deficit sat at $531.9 billion, about $72.0 billion above the deficit over the same period last fiscal year. Last month, individual income taxes ($283.0 billion) contributed more than half of the total receipts, while Social Security and Medicare payments ($204.0 billion) represented the largest expenditures.
  • The number of building permits issued for residential construction decreased 1.5% in January from December but were 8.6% above the January 2023 figure. Building permits for single-family residential construction increased 1.6% last month. Housing starts fell 14.8% in January and were 0.7% under the January 2023 rate. Single-family housing starts also declined, falling 4.7%. January home completions were 8.1% below the December estimate but 2.8% above the rate from a year earlier.
  • The national average retail price for regular gasoline was $3.192 per gallon on February 12, $0.056 per gallon higher than the prior week’s price but $0.198 per gallon less than a year ago. Also, as of February 12, the East Coast price increased $0.034 to $3.151 per gallon; the Midwest price rose $0.133 to $3.044 per gallon; the Gulf Coast price decreased $0.014 to $2.807 per gallon; the Rocky Mountain price advanced $0.045 to $2.791 per gallon; and the West Coast price increased $0.028 to $4.011 per gallon.
  • For the week ended February 10, there were 212,000 new claims for unemployment insurance, a decrease of 8,000 from the previous week’s level, which was revised up by 2,000. According to the Department of Labor, the advance rate for insured unemployment claims for the week ended February 3 was 1.3%, an increase of 0.1 percentage point from the previous week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended February 3 was 1,895,000, an increase of 30,000 from the previous week’s level, which was revised down by 6,000. States and territories with the highest insured unemployment rates for the week ended January 27 were New Jersey (2.8%), Rhode Island (2.7%), Minnesota (2.5%), Massachusetts (2.4%), California (2.3%), Illinois (2.3%), Montana (2.2%), Alaska (2.1%), Connecticut (2.1%), Pennsylvania (2.1%), and Washington (2.1%). The largest increases in initial claims for unemployment insurance for the week ended February 3 were in Missouri (+1,921), Texas (+1,514), Colorado (+783), Illinois (+612), and Florida (+399), while the largest decreases were in Oregon (-4,561), California (-4,312), Ohio (-4,090), New York (-3,165), and Pennsylvania (-3,075).

Eye on the Week Ahead

There’s very little in terms of market-moving economic data being released this week. The Federal Open Market Committee releases the minutes from its last meeting, which might provide some insight as to the direction the Committee may be headed with respect to interest rates. Also out this week is the January data on sales of existing homes. Sales declined 1.0% in December and 6.2% year over year.

Monthly Market Review – January 2024

Published on by dredheadz

The Markets (as of market close January 31, 2024)

Stocks closed January generally higher. Each of the benchmark indexes listed here ended January higher, with the exception of the small caps of the Russell 2000. Historically, positive market returns in January are often a precursor to favorable market performance for the remainder of the year. Of course, past performance is no guarantee of future results. Despite the end results, January proved to be a month of ebbs and flows. It began with stocks closing in the red, only to pick up momentum throughout the rest of the month.

The most recent inflation data showed prices inched higher in December after falling the previous month. Both the Consumer Price Index and the personal consumption expenditures price index increased, both monthly and annually. However, core prices, excluding the more volatile food and energy indexes, declined over the 12 months ended in December.

The Federal Reserve met in January and maintained the federal funds target rate range at its current 5.25%-5.50%. According to the Fed, the economy continued to show strength and job gains were steady. While noting that inflation had slowed, it remained above the Fed’s target of 2.0%, all of which bolstered the Fed’s reluctance to begin lowering interest rates.

The economy has proven resilient despite the ongoing war in Ukraine and turmoil in the Middle East. Fourth-quarter gross domestic product expanded at an annualized rate of 3.3%, according to the initial estimate. Consumer spending, the largest contributor to GDP, was 2.8%.

Job growth remained steady, with 216,000 new jobs added in December, an increase from November’s 173,000. Wages continued to rise, increasing 4.1% over the last 12 months. Unemployment claims increased from a year ago (see below).

Fourth-quarter earnings season for S&P 500 companies has been lackluster so far. While the majority of companies have yet to release earnings data, the percentage of S&P 500 companies that have reported positive earnings surprises is below average according to FactSet, while actual earnings reported have been below estimates in aggregate. Companies in the financial sector have been particularly subpar. Roughly 25% of the S&P 500 companies have reported fourth-quarter earnings. Of these companies, 69% exceeded estimates, which is below the five-year average of 77%. In aggregate, companies reported earnings that are 5.3% below estimates, which is below the five-year average of 8.5%.

Sales of existing homes retreated in December, primarily due to lack of inventory, high prices, and advancing mortgage rates. Sales of new single-family homes increased 8.0% in December and 4.4% over the past 12 months.

Industrial production ticked higher in December after no growth in November and an 0.8% decline in October. Manufacturing ticked up 0.1% in December but declined 2.2% in the fourth quarter. Excluding motor vehicles and parts, factory output declined 0.1% in December and 0.3% in the fourth quarter. According to the latest survey from the S&P Global US Manufacturing Purchasing Managers’ Index™, the manufacturing sector slipped further into contraction in December. The services sector saw business accelerate marginally.

Eight of the 11 market sectors ended December higher, led by communication services and information technology. Last month saw real estate, consumer discretionary, materials, and utilities decline.

Bond prices gained some momentum at the end of January, particularly following the Fed’s decision to maintain interest rates for longer than some had expected. Despite the late-month surge in bond prices, 10-year Treasury yields generally closed the month higher. The 2-year Treasury yield fell nearly 11.0 basis points to about 4.21% in January. The dollar inched higher against a basket of world currencies. Gold prices rode a topsy-turvy month, ultimately closing lower. Crude oil prices advanced in January on the heels of production cuts and shipping interruptions in the Middle East. The retail price of regular gasoline was $3.095 per gallon on January 29, $0.233 above the price a month earlier but $0.394 lower than a year ago.

Stock Market Indexes

Market/Index2023 ClosePrior MonthAs of January 31Monthly ChangeYTD Change
DJIA37,689.5437,689.5438,150.301.22%1.22%
Nasdaq15,011.3515,011.3515,164.011.02%1.02%
S&P 5004,769.834,769.834,845.651.59%1.59%
Russell 20002,027.072,027.071,947.34-3.93%-3.93%
Global Dow4,355.284,355.284,375.950.47%0.47%
fed. funds target rate5.25%-5.50%5.25%-5.50%5.25%-5.50%0 bps0 bps
10-year Treasuries3.86%3.86%3.96%10 bps10 bps
US Dollar-DXY101.39101.39103.552.13%2.13%
Crude Oil-CL=F$71.30$71.30$75.766.26%6.26%
Gold-GC=F$2,072.50$2,072.50$2,057.90-0.70%-0.70%

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

Latest Economic Reports

  • Employment: Total employment increased by 216,000 in December. Employment continued to trend up in government, health care, social assistance, and construction, while transportation and warehousing lost jobs. Employment rose by 2.7 million in 2023 (an average monthly gain of 225,000), less than the increase of 4.8 million in 2022 (an average monthly gain of 399,000). Employment in October was revised down by 45,000 and the change for November was revised down by 26,000. With these revisions, employment in October and November combined was 71,000 lower than previously reported. In December, the unemployment rate was unchanged at 3.7% but was 0.2 percentage point higher than the rate a year earlier. The number of unemployed persons was relatively unchanged at 6.3 million but was 570,000 above the December 2022 figure. In December, the number of long-term unemployed (those jobless for 27 weeks or more), at 1.2 million, was little changed from November and over the year. These individuals accounted for 19.7% of all unemployed persons. The labor force participation rate, at 62.5%, and the employment-population ratio, at 60.1%, both decreased by 0.3 percentage point in December and showed little or no change over the year. In December, average hourly earnings increased by $0.15 to $34.27. For 2023, average hourly earnings rose by 4.1% (average hourly earnings were $32.29 in December 2022). The average workweek decreased by 0.1 hour to 34.3 hours in December, down 0.1 hour from December 2022.
  • There were 214,000 initial claims for unemployment insurance for the week ended January 20, 2024. During the same period, the total number of workers receiving unemployment insurance was 1,833,000. A year ago, there were 194,000 initial claims, while the total number of workers receiving unemployment insurance was 1,658,000.
  • FOMC/interest rates: As expected, the Federal Open Market Committee maintained the target range for the federal funds rate at the current 5.25%-5.50% following its meeting in January. In arriving at its decision, the Committee noted that the economy had expanded at a solid pace, job gains moderated since last year but remained strong, the unemployment rate was low, and inflation eased over the past year but remained elevated. Essentially, while progress has been made in achieving employment and inflation goals, more moderating needs to be done. Interest rates are not expected to be reduced until the Committee has gained greater confidence that inflation is moving sustainably toward 2.0%.
  • GDP/budget:The economy, as measured by gross domestic product, accelerated at an annual rate of 3.3% in the fourth quarter. GDP increased 2.5% in 2023 (from the 2022 annual level to the 2023 annual level), compared with an increase of 1.9% in 2022. The increase in GDP in 2023 primarily reflected increases in consumer spending, nonresidential fixed investment, state and local government spending, exports, and federal government spending that were partly offset by decreases in residential fixed investment and inventory investment. Imports decreased. Consumer spending, as measured by the personal consumption expenditures index, rose 2.8% in the fourth quarter, down from 3.1% in the previous quarter. Spending on services rose 2.4% in the fourth quarter compared with a 2.2% increase in the third quarter. Consumer spending on durable goods increased 4.6% in the fourth quarter, while consumer spending on nondurable goods increased 3.4%. Fixed investment advanced 2.1% in the fourth quarter after increasing 10.0% in the third quarter. The personal consumption expenditures price index increased 1.7% in the fourth quarter, compared with an increase of 2.6% in the third quarter.
  • December saw the federal budget deficit come in at $129.4 billion, down roughly $185.0 billion under the November 2023 deficit. The deficit for the first three months of fiscal year 2024, at $509.9 billion, is $88.5 billion higher than the first three months of the previous fiscal year. So far in fiscal year 2024, total government receipts were $1.1 trillion ($1.0 trillion in 2023), while government outlays were $1.6 trillion through the first three months of fiscal year 2024, compared to $1.4 trillion over the same period in the previous fiscal year.
  • Inflation/consumer spending: According to the latest personal income and outlays report, personal income and disposable personal income rose 0.3% in December after increasing 0.4% in November. Consumer spending advanced 0.7% in December after increasing 0.4% the previous month. Consumer prices inched up 0.2% in December after falling 0.1% in November. Excluding food and energy (core prices), consumer prices rose 0.2% in December, 0.1 percentage point above the November advance. Consumer prices rose 2.6% since December 2022, unchanged from the 12 months ended in November. Core prices increased 2.9% over the same period, 0.3 percentage point lower than the year ended in November.
  • The Consumer Price Index rose 0.3% in December after ticking up 0.1% in November. Over the 12 months ended in December, the CPI rose 3.4%, up 0.3 percentage point from the period ended in November. Excluding food and energy prices, the CPI rose 0.3% in December, unchanged from the previous month, and 3.9% for the year ended in December, down 0.1 percentage point from the 12-month period ended in November. Prices for shelter, up 0.5%, continued to rise in December, contributing to over half of the monthly all items increase. Energy rose 0.4% over the month. Food prices increased 0.2% in December.
  • Prices that producers received for goods and services declined 0.1% in December after being unchanged in November. Producer prices increased 1.0% for the 12 months ended in December, up from a 0.9% increase for the year ended in November. Producer prices less foods, energy, and trade services inched up 0.2% in December (0.1% in November), while prices excluding food and energy were flat for the second straight month. For the 12 months ended in December, prices less foods, energy, and trade services moved up 2.5%, the same increase as for the 12 months ended in November. Prices less foods and energy increased 1.8% for the year ended in December (2.0% for the period ended in November). In December, prices for food fell 0.9% for the month and 5.0% year over year. Energy prices were down 1.2% in December and 4.8% since December 2022.
  • Housing: Sales of existing homes decreased 1.0% in December and 6.2% from December 2022. The median existing-home price was $382,600 in December, lower than the November price of $387,700 but higher than the December 2022 price of $366,500. Unsold inventory of existing homes represented a 3.2-month supply at the current sales pace, down slightly from November (3.5 months) but above the 2.9-month supply in December 2022. Sales of existing single-family homes decreased 0.3% in December and 7.3% since December 2022. The median existing single-family home price was $387,000 in December, down from $392,200 in November but above the December 2022 price of $372,000.
  • New single-family home sales increased in December, climbing 8.0% after dropping 7.4% in November. Sales were up 4.4% from December 2022. The median sales price of new single-family houses sold in December was $413,200 ($426,000 in November). The December average sales price was $487,300 ($485,500 in November). The inventory of new single-family homes for sale in December represented a supply of 9.1 months at the current sales pace.
  • Manufacturing: Industrial production increased 0.1% in December after being unchanged in the previous month. Manufacturing edged up 0.1% in December after increasing 0.2% in November. Mining rose 0.9%, while utilities fell 1.0%. Over the past 12 months ended in December, total industrial production was 1.0% below its year-earlier reading. For the 12 months ended in December, manufacturing increased 1.2%, utilities declined 4.9%, while mining increased 4.3%.
  • New orders for durable goods were flat in December following a 5.5% increase in November. New orders for durable goods rose 4.4% since December 2022. Excluding transportation, new orders increased 0.6% in December. Excluding defense, new orders increased 0.5%. Primary metals, up three of the last four months, drove the overall increase, after increasing 1.4% in December.
  • Imports and exports: U.S. import prices were unchanged in December after declining 0.5% in November. Import prices fell 1.6% over the past year. Prices for import fuel declined 0.3% in December following a 6.4% drop in November. Import fuel prices fell 9.4% from December 2022 to December 2023. Prices for nonfuel imports were unchanged in December after ticking up 0.1% in November. Nonfuel imports fell 0.8% since December 2022. Export prices declined 0.9% in December after falling 0.9% in November. Prices for exports decreased 0.9% for the third consecutive month in December. Those were the first one-month declines since June 2023. Lower prices for both agricultural and nonagricultural exports contributed to the December drop. U.S. export prices fell 3.2% over the past year. Despite the recent declines, the December decrease was the smallest 12-month drop since February 2023.
  • The international trade in goods deficit was $88.5 billion in December, down $0.9 billion, or 1.0%, from November. Exports of goods were $169.8 billion in December, $4.1 billion, or 2.5%, less than in November. Imports of goods were $258.3 billion in December, $3.2 billion, or 1.3%, less than in November. Since December 2022, exports rose 1.0%, while imports declined 0.3%.
  • The latest information on international trade in goods and services, released January 9, is for November and revealed that the goods and services trade deficit was $63.2 billion, a decrease of $1.3 billion from the October deficit. November exports were $253.7 billion, 1.9% less than October exports. November imports were $316.9 billion, 1.9% less than October imports. Year to date, the goods and services deficit decreased $161.8 billion, or 18.4%, from the same period in 2022. Exports increased $28.8 billion, or 1.0%. Imports decreased $133.0 billion, or 3.6%.
  • International markets: Inflation continued to fall in most major countries at the end of 2023. However, several central banks, including those of Japan, Germany, the European Union, Canada, and the United Kingdom are maintaining their current monetary policies. While Europe’s economic growth hasn’t quite kept up with the United States, it appears reasonably certain that the recession some feared will not come to fruition. The EU’s economy was flat in the fourth quarter, Japan’s economy declined 0.7%, Germany saw its economy recede 0.3%, while the U.K.’s economy dipped 0.1%. This is compared to the U.S. GDP, which expanded by 3.3%. For January, the STOXX Europe 600 Index rose 2.7%; the United Kingdom’s FTSE was flat; Japan’s Nikkei 225 Index gained 8.4%; and China’s Shanghai Composite Index lost 6.0%.
  • Consumer confidence: Consumers began the new year with a surge in confidence and restored optimism for 2024. The Conference Board Consumer Confidence Index® increased in January to 114.8, following a 108.0 reading in December. The reading was the highest since December 2021 and marked the third straight monthly increase. The Present Situation Index, based on consumers’ assessment of current business and labor market conditions, rose to 161.3 in January, up from 147.2 in the previous month. The Expectations Index, based on consumers’ short-term outlook for income, business, and labor market conditions, improved to 83.8 in January from 81.5 in December.

Eye on the Month Ahead

Entering February, much of the focus will be on the economy, inflation, and global unrest, particularly in the Middle East. Recent data has shown that the economy has weathered the aggressive interest-rate policy adopted by the Federal Reserve, which does not meet again until March. Inflationary pressures continued to slowly recede, prompting speculation as to when the Fed will begin lowering interest rates.

What I’m Watching This Week – 29 January 2024

Published on by dredheadz

The Markets (as of market close January 26, 2024)

Stocks closed higher last week, with the S&P 500 and the Nasdaq reaching record highs. Investors spent most of the week parsing through corporate earnings results and important economic data. Among the market sectors, communication services and energy rose over 5.0%, while health care ended the week in the red. Ten-year Treasury yields ticked up marginally. Crude oil prices rose nearly 6.0% as production cuts have begun to drive prices higher. The dollar advanced, while gold prices fell 0.6%.

Wall Street opened last week on a high note, with the small caps of the Russell 2000 advancing 1.9%, while the Dow (0.4%) and the S&P 500 (0.2%) notched new record highs. The Nasdaq and the Global Dow rose 0.3%. Industrials, information technology, and health care garnered solid gains among the sectors. Ten-year Treasury yields slid 5.2 basis points to 4.09%. Crude oil prices rose 2.2% to $75.01 per barrel on supply disruptions and strong demand. The dollar was flat, while gold prices fell 0.4%.

Stocks closed last Tuesday mixed, with the Nasdaq (0.4%) and the S&P 500 (0.3%) hitting new record highs as investors dissected the latest batch of earnings reports. The Global Dow edged up 0.1%, while the Russell 2000 slid 0.4% and the Dow dipped 0.3%. Ten-year Treasury yields added 4.8 basis points to close at 4.14%. Crude oil prices ended the day at about $74.54 per barrel after falling 0.3%. The dollar and gold prices gained 0.2% and 0.4%, respectively.

Equities were mixed for the second straight session last Wednesday, with the Nasdaq (0.4%) and the S&P 500 (0.1%) achieving new all-time highs, while the Russell 2000 (-0.7%) and the Dow (-0.3%), slid lower. The Global Dow edged up 0.5%. Several tech companies reported strong earnings, which helped offset several declining sectors, including real estate, materials, consumer staples, health care, and utilities. Long-term bond values continued to decline, pushing yields higher. Ten-year Treasury yields closed at 4.17%, an increase of 3.6 basis points. Crude oil prices jumped 1.5% to $75.46 per barrel. The dollar and gold prices declined.

Last Thursday saw the S&P 500 hit a record high for the fifth straight session. The Dow and the Russell 2000 led the benchmark indexes listed here, each gaining 0.6%, followed by the S&P 500, which added 0.5%. The Nasdaq and the Global Dow edged up 0.2%. Investors digested another batch of corporate earnings, along with a favorable report on fourth-quarter gross domestic product (see below). Ten-year Treasury yields fell 4.6 basis points, settling at 4.13%. Crude oil prices rose 2.8% to $77.71 per barrel. The dollar and gold prices moved higher.

In yet another day of uneven returns, stocks closed last Friday mixed, with the Dow, the Global Dow, and the Russell 2000 each edging up 0.2%, while the Nasdaq (-0.4%) and the S&P 500 (-0.1%) ticked lower. Ten-year Treasury yields settled at 4.16% after gaining 2.8 basis points. Crude oil prices neared $80.00 per barrel. The dollar dipped 0.1%, while gold prices closed the day flat.

Stock Market Indexes

Market/Index2023 ClosePrior WeekAs of 1/26Weekly ChangeYTD Change
DJIA37,689.5437,863.8038,109.430.65%1.11%
Nasdaq15,011.3515,310.9715,455.360.94%2.96%
S&P 5004,769.834,839.814,890.971.06%2.54%
Russell 20002,027.071,944.391,978.331.75%-2.40%
Global Dow4,355.284,318.474,372.081.24%0.39%
fed. funds target rate5.25%-5.50%5.25%-5.50%5.25%-5.50%0 bps0 bps
10-year Treasuries3.86%4.14%4.16%2 bps30 bps
US Dollar-DXY101.39103.25103.460.20%2.04%
Crude Oil-CL=F$71.30$73.79$78.195.96%9.66%
Gold-GC=F$2,072.50$2,031.50$2,018.40-0.64%-2.61%

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 initial estimate of gross domestic product for the fourth quarter of 2023, revealed that the economy accelerated at an annualized rate of 3.3%, down from the third quarter rate of 4.9%, but well above expectations that hovered around 2.0%. Compared to the third quarter of 2023, the deceleration in GDP in the fourth quarter primarily reflected slowdowns in private inventory investment, federal government spending, residential fixed investment, and consumer spending. Personal consumption expenditures, a measure of consumer spending, rose 2.8% in the fourth quarter and was the largest contributor to GDP. Spending on durable goods rose 4.6%, while nondurable goods spending advanced 3.4%. Services gained 2.4%. Despite rising interest rates, gross domestic investment rose 2.1% in the fourth quarter, well below the third-quarter rate of 10.0%. Nevertheless, both residential and nonresidential fixed investment increased 1.1% and 1.9%, respectively. Exports increased 6.3%, while imports, which are a negative in the calculation of GDP, increased 1.9%. The personal consumption expenditures price index increased 1.7%, compared with an increase of 2.6% in the third quarter. Excluding food and energy prices, the PCE price index increased 2.0%, the same change as the third quarter.
  • According to the latest report on personal income and outlays, consumer prices edged up 0.2% in December, while core prices, excluding food and energy, also increased 0.2%. For the 12 months ended in December, consumer prices rose 2.6%, unchanged from the previous 12-month period. Core prices rose 2.9%, the lowest 12-month advance since the period ended March 2021. Both personal income and disposable (after-tax) personal income rose 0.3% in December. Consumer spending, as measured by the personal consumption expenditures index, outpaced income growth after climbing 0.7% last month.
  • The advance report on international trade in goods showed the deficit was $88.5 billion in December, down $0.9 billion, or 1.0%, from the November figure. Exports of goods for December were $169.8 billion, $4.1 billion, or 2.5%, more than November exports. Imports of goods for December were $258.3 billion, $3.2 billion, or 1.3%, more than November imports. New orders for transportation fell 0.9% last month, while new orders for defense declined 2.9%. New orders for capital goods decreased 1.1% in December after increasing 13.0% in November. The largest drag on new orders for capital goods in December was a 14.5% decline in defense capital goods.
  • The advance report on durable goods orders for December showed new orders inched up $0.1 billion for a net 0.0% change after advancing 5.5% in November. Excluding transportation, new orders increased 0.6%. Excluding defense, new orders increased 0.5%.
  • December saw sales of new single-family homes increase 8.0% from November and 4.4% from December 2022. The median sales price of new houses sold in December 2023 was $413,200. The average sales price was $487,300. Inventory of new single-family homes for sale in December represented an 8.2-month supply at the current sales pace, down from the 8.8-month supply in November.
  • The national average retail price for regular gasoline was $3.062 per gallon on January 22, $0.004 per gallon higher than the prior week’s price but $0.353 less than a year ago. Also, as of January 22, the East Coast price decreased $0.018 to $3.021 per gallon; the Midwest price rose $0.066 to $2.889 per gallon; the Gulf Coast price increased $0.015 to $2.685 per gallon; the Rocky Mountain price fell $0.062 to $2.671 per gallon; and the West Coast price decreased $0.050 to $3.926 per gallon.
  • For the week ended January 20, there were 214,000 new claims for unemployment insurance, an increase of 25,000 from the previous week’s level, which was revised up by 2,000. According to the Department of Labor, the advance rate for insured unemployment claims for the week ended January 13 was 1.2%, unchanged from the previous week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended January 13 was 1,833,000, an increase of 27,000 from the previous week’s level. States and territories with the highest insured unemployment rates for the week ended January 6 were New Jersey (2.7%), Rhode Island (2.6%), Minnesota (2.5%), California (2.4%), Alaska (2.3%), Massachusetts (2.3%), Illinois (2.2%), Puerto Rico (2.2%), Montana (2.1%), and Washington (2.1%). The largest increases in initial claims for unemployment insurance for the week ended January 13 were in Texas (+2,433), California (+1,949), Oregon (+1,111), Kansas (+1,054), and Florida (+1,025), while the largest decreases were in New York (-17,358), Wisconsin (-4,505), Michigan (-4,427), Pennsylvania (-3,835), and South Carolina (-3,042).

Eye on the Week Ahead

The Federal Open Market Committee meets this week. The consensus is that interest rates will remain unchanged, however, it will be interesting to glean the direction of the Committee moving forward. The employment figures for January are also out this week. Employment grew by 216,000 in December, well above expectations.

What I’m Watching This Week – 18 December 2023

Published on by dredheadz

The Markets (as of market close December 15, 2023)

Last week saw stocks rally after the Federal Reserve policy statement released last Wednesday suggested no more interest rate hikes, while predicting rate cuts in 2024 (see below). Despite losing momentum at the end of the week, stocks enjoyed their seventh consecutive week of gains, with the S&P 500 marking its longest winning streak since 2017 and the Dow’s longest since 2018. Each of the market sectors ended the week higher, led by real estate, consumer discretionary, materials, and financials. Bond yields continued to be volatile, dropping 32.0 basis points as investors tried to determine the direction interest rates will take. Crude oil prices ended a stretch of six weeks of losses. The dollar registered its largest weekly drop in a month against a basket of currencies.

Wall Street began last week on a positive note as investors awaited the upcoming release of the latest inflation data and the Federal Reserve meeting. Each of the benchmark indexes listed here closed higher last Monday, led by the Dow, the S&P 500, and the Global Dow, which each rose 0.4%. The Russell 2000 and the Nasdaq inched up 0.2%. Ten-year Treasury yields slipped minimally to 4.23%. Crude oil prices rose 0.3% to $71.45 per barrel. The dollar ticked higher, while gold prices fell nearly 1.0%.

Markets closed generally higher last Tuesday. The Consumer Price Index (see below) showed inflation held steady with the Federal Reserve’s final meeting of 2023 on tap for Wednesday. The Dow and the S&P 500 gained 0.5%, while the Nasdaq added 0.7%, with all three indexes closing at their highest levels since January 2022. The Global Dow ticked up 0.2%, while the Russell 2000 dipped 0.1%. Crude oil prices gave back recent gains, falling 3.6% to $68.73 per barrel. Yields on 10-year Treasuries fell 3.3% to 4.20%. The dollar fell 0.3%, while gold prices rose less than 0.1%.

Wall Street reacted favorably to the outcome of the Federal Reserve’s meeting last Wednesday (see below) as stocks climbed to record highs. Each of the benchmark indexes listed here posted solid gains led by the Russell 2000, which climbed 3.5%. The Dow, the Nasdaq, and the S&P 500 each rose 1.4%, while the Global Dow added 1.1%. Ten-year Treasury yields fell to 4.03%, the lowest rate since August, while two-year yields tumbled 30.0 basis points to 4.43%, all in response to the Fed’s statement. Crude oil prices swung higher, closing at $69.74 per barrel after gaining 1.65%. The dollar fell 0.9%, while gold prices rose 2.3%.

Stocks continued to climb higher last Thursday as investors rode momentum from the Fed’s aforementioned policy statement. The Dow jumped 0.4% to hit another record high, while the S&P 500 (0.3%) and the Nasdaq (0.2%) notched gains. But the interest-sensitive small caps of the Russell 2000 posted notable gains after advancing 2.7%, while the Global Dow rose 1.3%. Ten-year Treasuries dipped to 3.93%, falling below 4.0% for the first time since August. Crude oil prices rose 3.2% to $71.70 per barrel. The dollar declined 0.9%, while gold prices climbed 2.7%.

Stocks cooled to end last week. Of the benchmark indexes listed here, only the Nasdaq (0.4%) and the Dow (0.2%) advanced. The Russell 2000 lost 0.7%, the Global Dow fell 0.2%, while the S&P 500 was flat. Crude oil prices rose for the fourth day out of five, gaining 0.7%. The dollar ended a three-day losing streak after gaining 0.6%. Gold prices dipped 0.6%.

Stock Market Indexes

Market/Index2022 ClosePrior WeekAs of 12/15Weekly ChangeYTD Change
DJIA33,147.2536,247.8737,305.162.92%12.54%
Nasdaq10,466.4814,403.9714,813.922.85%41.54%
S&P 5003,839.504,604.374,719.192.49%22.91%
Russell 20001,761.251,880.821,985.135.55%12.71%
Global Dow3,702.714,191.864,285.042.22%15.73%
Fed. Funds target rate4.25%-4.50%5.25%-5.50%5.25%-5.50%0 bps100 bps
10-year Treasuries3.87%4.24%3.92%-32 bps5 bps
US Dollar-DXY103.48103.98102.61-1.32%-0.84%
Crude Oil-CL=F$80.41$71.25$71.620.52%-10.93%
Gold-GC=F$1,829.70$2,019.40$2,033.400.69%11.13%

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

Last Week’s Economic News

  • The Federal Reserve decided to maintain the target range for the federal funds rate at 5.25%-5.50% for the third straight meeting. Based on Fed projections for interest rates by the end of next year, it appears the Fed anticipates making three rate cuts of 0.25% each over the course of 2024.
  • The Consumer Price Index increased 0.1% in November, after being unchanged in October. The index less food and energy rose 0.3% in November, after rising 0.2% in October. Prices for shelter continued to rise in November, offsetting a decline in gasoline prices. Prices for energy fell 2.3%, while prices for food increased 0.2%. The CPI rose 3.1% for the 12 months ended in November, a smaller increase than the 3.2% advance for the 12 months ended in October. Prices less food and energy rose 4.0% for the year ended in November, the same increase as for the 12 months ended in October. Energy prices decreased 5.4% for the 12 months ended in November, while food prices increased 2.9% over the last year.
  • The Producer Price Index, which measures prices producers receive for goods and services, was unchanged in November after declining 0.4% in October. Last month, prices for both goods and services were unchanged. For the year ended in November, the PPI increased 0.9%. Producer prices less foods, energy, and trade services edged up 0.1% in November, the sixth consecutive monthly advance. For the 12 months ended in November, prices less foods, energy, and trade services rose 2.5%.
  • Retail sales rose by 0.3% in November and were up 4.1% from November 2022. Retail trade sales rose 0.1% last month and 3.1% from November 2022.
  • Prices for imports decreased 0.4% in November following a 0.6% decline the previous month. The November decline was the first one-month declines since June 2023. Lower fuel prices in November more than offset an increase in nonfuel prices. Prices for imports fell 1.4% for the year ended in November. Export prices fell 0.9% for the second consecutive month in November. Lower prices for nonagricultural exports in November more than offset higher agricultural prices. The price index for exports also declined over the past 12 months, decreasing 5.2% from November 2022.
  • Industrial production increased 0.2% in November. Manufacturing output jumped 0.3%, largely due to a 7.1% increase in motor vehicles and parts production following the resolution of strikes at several major automakers. Excluding motor vehicles and parts, manufacturing fell 0.2%. The output of utilities moved down 0.4%, and the output of mines moved up 0.3%. Total industrial production in November was 0.4% below its year-earlier level.
  • The November deficit for the federal government was $314.0 billion, $247.5 billion above the October deficit and $65.5 billion higher than the November 2022 deficit. Total government receipts in November were $274.8 billion and government outlays totaled $588.8 billion. Through the first two months of fiscal year 2024, the government budget deficit sat at $380.6 billion compared to $336.4 billion over the same period last fiscal year.
  • The national average retail price for regular gasoline was $3.126 per gallon on December 11, $0.095 per gallon lower than the prior week’s price and $0.103 less than a year ago. Also, as of December 11, the East Coast price decreased $0.083 to $3.123 per gallon; the Midwest price fell $0.090 to $2.901 per gallon; the Gulf Coast price declined $0.116 to $2.622 per gallon; the Rocky Mountain price dropped $0.116 to $2.899 per gallon; and the West Coast price decreased $0.111 to $4.141 per gallon.
  • For the week ended December 9, there were 202,000 new claims for unemployment insurance, a decrease of 19,000 from the previous week’s level, which was revised up by 1,000. According to the Department of Labor, the advance rate for insured unemployment claims for the week ended December 2 was 1.3%, an increase of 0.1 percentage point from the previous week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended December 2 was 1,876,000, an increase of 20,000 from the previous week’s level, which was revised down by 5,000. States and territories with the highest insured unemployment rates for the week ended November 25 were New Jersey (2.4%), California (2.3%), Alaska (2.2%), Puerto Rico (1.9%), Washington (1.9%), Hawaii (1.8%), Massachusetts (1.8%), Minnesota (1.8%), New York (1.8%), and Oregon (1.8%). The largest increases in initial claims for unemployment insurance for the week ended December 2 were in California (+13,478), New York (+9,073), Texas (+8,321), Georgia (+6,728), and Oregon (+5,406), while the largest decreases were in Kansas (-893), Vermont (-14), and Delaware (-14).

Eye on the Week Ahead

The final estimate of third-quarter gross domestic product is available this week. The second estimate had the economy accelerating at an annualized rate of 5.2%. The November data on personal income and outlays is also out this week. Consumer spending rose 0.2% in October, while the personal consumption expenditures price index, a measure of inflation, was flat. Consumer prices continue to inch lower, although they remain above the Federal Reserve’s target of 2.0%.