Markets were volatile last week as traders worked through a heavy backlog of economic data released following the 43-day government shutdown. Stocks sold off early in the week, particularly in the technology sector, before rebounding sharply after a cooler-than-expected inflation report helped ease rate concerns. The S&P 500 and NASDAQ finished the week modestly higher, while the Dow, Global Dow, and small-cap Russell 2000 ended lower. Market leadership narrowed, with only consumer discretionary and health care posting gains among the S&P 500 sectors. Energy was the weakest performer as crude oil prices fell to their lowest levels in nearly five years amid global oversupply concerns and lingering trade tensions. Despite rising unemployment, moderating inflation has increased optimism that seasonal year-end strength — often referred to as a “Santa Claus rally” — could still materialize.
Last Week’s Economic News
- Employment growth slowed in November, with payrolls increasing by 64,000. The unemployment rate rose to 4.6%, up from both the prior month and a year earlier, while wage growth moderated to a 3.5% year-over-year pace.
- Inflation data showed easing price pressures, with the Consumer Price Index rising 0.2% over the two months ended in November. Over the past 12 months, headline inflation slowed to 2.7%, while core inflation eased to 2.6%.
- Retail sales were essentially flat in October, though spending remained higher than a year ago, led by strong growth in online sales and food services.
- Existing home sales increased modestly in November, while inventory tightened slightly. Home prices dipped from October levels but remained higher year over year.
- Initial jobless claims declined for the week ended December 13, though continuing claims rose, pointing to a labor market that is cooling but not contracting sharply.
- Gasoline prices continued to fall, with the national average dropping below $2.90 per gallon, reflecting lower crude oil prices and ample supply.
Eye on the Week Ahead
Attention turns to updated gross domestic product data as the government works through delayed releases. Investors will also continue monitoring inflation trends and labor market conditions for clues about economic momentum heading into 2026.
Have a nice week!
Sincerely,
Robert G. Carpenter