Wall Street closed the holiday-shortened week generally higher, with most major stock market indexes posting gains, except for the Russell 2000 and the Global Dow. The surge in stocks was driven primarily by information technology and communication services, with chip makers leading the charge. Other than financials, which ticked up marginally higher, the remaining market sectors ended the week in the red. Following December’s surge, investors became pensive about stocks to begin the new year after expectations of an impending interest rate cut waned. However, favorable economic news helped bolster confidence in equities, at least for the time being. Long-term bond prices faded, pushing yields higher, as good economic news, particularly in the labor sector, supported the Federal Reserve’s inclination to keep rates higher for longer.
Last Week’s Economic News
- Retail and food services sales rose in December and 5.6% over the December 2022 rate. Total retail sales for 2023 increased 3.2%.
- Import prices were unchanged in December after declining 0.5% in November.
- Industrial production inched up 0.1% in December after being unchanged in November. For the 12 months ended in December, industrial production rose 1.0%.
- The number of building permits issued for residential construction increased by 1.9% in December over November and 6.1% above the December 2022 rate.
- Sales of existing homes declined 1.0% in December and 6.2% from December 2022. According to the latest report from the National Association of REALTORS®, despite the drop in December sales, activity is expected to pick up in 2024 as mortgage rates continue to decline and more inventory is expected to appear on the market.
- The national average retail price for regular gasoline was $3.058 per gallon on January 15.
- For the week ended January 13, there were 187,000 new claims for unemployment insurance, a decrease of 16,000 from the previous week’s level.
Eye on the Week Ahead
Reports focusing on several different sectors of the economy are available this week. The manufacturing sector is represented by the report on durable goods orders for December. New orders for durable goods rose 5.4% in November. The latest information on sales of new single-family homes is out this week. Sales fell 12.2% in November and look to rebound in December. The advance estimate of gross domestic product for the fourth quarter of 2023 is out this week. GDP expanded at an annualized rate of 4.9% in the third quarter. The report on personal income and expenditures for December is released this week. This report includes the personal consumption expenditures price index, a key inflation guide for the Federal Reserve. The PCE price index slid 0.1% in November. However, other inflation indicators increased in December, and it is likely that the PCE price index will follow suit.
Have a nice week!
Sincerely,
Robert G. Carpenter