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Weekly Update

Market Summary

Stock market turbulence around the world continued with another volatile week of trading to close out the year. U.S equities maintained a sharp downward slide going into Christmas day, just to post their largest percentage daily gain since March 2009 on Wednesday the 26th. On that day, the S&P 500 and Dow each climbed almost 5% and the NASDAQ jumped over 5.8%, which reversed some of the damage from the prior week, as some investors deemed the previous sell-off as an overreaction. Despite the post-Christmas rebound, all three indices are down over 10% in December alone. As a result, the month of December is on track to notch its worst U.S. equity market performance since the Great Depression.

Much of the sell-off over the past few weeks has centered on December’s Federal Reserve meeting. As widely anticipated, the Fed raised rates by 0.25%, bringing the federal funds rate to 2.5%, and the Fed’s median expectation for the number of rate hikes in 2019 dropped from three to two, which indicates that a near-term pause in hikes is more likely. However, many investors were rattled by a less accommodative tone to Fed commentary regarding future monetary policy, especially given falling global growth rates and inflation and the recent market turmoil, which Fed Chairman Jerome Powell downplayed.

Uncertainty out of Washington has added to worries. In addition to the announced departure of key administration officials, a partial government shutdown has taken place as President Trump is refusing to sign a stopgate spending bill unless he gets border wall funding. The White House and Democrats remain at an impasse on finding a resolution to end the shutdown.

In the weeks ahead, many market participants are looking to potential trade developments for a source of reprieve to the building negative sentiment. A U.S. trade team will travel to Beijing next week to hold negotiations with Chinese officials. Since coming to a temporary truce a month ago, China has implemented several concessions, including a decrease in import tariffs and drafting a law to prevent forced technology transfers.

We wish all of our readers a healthy and prosperous New Year.

Economic Highlights: 

Consumer Confidence: The Consumer Confidence index fell from 136.4 to 128.1 in December, which was short of consensus expectations of 133.6, but the index remains near its post-recession high. Consumer spending has been one of the bright spots powering U.S. economic performance, so any potential slowdown will be monitored closely by market participants.

Housing: Several U.S. housing market indicators, including existing home sales, housing starts, and new building permits, all surpassed expectations for November, a positive result for an industry that has struggled of late amid rising mortgage rates and declining inventory.

US Economy – The Week Ahead

Tuesday 1/1/2019

  • Markets closed for New Year’s Day

Wednesday 1/2/2019

  • No data

Thursday 1/3/2019

  • Initial Jobless Claims – Consensus Estimate: 216,000 (0% WoW), Prior Week: 216,000 (-0.5% WoW)
  • ISM Manufacturing PMI – Consensus Estimate: 57.8 (-2.5% MoM), Prior Month: 59.3 (2.8% MoM)
  • Construction Spending Month-over-Month Growth – Consensus Estimate: 0.2%, Prior Month: -0.1%

Friday 1/4/2019

  • U.S. Unemployment Rate – Consensus Estimate: 3.7%, Prior Month: 3.7%
  • Hourly Earnings Growth Year-over-Year – Consensus Estimate: 3.0%, Prior Month: 3.1%
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