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Market Summary

U.S. stocks opened the New Year with a choppy week of trading capped off by a notable rally on Friday that recouped and surpassed the week’s prior losses. For the week, the Dow and S&P gained 2.3% and 1.6%, respectively, while the Nasdaq ended the week with a 3.2% gain after climbing 4.3% on Friday alone. There was also some calming down in the energy market as U.S. WTI crude oil marked its first weekly gain in a month, rising 5.8% to $48/bbl. Much of the late week rally resulted from a strong employment report that reaffirmed some investors’ faith in the strength of the U.S. economy and to more patient and adaptive commentary from Federal Reserve Chairman Jerome Powell in regards to future monetary policy. These drivers helped to offset concerns of slowing global manufacturing activity and reduced foreign sales growth outlooks for U.S. multinational corporations.

According to Friday’s payroll data, the U.S. economy added 312K jobs in December, which overwhelmed the consensus estimate for 180K new jobs. Meanwhile, the unemployment rate rose 0.2% to 3.9% for the month due to more job seekers joining the labor force, and average hourly earnings were up 3.2% year-over-year.

Earlier in the week, poor manufacturing readings in China, Europe, and the U.S. helped feed negative sentiment of a slowing global economy. In particular, Chinese manufacturing had a worse December than expected, with its Manufacturing PMI falling to 49.4 from 50.0 in November, below the critical 50 level that separates growth from contraction. China’s contracting economy and the global financial market turbulence have lent an additional sense of urgency to the in-person trade negotiations occurring this week between the U.S. and China.

Investors will also be listening intently for developments in the current federal government shutdown, which is entering into its third week after weekend meetings failed to yield a solution. House Democrats and the Trump Administration remain deadlocked on the border wall funding issue.

Economic Highlights: 

Manufacturing: The U.S. ISM Manufacturing PMI faltered in December, falling from 59.3 to 54.1, which was well below expectations of 57.8. The PMI, or Purchasing Managers Index, is a monthly composite survey of purchasing and supply executives on current manufacturing conditions and sentiment.

U.S. Treasury Curve: Following Friday’s employment numbers, the 10-year Treasury yield, which in part reflects future economic growth expectations, started to rebound on the news but still ended down for the week, falling from 2.74% to 2.66% as the yield curve continues to flatten.

US Economy – The Week Ahead

Tuesday 1/8/2019

  • Job Openings & Labor Turnover Survey – Consensus: 7,025K (-0.8% MoM), Prior Month: 7,079K (1.7% MoM)
  • Trade Balance – Consensus Estimate: -$54.0B (2.7% MoM), Prior Month: -$-55.5B (-3.4% MoM)
  • NFIB Small Business Optimism Index – Consensus Estimate: 105 (0.2% MoM), Prior Month: 104.8 (-2.4% MoM)

Wednesday 1/9/2019

  • No data

Thursday 1/10/2019

  • Initial Jobless Claims – Consensus Estimate: 225,000 (-2.6% WoW), Prior Week: 231,000 (4.5% WoW)
  • Wholesale Inventories Month-Over-Month Growth – Consensus Estimate: 0.4%, Prior Month: 0.8%

Friday 1/11/2019

  • U.S. Consumer Price Index (CPI) Year-Over-Year – Consensus Estimate: 1.9%, Prior Month: 2.2%
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