Stocks pulled back last week as tech shares pared gains from the prior week. The NASDAQ posted a minimal increase, while the S&P 500 retreated from recent record highs. Nine of the 11 market sectors declined last week, with only consumer discretionary and communication services advancing. Traders will pay close attention to the Federal Open Market Committee, which meets December 17-18. At that time, the Committee will have to decide if the recent uptick in price inflation is sufficient to defer another interest rate cut. While the November Consumer Price Index and Producer Price Index came in as expected, data from both sources showed inflationary pressures moved further away from the Fed’s 2.0% target. This trend, coupled with a solid labor market, opens the possibility that the Committee may decide to wait until the January 2025 meeting before considering a further interest rate reduction. Nevertheless, the consensus remains that the Fed will reduce the federal funds rate by 25.0 basis points when it meets this week. Crude oil prices rose to their highest levels in three weeks, buoyed by expectations of an increase in demand following China’s economic stimulus and potential supply disruptions resulting from U.S. sanctions on Iran and Russia.
Last Week’s Economic News
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- The Consumer Price Index posted the largest gain in seven months after climbing 0.3% in November. For the 12 months ended in November, the CPI advanced 2.7%, up 0.1 percentage point from the comparable period ended in October.
- Prices at the wholesale level rose 0.4% in November, according to the latest Producer Price Index. For the 12 months ended in November, producer prices advanced 3.0%, up 0.8 percentage point from the 12-month period ended in October. This was the largest 12-month increase since prices rose 4.7% for the year ended in February 2023.
- The Treasury budget deficit for November was $367 billion, well above the October estimate and $53 billion more than the deficit from last November.
- Prices for imports increased slightly for the second consecutive month in November and 1.3% over the last 12 months, the largest one-year advance since the period ended July 2024.
- The national average retail price for regular gasoline was $3.008 per gallon on December 9.
- For the week ended December 7, there were 242,000 new claims for unemployment insurance, an increase of 17,000 from the previous week’s level.
Eye on the Week Ahead
The Federal Reserve meets for the last time this year. Many expect the Fed to drop interest rates by 25.0 basis points. The third and final estimate of gross domestic product for the third quarter is also out this week. The last reading had the economy expanding at an annualized rate of 2.8%.
Have a nice week!
Sincerely,
Robert G. Carpenter