Last week saw stocks rally after the Federal Reserve policy statement released last Wednesday suggested no more interest rate hikes, while predicting rate cuts in 2024. Despite losing momentum at the end of the week, stocks enjoyed their seventh consecutive week of gains, with the S&P 500 marking its longest winning streak since 2017 and the Dow’s longest since 2018. All the major market sectors ended the week higher, led by real estate, consumer discretionary, materials, and financials. Bond yields continued to be volatile, dropping 32.0 basis points as traders tried to determine the direction interest rates will take. Crude oil prices ended a stretch of six weeks of losses. The dollar registered its largest weekly drop in a month against a basket of currencies.
Last Week’s Economic News
- The Federal Reserve decided to maintain the target range for the federal funds rate at 5.25%-5.50% for the third straight meeting. Based on Fed projections for interest rates by the end of next year, it appears the Fed anticipates making cuts over the course of 2024.
- The Consumer Price Index increased slightly in November. The CPI rose 3.1% for the 12 months ended in November.
- The Producer Price Index, which measures prices producers receive for goods and services, was unchanged in November after declining 0.4% in October. For the 12 months ended in November, prices less foods, energy, and trade services rose 2.5%.
- Retail sales rose by a bit in November and were up 4.1% from November 2022.
- Prices for imports decreased 0.4% in November following a 0.6% decline the previous month. The November decline was the first one-month declines since June 2023.
- Industrial production increased 0.2% in November. Total industrial production in November was 0.4% below its year-earlier level.
- The November deficit for the federal government was $314.0 billion, $247.5 billion above the October deficit and $65.5 billion higher than the November 2022 deficit. Through the first two months of fiscal year 2024, the government budget deficit sat at $380.6 billion compared to $336.4 billion over the same period last fiscal year.
- The national average retail price for regular gasoline was $3.126 per gallon on December 11.
- For the week ended December 9, there were 202,000 new claims for unemployment insurance, a decrease of 19,000 from the previous week’s level.
Eye on the Week Ahead
The final estimate of third-quarter gross domestic product is available this week. The second estimate had the economy accelerating at an annualized rate of 5.2%. The November data on personal income and outlays is also out this week. Consumer spending rose 0.2% in October, while the personal consumption expenditures price index, a measure of inflation, was flat. Consumer prices continue to inch lower, although they remain above the Federal Reserve’s target of 2.0%.
Have a nice week!
Sincerely,
Robert G. Carpenter