Despite a late-week rally, stocks tumbled lower last week as Wall Street appears to be limping into the new year. The major benchmark stock indexes lost value, with the Russell 2000 falling nearly 4.5%. For much of the week, traders seemed to move from risk, particularly in light of the Federal Reserve’s revised projection of fewer interest rate reductions in 2025. The decline in equities was broad-based, with each of the market sectors ending the week in the red, with real estate, energy, and materials falling the furthest. Bond yields reached a near seven-month high. Crude oil prices declined on concerns over waning demand. The dollar reached a two-year high earlier in the week, while gold prices ended the week lower.
Last Week’s Economic News
-
- The Federal Reserve cut interest rates by 25 basis points, marking the third rate cut this year, while projecting two more rate cuts for 2025, fewer than previously indicated. The Fed noted that the economy has expanded at a solid pace, labor conditions have eased, and inflation has progressed toward the 2% target objective, though it remains somewhat elevated. The central bank may proceed at a slower pace due to substantial rate reductions already implemented and uncertainties around inflation and potential policy changes under the incoming U.S. Presidential administration.
- The personal consumption expenditures (PCE) price index ticked up slightly in November.
- Gross domestic product advanced 3.1% in the third quarter.
- Retail sales rose 0.7% in November and 3.8% over the last 12 months.
- Industrial production moved down slightly in November after a 0.4% decline in October.
- Residential building permits issued rose 6.1% in November but were 0.2% below the November 2023 rate.
- Existing home sales grew by 4.8% in November compared to the prior month. Over the last year, sales of existing homes rose 6.1%.
- The national average retail price for regular gasoline was $3.016 per gallon on December 16.
- For the week ended December 14, there were 220,000 new claims for unemployment insurance, a decrease of 22,000 from the previous week.
Eye on the Week Ahead
There isn’t much in the way of important economic data during Christmas week, and trading customarily slows down. The report on the manufacture of durable goods for November is worth noting. New orders for durable goods are indicative of how busy factories will be in the coming months. In October, new orders rose 0.2%, driven mostly by a bump in transportation.
Have a nice week!
Sincerely,
Robert G. Carpenter