A strong labor report and solid earnings data from megatech companies helped drive stocks higher last week. The major stock benchmark indexes posted solid gains except for the Russell 2000. Nine of the 11 market sectors advanced last week, led by consumer discretionary, consumer staples, and health care, while real estate and energy declined. Ten-year Treasury yields trended lower for most of the week, only to vault higher on Friday. Crude oil prices, which had been surging, fell last week as continued unrest in the Middle East has irritated oil markets. The dollar inched higher, while gold prices advanced.
Last Week’s Economic News
- As expected, the Federal Open Market Committee maintained the federal funds target rate range at its current 5.25%-5.50%. While economic activity and employment were solid, inflation remained elevated. The Committee appeared to discourage any expectations of an impending interest rate reduction.
- January saw employment increase by 353,000, above expectations. January’s total, coupled with December’s upwardly revised total of 333,000, clearly shows strength in the labor sector. In January, the unemployment rate was 3.7% for the third month in a row, and the number of unemployed people declined by 144,000 to 6.1 million.
- Manufacturing improved in January for the first time since April 2023. The S&P Global US Manufacturing Purchasing Managers’ Index™ was 50.7 in January, up from 47.9 in December. The latest advance in the purchasing managers’ index ended two months of declines and marked the strongest improvement in operating conditions since September 2022.
- The number of job openings, at 9.0 million, ticked up 101,000 in December from November, according to the latest Job Openings and Labor Turnover Summary. Nevertheless, this measure is down from a series high of 12.0 million in March 2022.
- The national average retail price for regular gasoline was $3.095 per gallon on January 29, $0.033 per gallon higher than the prior week’s price but $0.394 less than a year ago.
- For the week ended January 27, there were 224,000 new claims for unemployment insurance, an increase of 9,000 from the previous week’s level, which was revised up by 1,000. According to the Department of Labor, the advance rate for insured unemployment claims for the week ended January 20 was 1.3%, an increase of 0.1 percentage point from the previous week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended January 20 was 1,898,000, an increase of 70,000 from the previous week’s level, which was revised down by 5,000.
Eye on the Week Ahead
This week is light on economic data. Most of the attention will remain on the escalating conflict in the Middle East and the presidential primaries. The January survey of purchasing managers in the services sector is out this week. December saw the Purchasing Managers’ Index expand modestly.
Have a nice week!
Sincerely,
Robert G. Carpenter