STOCKS ADVANCE FOR 9^th WEEK IN A ROW DESPITE WORRISOME MANUFACTURING, HOUSING, TRADE DEFICIT AND LABOR MARKET DATA

Weekly Market Update — December 30, 2023

• This week saw the major equity indices advance for the 9th week in a row, wrapping up the week, month, quarter and 2023
• It was another light trading week as Wall Street was closed Monday and markets will be closed again this coming Monday for New Year’s Day
• When the week was over, NASDAQ (+0.1%), the S&P 500 (+0.3%) and the DJIA (+0.8%) all advanced less than 1%, with the S&P 500 approaching its all-time high close on Thursday, before retreating on the last trading day of the year
• The large-cap and mid-cap stocks outperformed small caps, as the small-cap Russell 2000 lost 0.3% on the week
• Despite this week’s loss, the Russell 2000 is still up more than 12% for December, versus gains of about 5% for the S&P 500 and NASDAQ
• Of the 11 S&P 500 sectors, four lost ground, with Energy (-1.4%) as the worst performer, followed by Consumer Discretionary (-0.4%) and Communication Services (-0.4%) sectors
• Of the 7 sectors that advanced, Utilities (+1.1%) and Consumer Staples (+1.1%) led the way
• The Richmond Fed Manufacturing Index for December came in at -11, down from -5 in November (the dividing line between expansion and contraction is 0.0)
• The Chicago PMI dropped to 46.9% in December from 55.8% in November
• Weekly initial Claims came in at 218k, higher than expected
• The 10-yr Treasury yield closed the week virtually unchanged at 3.90% after reaching a high yield of 5.02% in mid-October
• The 2-year Treasury yield declined slightly to 4.25%
• Crude oil lost more than 4% and about $3/barrel and ended the week at $71.33
• The VIX, also known as Wall Street’s fear index, dropped about 10% on the week and now stands at 12.45, its yearly low

*Source: Bonds represented by the Bloomberg Barclays US Aggregate Bond TR USD. This chart is for illustrative purposes only and does not represent the performance of any specific security. Past performance cannot guarantee future results.

Stocks Advance for 9^th Week in a Row

Equity investors rejoiced again this week as Wall Street rose for the 9th consecutive week and built on its year-end rally, although the gains were muted relative to previous weeks. The 9th consecutive weekly gain for the S&P 500 Index is its longest since 2004 and it is less than 1% from its all-time high.

The week closed out a strong year for all the major indexes, led by NASDAQ, which recorded its sixth-biggest annual gain since the index was launched in 1971. As happens every year, trading volumes and market action was soft most of the week, with trading closed Monday and many investors out of the office.

From a macro perspective, there was a decent amount of data to report, but the manufacturing data in the mid-Atlantic region and Chicago region of the country was mostly sour.

Specifically, the index of Mid-Atlantic manufacturing activity fell sharply in December and indicated the fastest pace of contraction since February. Then two days later, a similar index of business activity in the Chicago region came in much lower than expected as it moved back into contraction territory.

Economic Data This Week

Besides manufacturing data, there was a lot more economic data this week, covering the labor market, our trade deficit, wholesale and retail inventories and various aspects of the housing market, including that:

• Initial jobless claims for the week ending December 23 increased by 12,000 to 218,000.
• Continuing jobless claims for the week ending December 16 increased by 14,000 to 1.875 million.
• The four-week moving average for initial claims decreased by 250 to 212,000.
• The four-week moving average for continuing claims decreased by 12,500 to 1,864,500.
• The total number of continued weeks claimed for benefits in all programs for the week ending December 9 was 1,863,707, an increase of 68,973 from the previous week. In the same week a year ago, there were 1,620,130 weekly claims filed for benefits in all programs.
• The international trade deficit was $90.3 billion in November, up $0.7 billion from $89.6 billion in October.
• Exports of goods for November were $165.1 billion, $6.2 billion less than October exports.
• Imports of goods for November were $255.4 billion, $5.5 billion less than October imports.
• Wholesale inventories for November were estimated at an end-of-month level of $895.7 billion, down 0.2% from October 2023, and were down 3.1% from November 2022.
• Retail inventories for November were estimated at an end-of-month level of $794.9 billion, down 0.1% from October 2023, and were up 5.1% from November 2022.
• The Institute for Supply Management reported that Chicago PMI declined from 55.8 in November to 46.9 in December. Numbers below 50 show contraction.

House Prices up 6.3% Over 12 Months

On Tuesday, the Federal Housing Finance Agency reported that U.S. house prices rose in October, up 0.3% from September. House prices rose 6.3% from October 2022 to October 2023. The previously reported 0.6% price increase in September was revised to a 0.7% increase.

For the nine census divisions, seasonally adjusted monthly price changes from September 2023 to October 2023 ranged from -0.3 percent in the New England division to +1.1 percent in the Middle Atlantic division. The 12-month changes ranged from +2.6 percent in the Mountain division to +9.9 percent in the Middle Atlantic division.

“U.S. house price gains remained strong over the last 12 months.” said Dr. Nataliya Polkovnichenko, Supervisory Economist in FHFA’s Division of Research and Statistics. “On a monthly basis, price appreciation moderated in October, with four divisions exhibiting slowdowns from the previous month.”

census.gov;richmondfed.org;fhfa.gov;msci.com;fidelity.com;nasdaq.com;wsj.com; morningstar.com;