Last Week:

  • U.S. equities finished mixed for the week: On the week, the Dow Jones Industrial Average (Dow) gained 31 points, or rose 12bps, to 24,737. The Standard & Poor’s (S&P500) index decreased 6 points, or fell 22bps to 2,665. The Nasdaq closed 11bps higher at 7,165 while the 10-year Treasury ended the week at 2.77%.
  • Global Economy: Last week, we saw a slew of economic data showing mixed economic trends across the globe. In the United States, we continue to see signs of a solid labor market, which bodes well for the overall economy. Initial jobless claims fell below 200,000 last week, the lowest level since 1969, with the four-week average continuing to decline. This aligns with the unemployment rate at a 50-year low and, considering jobless claims have historically been a good predictor of trouble in the economy, this continues to be positive. However, U.S. housing data points released last week were not particularly encouraging, although very much in line with expectations. Existing home sales for the month of December were weak, down 6.4%, as housing suffered from high home prices and a dearth of starter homes. However, we saw mortgage applications for purchases move slightly higher, as mortgage rates eased a bit, as well as the National Association of Homebuilders (NAHB) housing market index tick up slightly – both positives.
  • However, economic data from China and Europe have continued to soften. GDP growth for the world’s second largest economy (China) came in at 6.6% for 2018, which although in line with expectations is the slowest growth rate since 1990. On the brighter side, although industrial production and retails sales remained weak, they exceeded forecasts. In Europe, we saw soft flash PMIs last week, with the European Central Bank’s Mario Draghi commenting that risks “have moved to the downside.” We also saw Germany cut their GDP growth outlook according to media reports, another potential sign of weakness for the region.
Source: Strategas Research Partners, IHS Markit, Nikkei/IHS Markit

Look Ahead:

  • Fourth quarter earnings season will continue this week, with expected earnings releases from Verizon, Apple, Microsoft, DowDuPont, Baxter, UPS, Altria, MasterCard, Eaton, Honeywell, Exxon Mobil, Chevron, and Johnson Controls, among others.
  • The economic calendar will focus on the Federal Open Market Committee Policy Decision (FOMC) on Wednesday, with Case Shiller data and Consumer Confidence data out Tuesday, and Jobs report out Friday. Outside the United States, we will see Euro Zone Confidence numbers reported on Wednesday and GDP numbers on Thursday, as well as China Industrial profits on Sunday night.