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Strong Week for U.S. Stocks

Weekly Update – December 13, 2019

  • U.S. stocks ended the week strong as two major uncertainties neared resolution. Investors cheered the announcement of a trade deal struck between the U.S. and China and greater clarity on Brexit following the U.K’s Boris Johnson’s electoral victory. For the week, the Nasdaq rose 0.9% for a record close of 8,735 and the S&P 500 gained 0.7% to close at 3169, also a record. The Dow gained 0.4% close at 28135. Elsewhere, Treasuries rallied, pushing the 10-year yield down 7bps to 1.82%.
  • The U.S. said it reached a “historic and enforceable” phase-one trade deal with China revolving around structural reforms and other changes to China’s economic and trade regime regarding intellectual property, technology transfer, agriculture, financial services and currency and foreign exchange.
  • The NY Fed announced additional repo market operations, potentially to the tune of more than $500 billion. The move follows renewed scrutiny on repo earlier in the week. In addition, widely followed Credit Suisse analyst Zoltan Pozsar warned that Fed efforts to calm funding markets may not be enough, potentially leading to a spike in Treasury yields and forcing the central bank to launch QE4.
  • December’s FOMC meeting held rates steady, as expected. Few changes to policy statement, though prior mention of “uncertainties” about the outlook were absent and the committee will monitor muted inflation pressures.
  • The U.S. House of Representatives announced an agreement on USMCA, paving the way for a vote on the deal, likely this week. The compromise includes increased enforcement on labor protections and environmental provisions.
  • November headline CPI of 0.3% month-over-month beat consensus of 0.2% and the 2.1% year-over-year was higher than October’s 1.8%. Core CPI of 0.2% month-over-month was on the slightly stronger side of consensus.
  • Weekly initial jobless claims at 252,000 were above consensus of 212,000 and up sharply from 203,000 the prior week. The new level is the highest since Sep 2017. Continuing claims were lower at 1,667,000 vs consensus 1,685,000.
  • Elsewhere, November PPI was unchanged at 0.0% from October, versus consensus 0.2% rise and October’s 0.4% gain.

CPWM Weekly Market Monitor (2019.12.13)

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