Weekly Update - December 14, 2018
- U.S. stocks began the week looking like they would rally, but economic disappointments from China and the Eurozone caused a retreat. The Dow Jones Industrial Average closed at about 24,100, marking the first time since March 2016 that the Dow, Nasdaq and S&P 500 simultaneously were in correction territory — i.e., a fall of at least 10% from a recent high. Asian and European bourses generally showed slight gains for the week.
- Friday saw a sharp drop in the major U.S. stock indexes. This seems to be a developing pattern as wary investors try to avoid large exposures over the weekend, when markets are closed but vulnerable to unpredictable geopolitical news. Technology companies most closely linked to the Chinese and global economy were among the hardest hit.
- U.S. Treasury yields were relatively stable for the week: the widely watched ten-year yield rose from 2.86% to 2.89%s. At the same time, the U.S. dollar continued its ascent, driving oil prices down. Gold prices also declined in response to the rising dollar and higher yields.
- American consumers gave the holiday shopping season a strong start in November. U.S. retail sales rose 0.2% from October, better than expected. Department store sales rose 0.4%, while electronics and appliance-store sales rose 1.4%. Sales at nonstore retailers such as Amazon.com increased 2.3%.
- Chinese retail sales and industrial production disappointed in November. Industrial production was up 5.4% yearover-year and retail sales increased 8.1% YoY, but the figures pointed to a continuing slowdown in China’s economy.
- U.S. industrial production rose 0.6% in November, driven by a 3.3% rise in utility output due to cool November weather. Output at U.S. factories, which accounts for about two-thirds of U.S. industrial production, was flat.
- U.S. inflation, as measured by the Consumer Price Index (CPI), was flat for November, falling from a 0.3% rise in October. Prices were up 2.2% YoY vs. 2.5% in October. Especially impactful was a 4.2% decline in gasoline prices. Core CPI, ex-food and energy, was up 0.2% on the month, in line with October, and up 2.2% YoY.