Global stocks were mixed for the week, with U.S. markets generally down. Still, the major indexes turned upward Friday, particularly the Nasdaq, on hopes the United States and China would sign a trade deal soon. The optimism was underscored when U.S. Trade Representative Robert Lighthizer announced the suspension of higher tariffs on Chinese goods. Also supportive were better than expected U.S. economic data. Conversely, news that China’s manufacturing PMI hit its lowest level in three years played into the global growth slowdown theme, rattling investors.
Oil prices rallied midweek on bullish U.S. inventory data but ended the week on a decline. Gold prices decreased as bond yields rose. Bond prices fell after an above-consensus 4Q18 GDP increase. The ten-year U.S. Treasury yield rose to about 2.76%. The one-to-five-year “belly” of the Treasury yield curve remained inverted, though its accuracy as a recession harbinger is being questioned. The U.S. dollar increased against a basket of major currencies.
The Conference Board’s index of U.S. consumer confidence rose from 121.7 in January to 131.4 in February, signaling a robust recovery of sentiment. The report also showed consumers’ inflation expectations continue to fall.
Home prices, as measured by the S&P CoreLogic Case-Shiller U.S. National Home Price index, rose at an annual rate of 4.7% in December 2018, their slowest pace since August 2015.
The Federal Reserve’s preferred inflation gauge, personal consumption expenditures (PCE), rose 1.75% YoY in December, for a seventh year below the Fed’s 2.0% target. By contrast, core PCE, which excludes food and energy, read 1.9%, which could signal broader inflation later on.
The Bureau of Economic Analysis reported that U.S. GDP grew at an annualized rate of 2.6% in 4Q18, slower than the pace of the two previous quarters. Still, the reading beat expectations of 2.2%, and full year 2018 growth fell just shy of 3%. The release noted contributions from personal consumption expenditures.
The Chicago Purchasing Managers’ index (PMI) rose 8 points to 64.7 in February, marking its largest monthly rise since February 2017. (Readings over 50 indicate improving conditions.) The new orders component rose 15.2 points.