by Gavyn Jensen-Schneider, Research Associate

Indices have trended upward this week on a burst of holiday positivity. The S&P 500 finished the week up +1.4%, while the Nasdaq grew 1.2%. The 10-Year Treasury yield, an interest rate indicator, closed at 4.14%, down -1 basis points (bps) from last week. The 6-Month US Treasury, a favorite of our US Treasury strategy, went down -2 bps to 3.58%.

The “Santa Rally” has been in full swing this week, pushing the S&P 500 to fresh record highs. The Santa Rally refers to the consistent market outperformance during the last five trading days in December, and the first two trading days of January. In the last 75 years, the stock market has averaged gains of around +1.3% during these seven trading days. Thus far, the market is looking to follow this historical trend.

The market rally does come on the back of some mildly positive, albeit delayed, economic data. Third quarter GDP—covering July, August and September—accelerated to 4.3%, well above analyst expectations of 3.0% for the quarter. Core Personal Consumption Expenditure (PCE) inflation for the third quarter also showed some acceleration, moving from 2.6% year-over-year in Q2 to 2.9% in Q3, though this was in line with analyst expectations. With these measures coming nearly three months after Q3 ended, their relevance to the current state of the macroeconomy is limited, but they do suggest the economy was chugging along through the later part of the summer.

The New Year’s Holiday creates another odd trading week, with markets—and our office—closed Thursday in observance of the federal holiday. Economic data releases are minimal, with Wednesday’s weekly unemployment claims highlighting the quiet release schedule.

by Gavyn Jensen-Schneider, Research Associate

The sideways march of market indices continued this week as investors await a directional catalyst. The S&P 500 finished the week up +0.10%, while the Nasdaq grew +0.48%. The 10-Year Treasury yield, an interest rate indicator, closed at 4.15%, down -4 basis points (bps) from last week. The 6-Month US Treasury, a favorite of our US Treasury strategy, rose +2 bps to 3.60%.

Markets zeroed in on two major data releases this week: Tuesday’s monthly jobs report, and Thursday’s Consumer Price Index (CPI) inflation report. The US economy added 64k jobs in November, a sizable improvement from the -105k loss in October and exceeding Wall Street’s expectation of 40k. Even with this move in the positive direction, the softening of the labor market, which has been progressing since late summer, continued on trend. The unemployment rate ticked up 0.2 percentage points from the prior reading, reaching 4.6% in November. Little market reaction came on the heels of this new data, as equities continued to trend sideways as the week progressed.

The November CPI report caused more of a stir given the utter lack of inflation data due to the recent government shutdown. Core CPI inflation of 2.6% year-over-year surprised analysts, who were estimating inflation of 3.1%. The positive release is not without its controversies; economists are skeptical of the validity of the data due to the condensed timeline it was collected under. Typically, the Bureau of Labor Statistics (BLS) collects a basket of goods prices across the entire month, which allows statisticians to create an aggregate measure of prices which more accurately reflects the entire month. This weeds out one-off discounts that could otherwise skew a month’s pricing data. Due to the government shutdown, the BLS only collected data from Nov. 14^th through the end of the month. As holiday shopping deals begin popping up around that time, there’s a strong chance that the price data—and thus CPI—captures temporary holiday price declines rather than a real decrease in the inflation rate.

Heading into the last leg of the holiday season, data releases, earnings reports, and investor conferences are quite sparse. Third quarter GDP and the Personal Consumption Expenditure (PCE) inflation index will be released on Dec. 23^rd, capitalizing on an otherwise quaint week. The New York Stock Exchange—as well as our office—will close early on Dec. 24^th and be closed on Dec. 25^th in recognition of the Christmas Holiday.

We wish you and your family a warm and happy holidays!