December 19th – Weekly Update

  • U.S. stock markets rose strongly for the week, propelled by a Friday surge as hope rose for passage of the tax overhaul. Japan and Europe bucked the trend, posting declines. Oil prices fell, continuing last week’s decline, while gold rose. The 10-year U.S. Treasury yield declined slightly to 2.35%.
  • Central bank policies made the news, though there were no surprises. The Federal Reserve raised rates by 25 bp for the third time in 2017, and left unchanged its projections for three rate hikes in 2018 and two in 2019. By contrast, the European Central Bank and Bank of England left their key rates and QE plans unchanged.
  • Core retail sales, which excludes food services, auto dealers, building materials stores and gasoline stations, rose 0.8% in November vs. October, and a jump of 5.8% over November 2016. The October reading was revised up 0.1% to 0.4%. The biggest winners were electronics and appliance stores, up 2.1% m/m and 6.4% y/y. Online retailers saw sales jump 2.5% m/m and 10.4% y/y.
  • The NFIB index of small business optimism increased to 107.5 in November from 103.8 in October. The release noted this is the second-highest reading in the index’s 44-year history, adding that such optimism has not been seen in 34 years.
  • November headline inflation (CPI) increased 0.4% vs. October, ahead of expectations for a 0.3% gain. Energy prices increased 3.9%, mainly from a rise in gasoline prices. The headline reading was overshadowed by the core CPI, which increased 0.1%, below expectations for a 0.2% gain. This pushed the year-over-year increase down to 1.7% from 1.8% in October.
  • November headline PPI increased 0.4% vs. October and 3.1% yoy, besting expectations. It was the biggest y/y increase in nearly six years. Eurozone flash manufacturing PMI hit a record high. Japan’s flash manufacturing PMI also beat expectations.
  • U.S. industrial production rose 0.2% in November from the prior month, slightly below economists’ forecast of 0.3%, and representing a 3.4% yoy increase. October’s gain was revised up to 1.2% from an initial estimate of 0.9%. China’s November industrial production and FAI growth were largely in line.

CPWM Weekly Market Monitor (2017.12.15)