December 4th – Weekly Update

  • It was another record-breaking week for U.S. stocks, as the Dow Jones Industrial Average topped 24,000. Investors overlooked North Korea’s latest missile launch and Friday’s turbulence, taking encouragement from Congress’ progress toward a tax cut bill. Japan gained whereas European bourses gave ground. Oil prices were flat; gold’s luster was slightly off. The U.S. 10-year note yield finished at 2.36%, virtually unchanged from last week.
  • Markets dropped precipitously Friday morning on news that former national security advisor Michael Flynn had pleaded guilty to lying to the FBI about his contacts with Russian diplomats, and would testify against President Trump. The Dow swung about 400 points, its most turbulent session of the year, but recovered most of the loss by end of day.
  • Third-quarter corporate profits increased 5.4% year-over-year, after a 6.4% in Q2. The Conference Board’s consumer confidence index rose to 129.5 in November from 126.2 in October, marking the fifth straight monthly increase and a new cycle high.
  • Q3 GDP growth was revised up to 3.3% annualized from 3.0%, the fastest pace in three years. The Richmond Fed manufacturing index rose to a record-high of 30 in November from 12 in the prior month. Core PCE inflation, the Federal Reserve’s preferred inflation gauge, increased 1.4%, up from 0.9% in Q2 and 1.3% in the advance estimate but in line with consensus expectations.
  • New home sales increased 6.2% to 685,000 in October, the third straight monthly increase and a new cycle high. Also, pending home sales increased 3.5% in October vs. September, ahead of consensus for a 1.1% gain.
  • The Case-Shiller 20-city composite home price index was up 0.5% in September, in line with August and up 6.2% yoy. The FHFA house price index increased 0.3% in September following a 0.7% gain in August.
  • Retail produced some upbeat headlines for the start of the holiday shopping season. According to Adobe Analytics, online sales on Thanksgiving Day and Black Friday rose 17.9% to ~$7.9 billion. Online sales on Black Friday alone increased nearly 16% to a record $5 billion. Cyber Monday sales are estimated up 16.5% to a record $6.6 billion.

CPWM Weekly Market Monitor (2017.12.04)