As we move deeper into December, there’s a lot happening in the economy and financial markets. Let’s unpack the highlights so you know what’s worth keeping an eye on.
Inflation and Economic Reports: What Happened Last Week?
Consumer Price Index (CPI)
Year-over-year inflation ticked up slightly in November, landing exactly where economists expected at 2.7%. Monthly inflation also aligned with predictions, rising by 0.3%. No major surprises here, but it’s a reminder that inflation is still hanging around at moderate levels.
Producer Price Index (PPI)
Here’s where things got a little spicier. Producer inflation rose faster than expected, with year-over-year growth hitting 3%. This increase hints that businesses might be dealing with higher costs, which could eventually affect consumer prices.
Small Business Optimism
Good news for small businesses! The NFIB Small Business Optimism Index jumped 8 points to its highest level in years. This could signal brighter days ahead for entrepreneurs and local businesses.
The Markets: Tech Shines, but It’s a Mixed Bag
Equity Markets
The Nasdaq Composite led the charge last week, thanks to strong performances from tech giants like Tesla and Alphabet. Tesla’s Robotaxi news and Alphabet’s advancements in quantum computing got a lot of buzz. Conversely, Nvidia and Meta had a tougher time, dragging on the S&P 500.
Fixed Income
Bond markets also made waves. The Treasury yield curve steepened, with long-term yields climbing after higher-than-expected producer inflation numbers. This is worth keeping an eye on because rising long-term rates could make borrowing more expensive for businesses and consumers down the road.
What to Watch This Week
The Federal Reserve’s December meeting is happening today (Wednesday), and it’s a big deal. Many are expecting the Fed to announce another interest rate cut. Rate changes can impact everything from mortgage rates to credit card APRs, so stay tuned.
Looking Ahead
In the final full week before the holiday break, the focus will be on inflation. We expect data on retail sales, housing, and personal income and spending. The highlight will be Wednesday’s FOMC decision.
- Tuesday, December 17, kicked off with retail sales for November. Headline and core retail sales are set to grow.
- On Wednesday, December 18, the FOMC will make its interest rate decision for December. The Fed is expected to lower the range of the federal funds rate 25 bps after its meeting.
- On Thursday, December 19, existing home sales for November will be released; the pace is expected to rise for the second consecutive month.
- Finally, on Friday, December 20, personal income and spending for November will be released. Both are expected to continue growing.
Final Thoughts
While last week’s inflation numbers were mostly predictable, the slight rise in producer costs and the buzz around small business optimism give us much to think about. As always, the key is to stay informed and proactive when it comes to your financial planning.
Disclosures: This material is intended for informational/educational purposes only and should not be construed as investment advice, a solicitation, or a recommendation to buy or sell any security or investment product. Please contact your financial professional for more information specific to your situation.
Certain sections of this commentary contain forward-looking statements that are based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. All indices are unmanaged and are not available for direct investment by the public. Past performance is not indicative of future results. The S&P 500 is based on the average performance of the 500 industrial stocks monitored by Standard & Poor’s. The Nasdaq Composite Index measures the performance of all issues listed in the Nasdaq Stock Market, except for rights, warrants, units, and convertible debentures. The Dow Jones Industrial Average is computed by summing the prices of the stocks of 30 large companies and then dividing that total by an adjusted value, one which has been adjusted over the years to account for the effects of stock splits on the prices of the 30 companies. Dividends are reinvested to reflect the actual performance of the underlying securities. The MSCI EAFE Index is a float-adjusted market capitalization index designed to measure developed market equity performance, excluding the U.S. and Canada. The MSCI Emerging Markets Index is a market capitalization-weighted index composed of companies representative of the market structure of 26 emerging market countries in Europe, Latin America, and the Pacific Basin. The Russell 2000® Index measures the performance of the 2,000 smallest companies in the Russell 3000® Index. The Bloomberg US Aggregate Bond Index is an unmanaged market value-weighted performance benchmark for investment-grade fixed-rate debt issues, including government, corporate, asset-backed, and mortgage-backed securities with maturities of at least one year. The U.S. Treasury Index is based on the auctions of U.S. Treasury bills, or on the U.S. Treasury’s daily yield curve. The Bloomberg US Mortgage Backed Securities (MBS) Index is an unmanaged market value-weighted index of 15- and 30-year fixed-rate securities backed by mortgage pools of the Government National Mortgage Association (GNMA), Federal National Mortgage Association (Fannie Mae), and the Federal Home Loan Mortgage Corporation (FHLMC), and balloon mortgages with fixed-rate coupons. The Bloomberg US Municipal Index includes investment-grade, tax-exempt, and fixed-rate bonds with long-term maturities (greater than 2 years) selected from issues larger than $50 million. One basis point is equal to 1/100th of 1 percent, or 0.01 percent. One basis point (bp) is equal to 1/100th of 1 percent, or 0.01 percent.
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