The Market Week In Review - Monday, Dec. 23

The U.S. stock market ended the week solidly higher following a strong consumer spending report and trade optimism. Interest rates also ended the week higher as the 10-year treasury yield rose from 1.82% to 1.92% amid upbeat economic data. Meanwhile, the spread between the 10-year treasury yield and the 2-year treasury yield continues to widen and currently sits at 0.29%. The price of gold was little changed over the week, rising only 0.14% to $1,482 an ounce. The price of crude oil rose 0.97% to $60.36 a barrel as stockpiles of the oversupplied commodity shrink.

This Week's Economic Highlights

• The construction of new homes (“housing starts”) grew at a seasonally-adjust annualized rate of 1.37 million in November, which is 3.2% higher than the month prior. Housing permits, a leading indicator of housing starts, rose by 1.4% in November to a seasonally-adjust annualized rate of 1.48 million. Over the past year, housing starts rose by 13.6% and housing permits rose by 11.1%.

• Industrial production jumped by 1.1% in November after falling by 0.9% in October. This rebound is largely attributed to the end of the United Auto Workers strike against General Motors in October. That said, when excluding automobiles, industrial production only rose by 0.5%.  Despite the much-needed rise, industrial production is still down 0.8% over the past year.

• After jumping by a large 49,000 last week, initial unemployment claims came back down this week, however, by a lesser 18,000 to 234,000. Meanwhile, the more stable four-average of initial claims rose by a slight 1,500 to 225,000.

• S. existing home sales fell by 1.7% in November to a seasonally-adjusted annualized rate of 5.35 million as open buyers struggle to find affordable properties with a limited amount of inventory. That said, the median sales price of existing homes has risen 5.4% over the past year to $271,300 while inventory sits at a 3.7-month supply (a 6-month supply is indicative a balanced market).

• Consumer spending increased by 0.4% in November, its fastest rate in four months. Meanwhile, the Personal Consumption Expenditures (PCE) index, the Fed’s preferred inflation barometer, rose by 0.2%. Over the past year, PCE has risen at a rate of 1.5%, which is well below the Fed’s 2.0% target.

Quote

“So as far as markets are concerned, impeachment is a sideshow — adding a little extra theater to an already drama-prone presidency.”