“Trading is a psychological game. Most people think they are playing against the market, but the market doesn’t care. You’re really playing against yourself.” – Martin Schwartz

The U.S. stock market ended the week higher amid the signing of a ‘Phase 1’ trade deal between the U.S. and China and better than expected big bank earnings. Interest rates were, however, little changed as the 10-year treasury yield rose from 1.83% to 1.84%. The price of gold was also little changed as the safe-haven metal dropped 0.24% to $1,557 an ounce. The price of crude oil only fell 0.37% to $58.81 a barrel as trade optimism was offset by sluggish economic growth in China (the world’s largest oil importer).

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This Week's Economic Highlights

• The Consumer Price Index (CPI), a measure of retail inflation, rose 0.2% in December. Over the past year CPI has risen at a stable 2.3%. Core CPI, which excludes the volatile food and energy prices, rose a more moderate 0.1% in December. However, over the past year core CPI has also risen 2.3%.
• The Producer Price Index (PPI), a measure of wholesale inflation, increased by 0.1% in December and just 1.3% over the past year. Meanwhile, core PPI, rose a slightly higher but still relatively low 1.5% over the past year. The PPI inflation rate has been on a steady downfall since July of 2018 when it was nearly 3.5%.
• Initial unemployment claims dropped by 10,000 to a near 50-year low of 204,000 for the week ending January 11th. The more stable four-week average of initial claims, meanwhile, dropped by a lesser 7,750 to 216,250. Continuing unemployment claims, which lags initial claims by a week, decreased by 37,000 to 1.77 million.
• Retail sales ended the year of 2019 strong with a 0.3% rise in December. Over the past year, retail sales grew at a healthy 5.8%, with only two of the twelve months recognizing decreases.
• Housing starts (i.e. home building) surged 16.9% in December to a seasonally-adjusted annual rate of 1.61 million units, it highest in 13 years. Over the past year, housing starts rose a staggering 40.8%. Meanwhile, building permits (a forward-looking indicator of housing starts) fell by 3.9% to a seasonally-adjusted annual rate of 1.41 million. Much of the rise in the housing market has been attributed to falling mortgage-rates as they bridge the affordability gap.
• U.S. industrial production fell by 0.3% in December as the manufacturing sector continues to struggle from a decline in global trade. In the fourth quarter of 2019 industrial production fell 0.5% and over the past year has fallen 1.0%.