US equity markets inked an 8th consecutive week of gains as investors continued to foster the soft landing narrative. Trading volumes lightened as the week progressed and corporate news was relatively quiet. A takeover bid for US Steel from Nippon Steel catalyzed markets on Monday, and better-than-expected earnings from Micron Technologies extended gains in the semiconductor sector later in the week. The economic calendar was full and featured the release of the PCE, the Fed’s preferred measure of inflation. Geopolitical tensions increased as the Israel/Gaza conflict induced cargo ship companies to reroute their ships from the Red Sea as the Iranian-backed Houthis continued to attack tankers in the region.
The S&P 500 gained 0.8%, the Dow rose 0.2%, the NASDAQ increased by 1.2%, and the Russell 2000 led gains with a 2.5% advance. US Treasuries on the front end of the curve were bid higher while longer tenures sold off slightly. The 2-year yield fell ten basis points to 4.33%, while the 10-year yield decreased by two basis points to 3.90%. Oil prices increased by 3.2% or $2.35 to close at $73.75 a barrel. Gold prices increased by $34.90 to $2069.80 an Oz. Copper prices rose by $0.02 to $3.90 per Lb. Bitcoin continued to hold on to its recent gains, closing at $43,480.
The PCE index came in at 0.1%, the first decline in PCE since 2020. The headline figure decreased to 2.6% on a year-over-year basis in November from 2.9% in October. The Core PCE came in at 0.1% versus the consensus estimate of 0.2%. The Core reading declined year-over-year to 3.2% from 3.4% in October. Personal Income came in at 0.4%, less than the 0.5% estimate. Personal Spending was up 0.2% but fell shy of the consensus estimate of 0.4%. Sentiment indicators were better than expected. Consumer Confidence rose to 106 from 104, while the University of Michigan’s Consumer Sentiment index increased to 69.7 in December from 61.3 in November. Most of the gains in sentiment came from a decline in inflation expectations. Initial Jobless claims increased by 2k to 205k as Continued Claims fell by 11k to 1865K. Housing Data reported during the week was mixed. Existing Home Sales came in line with estimates, New Home Sales came in less than expected, Housing Starts topped estimates, and Building Permits came in a bit light.
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