Stocks closed modestly higher last week as traders and investors took off for the holidays or closed their books for the year.
In the U.S. the major averages were all up about 0.5% for the week, with the Dow extending its winning streak to seven straight weeks. Heading into the final trading week of the year, the Dow leads among the three big-cap indexes with a 14.4% price gain, while the S&P 500 is up nearly 11% and NASDAQ up more than 9%. But all three trail small caps by a wide margin, as the Russell 2000 is up more than 20% this year. Overseas, stock price moves were also modest. The Stoxx Europe 600 was unchanged while the Nikkei 225 registered its seventh straight weekly gain, if modestly, rising 0.1%.
Bond prices had their first winning week since Donald Trump’s election. Yields on U.S. Treasury bonds and major European sovereign bonds fell about five basis points. The benchmark 10-year T-note ended the week at 2.54%; before the November 8 election, the note yielded 1.86%.
The latest revision of third quarter GDP came in better than expected, but more recent economic data wasn’t nearly as strong. The second and final revision of third quarter GDP growth rose to 3.5% from the previous estimate of 3.2% and up sharply from Q2’s 1.4% growth, making it the strongest quarterly rate in two years. But growth in corporate profits was revised downward to 4.3% from 5.2%. Moving into the fourth quarter, the Chicago Fed’s national activity index fell deeper into negative territory in November, falling to -0.27. Durable goods orders dropped a lower than expected 4.6% last month after rising by 4.8% the prior month. As usual, the headline figure was skewed downward by civilian aircraft orders, which dropped 74%; excluding transportation, overall orders rose 0.5%, and core capital goods orders were up 0.9%. Leading indicators were unchanged.
Consumer data was a little stronger, although consumer spending and personal income for November both disappointed. Spending rose 0.2%, down from October’s 0.4% rise, while incomes were unchanged after rising 0.5% in October. In the housing sector, though, the numbers were much better. Sales of existing homes rose for the third straight month, climbing 0.7% in November to an annual rate of 5.61 million, the strongest monthly reading since February 2007, while sales of newly-built homes rose 5.2% to an annualized pace of 592,000. The University of Michigan’s consumer sentiment index ended the year at 98.2, little changed from its mid-month reading but up nearly five points from a month earlier, reaching its highest level since January 2004.
Reports/dates/facts/links worth paying attention to over the next week:
1. December 26: Markets closed in observance of Christmas Day.
2. December 27: Conference Board consumer confidence index for December; S&P Corelogic Case-Shiller home price indexes for October.
3. December 28: Pending home sales for November.
4. December 29: Weekly unemployment claims.