January 20, 2020

Weekly Market Commentary January 13th to January 17th 2020

After nearly two years of negotiations, phase one of the U.S. China trade deal was signed by President Trump and Chinese Vice Premier Liu He on Wednesday. The agreement included commitments from China to increase their level of U.S. imports by an additional $200 billion over the next two years and end their long-standing practice of forcing foreign companies to transfer technology to Chinese companies. U.S. negotiators have set the stage for phase two stating that current tariffs will remain and will be used in further negotiations.

December Retails Sales exceeded expectations with a late surge of holiday shopping, although negative revisions for the previous two months will weigh on the all-important personal consumption component of Q4 GDP.

The Consumer Price Index (CPI) was higher by 0.2% in December, a tick behind the prior month reading. The Core CPI (excluding food and energy) was higher by 0.1% in December and 2.3% over the past year. The rising costs of health care expenses, apparel, new motor vehicles and vehicle insurance were more than offset by the pullback in costs of used vehicles, airline tickets and household furnishings.

Housing Starts jumped by 16.9% in December to a seasonally adjusted rate of 1.608 million units, the highest level since 2006. Unseasonably mild weather may have factored in to some degree, but lower interest rates bringing new buyers to the table has also been a solid catalyst in the rebound of the housing sector.

The yield on the bellwether 10-Year U.S. Treasury traded in a range of 1.86-1.78% before closing the week back where it started at 1.82%. U.S. stocks continued to set new records throughout the week, led higher by technology companies. The start of Q4 earnings season had some stellar results reported by key financial institutions. The S&P 500 advanced 2% for the week to 3,329. The NASDAQ was higher by 2.3% to 9,388.

In a light week for economic releases, key reports next week include Leading Indicators and Existing Home Sales.