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Weekly Market Commentary – 12/22/2023

-Darren Leavitt, CFA

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.

Investment advisory services offered through Foundations Investment Advisors, LLC (“FIA”), an SEC registered investment adviser. FIA’s Darren Leavitt authors this commentary which may include information and statistical data obtained from and/or prepared by third party sources that FIA deems reliable but in no way does FIA guarantee the accuracy or completeness.  All such third party information and statistical data contained herein is subject to change without notice.  Nothing herein constitutes legal, tax or investment advice or any recommendation that any security, portfolio of securities, or investment strategy is suitable for any specific person.  Personal investment advice can only be rendered after the engagement of FIA for services, execution of required documentation, including receipt of required disclosures.  All investments involve risk and past performance is no guarantee of future results. For registration information on FIA, please go to https://adviserinfo.sec.gov/ and search by our firm name or by our CRD #175083. Advisory services are only offered to clients or prospective clients where FIA and its representatives are properly licensed or exempted.