The Week On Wall Street
A late-week, two-day rally left stocks higher, adding to November’s gains as the last month of trading for 2023 began. The Dow Jones Industrial Average was flat (+0.01%), while the Standard & Poor’s 500 gained 0.21%. The Nasdaq Composite index advanced 0.69% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, was up 0.37%.
Stocks Extend Gains
The relationship between the bond and stock markets–which pushed stocks higher in November (i.e., falling bond yields, rising stock prices)–disappeared last week, with stocks falling in the first three days of the week despite declining yields. Yields dropped following a weak job openings report, the ADP employment update, and a substantial productivity revision. On Thursday, investor enthusiasm returned with force on Artificial Intelligence (AI) related news. One AI chip manufacturer announced a new AI chip, followed by a mega-cap tech company unveiling an enhanced version of its AI model for business use. Stocks continued their climb on Friday despite rising yields, as investors viewed a stronger-than-expected employment report as increasing the potential for a soft landing.
Higher productivity may be the most effective and preferred way to reduce inflation. Last week’s revised third-quarter productivity report saw an upward revision of the annualized productivity growth from the initial report of 4.7% to 5.2%; this was welcome news on the inflation front and an encouraging development for future corporate profits. The 5.2% jump in productivity represented the fastest pace since the third quarter of 2020. The report also showed unit labor costs falling at a 1.2% annualized pace, reflecting a cooling of wage-growth inflationary pressures. Productivity has increased for two straight quarters, potentially allowing the Fed to ease its restrictive monetary policy.
This Week: Key Economic Data
Tuesday: Consumer Price Index (CPI).
Wednesday: Producer Price Index (PPI). FOMC Announcement.
Thursday: Retail Sales. Jobless Claims.
Friday: Industrial Production. Purchasing Managers’ Index (PMI) Composite Flash.
This Week: Notable Companies Reporting Earnings
Wednesday: Adobe, Inc. (ADBE)
Thursday: Costco Wholesale Corporation (COST)
Friday: Lennar Corporation (LEN)
The big news for the remainder of year is Tuesday inflation numbers and Wednesday the Federal Reserve discusses interest rates. Until then, stocks will probably tread water and get their direction for the remainder of the year. We’ll be watching both news events closely. Have a great week!