What We Are Watching This Week
- US Retail Sales
- Federal Reserve Interest Rate Announcement
- Personal Consumption Index (PCE)
Highlights From Last Week
- US Consumer Price Index
- US Producer Price Index
- US Productivity
Most major stock indexes ended the week lower, except for the Nasdaq Composite, which posted modest gains and surpassed the 20,000 mark for the first time. Large-cap stocks outperformed their smaller-cap counterparts, as evidenced by the Russell 2000 Index lagging the S&P 500 Index for the second consecutive week. As measured by the Russell 1000 indexes, growth stocks outperformed value stocks for the third week, driven in part by significant gains in Tesla (+12.08%) and Alphabet, Google’s parent company (+8.44%). Alphabet recorded its largest two-day gain since 2015 on Tuesday and Wednesday. Monday marked the worst performance for the momentum factor—investing in stocks with strong recent performance and avoiding those with weak performance—in over a year. However, this trend stabilized by the week’s end. Sector-wise, performance was predominantly negative, with only communication services and consumer discretionary sectors achieving gains.
Canada’s main stock index extended its losses on Friday, weighed down by declines in mining and energy shares, as investors contended with global economic uncertainty and tariff concerns, which dampened market sentiment. The TSX fell 146.78 points to close at 25,263.93, marking a weekly loss of 417 points, or 1.62%. The Canadian dollar slipped by 0.09 cents to 70.24 cents U.S. The Canadian dollar faced significant pressure yesterday, alongside several other currencies. Resilient U.S. weekly jobless claims gave traders another reason to believe the Federal Reserve might ease interest rates less aggressively than anticipated. A series of U.S. economic reports suggest a slowing but remarkably resilient economy, supported by stock market gains and the prospect of personal and corporate tax cuts. In contrast, Canada’s economic outlook appears far weaker. Growth is barely positive, unemployment is surging, and much of the job creation seems driven by government hiring. The Bank of Canada cut its benchmark interest rate by 50 basis points this week, marking its second consecutive 50-point reduction. Meanwhile, federal policies continue to strain the domestic energy sector. Environment Minister Steven Guilbeault announced a new emissions reduction target yesterday, aiming to cut emissions by 45-50% from 2005 levels, adding further pressure on the industry. In economic updates, motor vehicle sales in October totaled 163,600, down from 166,600 in August. Manufacturing sales rose 2.1% in October, driven primarily by higher petroleum and coal products and transportation equipment sales. However, the paper subsector recorded the largest decline. Wholesale sales increased by 1.0% to $83.7 billion in October.
The pan-European STOXX Europe 600 Index declined 0.77% in local currency terms, as investors weighed whether the European Central Bank (ECB) is easing monetary policy quickly enough to support the struggling economy. Major stock indexes delivered mixed results: Germany’s DAX edged up 0.10%, and Italy’s FTSE MIB gained 0.40%, while France’s CAC 40 fell 0.23%, and the UK’s FTSE 100 dipped 0.10%. The ECB reduced its key deposit rate by 0.25 percentage points to 3.0%, marking its fourth rate cut this year. The central bank signaled the potential for further monetary easing by removing language about maintaining rates “sufficiently restrictive for as long as necessary” from its policy statement. However, it maintained a cautious approach, emphasizing that decisions will continue to be made on a meeting-by-meeting basis. The ECB lowered its growth and inflation forecasts, reflecting a more subdued economic outlook.
On Tuesday, in another sign of a post-election change in sentiment, the NFIB Small Business Optimism Index climbed eight points in November, reaching 101.7—its highest level since June 2021—after spending 34 months below the 50-year average of 98. Among the index’s ten components, nine showed improvement, none declined, and one remained unchanged. Meanwhile, the Uncertainty Index dropped by 12 points to 98, following October’s record high of 110. “The election results mark a significant shift in economic policy, driving a surge in optimism among small business owners,” said NFIB Chief Economist Bill Dunkelberg. “Main Street is now more confident about future business conditions, ending nearly three years of record-high uncertainty. Business owners are particularly optimistic about policies supporting strong economic growth, including tax and regulatory reforms and potential relief from inflationary pressures. Many are eager to expand their operations in this improved climate.” 1
According to the U.S. Bureau of Labor Statistics, labor productivity in the nonfarm business sector rose by 2.2% in the third quarter of 2024, with no changes from the preliminary estimate. Output increased by 3.5%, and hours worked rose by 1.2%, both remaining unchanged from earlier reports. (All quarterly percentage changes are seasonally adjusted annualized rates.) Compared to the same quarter in 2023, labor productivity grew by 2.0%, as previously reported. Unit labor costs in the nonfarm business sector were revised downward by 1.1 percentage points to a 0.8% increase in the third quarter of 2024. This adjustment reflects a corresponding downward revision in hourly compensation, showing a 3.1% increase. Over the past year, unit labor costs have risen by 2.2%.2
The Consumer Price Index for All Urban Consumers (CPI-U) rose by 0.3% in November on a seasonally adjusted basis, following four consecutive months of 0.2% increases, the U.S. Bureau of Labor Statistics reported on Wednesday. Over the past 12 months, the all-items index increased by 2.7% before seasonal adjustment. The shelter index increased by 0.3% in November, contributing nearly 40% of the overall monthly rise in the all-items index. The food index also saw an increase of 0.4%, driven by a 0.5% rise in the food-at-home index and a 0.3% rise in the food-away-from-home index. The energy index increased by 0.2% in November, following no change in October. Excluding food and energy, the index for all items rose by 0.3% in November, maintaining the same pace as in the previous three months. Categories with increases included shelter, used cars and trucks, household furnishings and operations, medical care, new vehicles, and recreation. The communication index was among the few major categories that declined during the month. Year-over-year, the all-items index rose by 2.7% in November, slightly up from the 2.6% increase recorded in October. The index for all items, excluding food and energy, increased by 3.3% over the past year. Meanwhile, the energy index declined by 3.2%, and the food index rose by 2.4% during the same period.3
For the week ending December 7, seasonally adjusted initial jobless claims increased to 242,000, up by 17,000 from the previous week’s revised level. The prior week’s figure was revised upward by 1,000, from 224,000 to 225,000. The four-week moving average rose to 224,250, an increase of 5,750 from the previous week’s revised average, which was adjusted up by 250, from 218,250 to 218,500. For the week ending November 23, the total number of continued weeks claimed for unemployment benefits across all programs was 1,688,220, reflecting a decrease of 63,269 from the previous week. By comparison, 1,870,962 claims were filed in the same week in 2023.4
On Thursday, according to the U.S. Bureau of Labor Statistics, the Producer Price Index (PPI) for final demand increased by 0.4% in November on a seasonally adjusted basis. This follows increases of 0.3% in October and 0.2% in September. On an unadjusted basis, the final demand index rose 3.0% over the 12 months ending in November, marking the largest annual gain since a 4.7% increase for the 12 months ending February 2023. In November, nearly 60% of the overall rise in final demand prices was driven by a 0.7% increase in the index for final demand goods, while prices for final demand services rose by 0.2%. Excluding foods, energy, and trade services, the final demand index increased by 0.1% in November, following a 0.3% increase in October. Over the past year, prices for final demand, such as less food, energy, and trade services, increased by 3.5%.5
| WK | Year to Date | |
| Dow | -1.82% | 16.23% |
| S&P500 | -0.64% | 26.86% |
| Nasdaq | 0.34% | 32.74% |
| S&P400 Mid-cap | -1.63% | 17.82% |
| Russell | -2.58% | 15.78% |
| TSX | -1.60% | 20.60% |
| Oil | 5.90% | -0.70% |
- https://www.nfib.com/news-article/new-nfib-survey-small-business-optimism-jumps-above-50-year-average-in-november/
- https://www.bls.gov/news.release/prod2.nr0.htm
- https://www.bls.gov/news.release/pdf/cpi.pdf
- https://www.dol.gov/ui/data.pdf
- https://www.bls.gov/news.release/ppi.nr0.htm
Important Information:
Warren Gerow is an independent investment wealth consultant to Sightline Wealth Management.
Sightline Wealth Management LP (“Sightline”) is an investment dealer and is a member of the Canadian Industry Regulation Organization (CIRO) and the Canadian Investor Protection Fund (CIPF).
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