What We Are Watching This Week
- Consumer Confidence
- Durable Goods
- New Home Sales
Highlights From Last Week
- US Retail Sales
- Federal Reserve Interest Rate Announcement
- Personal Consumption Index (PCE)
US stocks declined over the week, though a Friday rally helped offset some losses. Smaller-cap indexes performed worst, and the S&P 500 Index saw its 14th consecutive session with more decliners than gainers, the longest streak since 1978, raising concerns about the sustainability of the market’s recent gains. The Federal Reserve’s rate announcement dominated market sentiment. As expected, the Fed cut its policy rate by 25 basis points, marking a total reduction of 100 basis points since September. However, market sentiment turned negative after Fed Chair Jerome Powell’s comments on Wednesday. Powell noted that core inflation forecasts for 2025 had risen to 2.5% from 2.2%, and policymakers signaled caution about further cuts, reducing expected rate cuts in 2025 from four to two. The hawkish tone led to a nearly 3% drop in the S&P 500, its second-worst day of the year.
After a challenging week, Toronto’s markets rebounded on Friday, recovering some of the substantial losses experienced earlier. The TSX rose 185.54 points to close at 24,549.48, though it ended the week down 724 points, a decline of 2.7%. The Canadian dollar edged up by 0.17 cents to 69.60 cents US. On the economic front, Statistics Canada reported a 0.6% increase in retail trade for October, totaling $67.6 billion. Gains were recorded in five of nine subsectors, led by motor vehicle and parts dealers.
The pan-European STOXX Europe 600 Index fell 2.76% for the week, marking its largest loss in over three months. Concerns about US President-elect Donald Trump’s warnings on potential trade tariffs with the European Union and uncertainty over interest rates weighed on sentiment. Major European indexes declined, with Germany’s DAX down 2.55%, Italy’s FTSE MIB falling 3.22%, France’s CAC 40 dropping 1.82%, and the UK’s FTSE 100 sliding 2.60%.
The Bank of England (BoE) kept its key interest rate steady at 4.75%, though three members of the Monetary Policy Committee voted for a 0.25% cut, citing weak demand and a softer labor market. Despite this, rising wages and prices raised concerns about persistent inflation. Headline annual inflation rose to 2.6% in November from 2.3% in October, driven by higher gasoline and clothing costs, while wage growth outpaced expectations, with average earnings excluding bonuses increasing 5.2%.
According to the Empire State Manufacturing Survey, business activity in New York State remained steady in December. The general business conditions index dropped sharply to 0.2, following a significant increase in November. New orders and shipments grew modestly, while delivery times shortened, and supply availability remained stable. Inventories saw a notable increase. Labor market indicators showed a slight decline in employment and a reduction in the average workweek. Price pressures eased, with both input and selling price increases moderating. Firms expressed optimism about the six-month outlook, although less so compared to November. The future business activity index fell to 24.6, with 42% of firms expecting improvements. Inventories are anticipated to continue growing, and capital spending plans remained modest. Overall, while growth slowed, expectations for gradual improvement persist.1
In November, US retail and food services sales reached $724.6 billion, a 0.7% increase from October and a 3.8% rise compared to November 2023. Sales for the September-November period were up 2.9% year-over-year. Retail trade sales rose 0.9% from October and 4.1% from the previous year. Notable year-over-year gains included motor vehicle and parts dealers (+6.5%) and nonstore retailers (+9.8%). Adjustments to previous estimates showed a slight upward revision for October sales growth to 0.5%.2
Industrial production (IP) decreased by 0.1% in November, following a 0.4% decline in October. Manufacturing output rose by 0.2%, driven by a significant 3.5% increase in motor vehicles and parts production. However, the mining and utilities sectors saw declines of 0.9% and 1.3%, respectively. Overall, total IP stood at 102.0% of its 2017 average, 0.9% lower than last year. Capacity utilization fell to 76.8% in November, 2.9 percentage points below its long-term average (1972–2023).3
On Wednesday, the US Census Bureau reported that in November, building permits for privately-owned housing units rose to a seasonally adjusted annual rate of 1,505,000, a 6.1% increase from October but 0.2% lower than November 2023. Single-family permits were nearly flat at 972,000, while permits for buildings with five or more units reached 481,000. Housing starts declined by 1.8% from October to a rate of 1,289,000, 14.6% lower than November 2023. However, single-family housing starts rose by 6.4% to 1,011,000, while starts for buildings with five or more units dropped to 264,000. Housing completions decreased by 1.9% from October to a rate of 1,601,000 but were 9.2% higher than in November 2023. Single-family completions increased by 3.3% to 1,038,000, while completions for buildings with five or more units were at 544,000.4
For the week ending December 14, seasonally adjusted initial unemployment claims were 220,000, down 22,000 from the previous week’s level of 242,000. The 4-week moving average rose slightly to 225,500, an increase of 1,250 from the prior week’s average of 224,250. Continuing claims across all programs for the week ending November 30 totaled 1,960,295, an increase of 272,054 from the previous week. This compares to 1,794,734 claims filed in the same week of 2023.5
In November, the Conference Board Leading Economic Index rose by 0.3% to 99.7, marking its first increase since February 2022 and nearly offsetting October’s 0.4% decline. Over the six months ending in November, the LEI fell by 1.6%, a slower rate of decline than the previous six months. The increase was driven by gains in building permits, equities, improved average manufacturing hours, and fewer unemployment claims, though building permit growth was geographically concentrated in the Northeast and Midwest and focused on multi-unit dwellings. The Conference Board forecasts US GDP growth of 2.7% in 2024, slowing to 2.0% in 2025. The Conference Board Coincident Economic Index (CEI) increased by 0.1% to 113.0 in November, consistent with its growth since July. Over the past six months, the CEI rose by 0.6%, slightly outpacing the previous six months’ growth. Key contributors included payroll employment, personal income excluding transfer payments, and manufacturing and trade sales, which offset declines in industrial production. The Conference Board Lagging Economic Index (LAG) rose by 0.3% to 118.8 in November after a 0.1% decline in October. However, its six-month growth rate turned negative, declining by 0.4%, compared to a 0.6% increase in the previous six months.6
The November Personal Consumption Expenditures (PCE) Price Index rose 2.4% year-over-year, slightly below the expected 2.5%. Excluding volatile food and energy prices, the core PCE, the Federal Reserve’s preferred inflation measure, increased 2.8% year-over-year, meeting expectations. Month-over-month, the PCE Price Index rose 0.1%, below the forecasted 0.2% and following a 0.2% increase in October. Similarly, core PCE increased by 0.1% in November, below the expected 0.2% and following a 0.3% rise the previous month. These figures highlight a softer-than-anticipated increase in inflation, suggesting a modest deceleration in price pressures compared to earlier in the year.7
| WK | Year to Date | |
| Dow | -2.25% | 13.67% |
| S&P500 | -1.99% | 24.39% |
| Nasdaq | -1.78% | 30.39% |
| S&P400 Mid-cap | -4.67% | 12.32% |
| Russell | -4.45% | 10.62% |
| TSX | -2.70% | 17.40% |
| Oil | -2.50% | -3.00% |
- https://www.newyorkfed.org/medialibrary/media/Survey/Empire/empire2024/ESMS_2024_12.pdf?sc_lang=en&hash=B8BC13D22263047936F6CE2B61D41437
- https://www.census.gov/retail/marts/www/marts_current.pdf
- https://www.federalreserve.gov/releases/g17/current/default.htm
- https://www.census.gov/construction/nrc/pdf/newresconst.pdf
- https://www.dol.gov/ui/data.pdf
- https://www.conference-board.org/topics/us-leading-indicators
- https://www.bea.gov/data/personal-consumption-expenditures-price-index
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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