In this week’s recap: inflation moderates, oil prices head south, and equities have a tough week.
AS FUEL GROWS CHEAPER, INFLATION BECOMES TAMER
Last week, the latest Consumer Price Index arrived, showing no move for headline inflation in November and a 0.2% core inflation increase. That precisely matched the consensus forecast of economists polled by Reuters. What held the headline CPI in check last month? You can credit a sudden drop in gas prices, which fell 4.2%. Annualized inflation declined to 2.2%. Overall producer prices only rose 0.1% last month, compared to an October ascent of 0.6%.1,2
A MIDDLING ADVANCE FOR RETAIL SALES
During October, American households boosted their retail spending by 1.1% (originally reported by the Department of Commerce as a gain of 0.8%), but November presented a different story. Sales rose last month, but only by 0.2%. The gain remained at 0.2% with auto buying removed.2
OIL HEADS 2.6% LOWER
That was the weekly loss for light sweet crude, influenced by two factors: increasing dollar strength and concerning economic data from China, which made traders wonder if the P.R.C.’s demand for crude could lessen. Oil settled at $51.20 Friday on the NYMEX.3
STOCKS HEAD LOWER
Bothered by anxieties about global growth, bulls lost some of their appetite for risk last week. Across five trading days, the S&P 500 ceded 1.26%; the Dow Jones Industrial Average, 1.18%; the Nasdaq Composite, 0.84%. That left them at the following settlements on Friday: S&P, 2,599.95; DJIA, 24,100.51; COMP, 6,910.66. The small-cap Russell 2000 index had it worse, falling 2.57% to 1,410.81 over five days. While all this happened, volatility actually declined, at least according to the CBOE VIX; the leading gauge of Wall Street instability retreated 6.89% for the week to 21.63.4
TIP OF THE WEEK
A simple tip to keep credit card spending under control: only use a card for purchases you know you can pay off within one month.
Oracle and Red Hat share quarterly results on Monday. | On Tuesday, the Census Bureau offers a snapshot of November residential construction activity, and Darden Restaurants, FedEx, Jabil, Micron Technology, Navistar, Steelcase, and Worthington Industries present earnings. | Wednesday, the Federal Reserve releases its latest policy statement, followed by a press conference with Fed chair Jerome Powell; in addition, investors will consider October existing home sales numbers and earnings from General Mills, Paychex, Rite Aid, and Winnebago. | On Thursday, earnings roll in from Accenture, BlackBerry, Conagra Brands, Nike, and Walgreens Boots Alliance, and the Department of Labor issues a new initial claims report. | Friday, Wall Street reviews November consumer spending and capital goods orders data, the federal government’s third estimate of Q3 growth, and earnings from CarMax.
|% CHANGE||Y-T-D||1-YR CHG||5-YR AVG||10-YR AVG|
|REAL YIELD||11/9 RATE||1 YR AGO||5 YRS AGO||10 YRS AGO|
|10 YR TIPS||1.07||0.48||0.72||2.43|
Sources: wsj.com, bigcharts.com, treasury.gov – 12/14/184,5,6,7
Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly. These returns do not include dividends. 10-year TIPS real yield = projected return at maturity given expected inflation.
THE WEEKLY RIDDLE
Dave says that the small city he lives in has a municipal building with more than a hundred stories. What building is this?
LAST WEEK’S RIDDLE: Take a word with four letters. Take away one, and what remains will be better … better than zero, anyway. What word is this?
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1 – cnbc.com/2018/12/12/us-consumer-price-index-november-2018.html [12/12/18]
3 – marketwatch.com/story/oil-falls-as-stock-weakness-and-dollar-strength-dull-impact-of-bullish-supply-data-2018-12-14 [12/14/18]
4 – markets.wsj.com/ [12/14/18]
5 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=12%2F14%2F17&x=0&y=0 [12/14/18]
6 – treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyield [12/14/18]
7 – treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyieldAll [12/14/18]