Market Update—Week of December 11, 2023

Market Update—Week of December 11, 2023
Presented by Axial Financial Group

Quick Hits

Report releases: The unemployment rate unexpectedly fell to 3.7 percent in November.
2. Financial market data: Employment remained strong but new openings continued to fall.
3. Looking ahead: Inflation and the Federal Reserve (Fed) will be the primary focus.

Keep reading for an in-depth look.

Report Releases—December 4–8, 2023

ISM Services Index: November (Tuesday)

Service sector confidence improved more than expected in November, supported by faster-than-expected new order growth. The index has remained in expansionary territory throughout the year.

Expected/prior ISM Services index: 52.3/51.8
Actual ISM Services index: 52.7

Trade Balance Report: October (Wednesday)

The trade deficit widened slightly more than expected in October. Imports rose 0.2 percent and exports fell 1 percent.

Expected/prior trade balance: –$64.2 billion/–$61.2 billion
Actual trade balance: –$64.3 billion

Employment Report: November (Friday)
Hiring accelerated in November; the 199,000 jobs added during the month beat economist expectations. Underlying data also showed signs of continued labor demand; the unemployment rate unexpectedly fell from 3.9 percent in October to 3.7 percent in November.

Expected/prior change in nonfarm payrolls: +185,000/+150,000
Actual change in nonfarm payrolls: +199,000

Preliminary University of Michigan Consumer Sentiment Index: December (Friday)
Consumer sentiment unexpectedly rose to a four-month high. Part of the improvement was due to tumbling inflation expectations, with one-year inflation forecasts falling from 4.5 percent in November to 3.1 percent to start December.

Expected/prior month consumer sentiment index: 62/61.3
Actual consumer sentiment index: 69.4

The Takeaway

Service sector and consumer confidence were both higher than expected.
Employment and trade beat expectations as the U.S. economy remained resilient.

Financial Market Data

Equity

Index	Week-to-Date	Month-to-Date	Year-to-Date	12-Month
S&P 500	0.24%	0.83%	21.81%	18.98%
Nasdaq Composite	0.70%	1.26%	38.73%	32.01%
DJIA	0.04%	0.90%	11.72%	10.64%
MSCI EAFE	0.39%	0.65%	13.01%	11.07%
MSCI Emerging Markets	–0.71%	–1.20%	4.42%	2.29%
Russell 2000	1.00%	4.00%	8.36%	6.36%

Source: Bloomberg, as of December 8, 2023

U.S. equities continued their recent gains as Apple, Nvidia, Alphabet, Meta Platforms, and Tesla supported the modest move higher. Communication services, consumer discretionary, and technology were the top performing sectors and were widely supported by the moves from these companies. Energy, materials, and staples fared worst. West Texas Intermediate (WTI) crude oil fell for the seventh consecutive week, losing 3.8 percent but closing above $70 per barrel.

Fixed Income

Index	Month-to-Date	Year-to-Date	12-Month
U.S. Broad Market	1.01%	2.66%	1.29%
U.S. Treasury	0.86%	1.53%	0.22%
U.S. Mortgages	1.22%	1.93%	0.81%
Municipal Bond	0.72%	4.73%	4.17%

Source: Bloomberg, as of December 8, 2023

Short-term Treasury yields rose but those on the long end of the curve, such as the 30-year, continued their recent move lower. Positive employment data led to questions about near-term Fed policy and potential growth in the short term. The 2-year rose 16 basis points (bps), closing the week just shy of 4.73 percent. The 10-year rose 2 bps to 4.25 percent, whereas the 30-year fell 11 bps to 4.31 percent.

The Takeaway

Several companies in the so called, “Magnificent Seven” continued to lift technology, communications, and consumer discretionary; energy continued to struggle.
Strong employment data continues to pose a challenge to the Fed’s attempts to hit its 2 percent inflation target.

(80-200 words) Looking Ahead

Inflation and the Fed will be the primary focus this week.

On Tuesday, we expect the release of the Consumer Price Index for November. Consumer inflation is expected to moderate, with year-over-year consumer price growth set to fall from 3.2 percent in October to 3.1 percent.
The Producer Price Index for November will be released on Wednesday. Producer inflation is also expected to show slowing growth, with year-over-year producer inflation set to fall from 1.3 percent in October to 1.1 percent.
The main event will be the December rate decision by the Federal Open Market Committee (FOMC). The Fed is expected to keep the federal funds rate unchanged at its December meeting. Investors and economists will focus on the post-meeting news release, along with Fed Chair Jerome Powell’s news conference, for hints on the path of monetary policy.
Finally, the S&P Global’s Preliminary US PMIs for December will be released on Friday. Manufacturing is expected to improve slightly, from 49.4 to 49.5. The service sector is expected to hold steady at 50.8 and remain in expansionary territory.

Authored by the Investment Research team at Commonwealth Financial Network^®.

Disclosures: Certain sections of this commentary contain forward-looking statements that are based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. All indices are unmanaged and are not available for direct investment by the public. Past performance is not indicative of future results. The S&P 500 is based on the average performance of the 500 industrial stocks monitored by Standard & Poor’s. The Nasdaq Composite Index measures the performance of all issues listed in the Nasdaq Stock Market, except for rights, warrants, units, and convertible debentures. The Dow Jones Industrial Average is computed by summing the prices of the stocks of 30 large companies and then dividing that total by an adjusted value, one which has been adjusted over the years to account for the effects of stock splits on the prices of the 30 companies. Dividends are reinvested to reflect the actual performance of the underlying securities. The MSCI EAFE Index is a float-adjusted market capitalization index designed to measure developed market equity performance, excluding the U.S. and Canada. The MSCI Emerging Markets Index is a market capitalization-weighted index composed of companies representative of the market structure of 26 emerging market countries in Europe, Latin America, and the Pacific Basin. The Russell 2000^® Index measures the performance of the 2,000 smallest companies in the Russell 3000^® Index. The Bloomberg US Aggregate Bond Index is an unmanaged market value-weighted performance benchmark for investment-grade fixed-rate debt issues, including government, corporate, asset-backed, and mortgage-backed securities with maturities of at least one year. The U.S. Treasury Index is based on the auctions of U.S. Treasury bills, or on the U.S. Treasury’s daily yield curve. The Bloomberg US Mortgage Backed Securities (MBS) Index is an unmanaged market value-weighted index of 15- and 30-year fixed-rate securities backed by mortgage pools of the Government National Mortgage Association (GNMA), Federal National Mortgage Association (Fannie Mae), and the Federal Home Loan Mortgage Corporation (FHLMC), and balloon mortgages with fixed-rate coupons. The Bloomberg US Municipal Index includes investment-grade, tax-exempt, and fixed-rate bonds with long-term maturities (greater than 2 years) selected from issues larger than $50 million. Basis points (bps) is a common unit of measure for interest rates and other percentages in finance. One basis point is equal to 1/100th of 1 percent, or 0.01 percent.

Market Update—Week of December 11, 2023