Chief Economist Scott Brown discusses the latest market data.
For stock market participants, weak economic data has often been taken as a positive, since that implies more fiscal stimulus. However, investors have grown more concerned about possible stumbling blocks. Democratic majorities in the House and Senate are very narrow, some lawmakers are worried about running up the debt, and the window for bipartisan agreement may be short.
The economic data were mixed. Retail sales fell 0.7% in December (+2.9% y/y), down 1.4% ex-autos (+1.1% y/y). Ex-autos, building materials and gasoline, sales fell 2.4% following a 1.5% drop in November – however, the 4Q20 total was 3.5% higher than in 4Q19. Industrial production rose 1.6% in December (-3.6% y/y), boosted partly by a 6.2% increase in the output of utilities (November was unseasonably warm). Manufacturing output rose 1.0% (-2.6% y/y), up 1.1% excluding motor vehicles (-3.2% y/y). The Consumer Price Index rose 0.4% in December (+1.4% y/y), boosted by an 8.4% rise in gasoline (+3.4% before seasonal adjustment, -15.2% y/y). Ex-food and energy, the CPI rose 0.1% (+1.6% y/y).
Next week, the economic calendar is thin. December is not a critical month for residential construction or existing home sales, and figures will be subject to seasonal distortions. Jobless claims, which surged in the first week of the new year, are likely to remain elevated. With the National Mall closed and authorities on high alert, unrest on Inauguration Day should be limited (we hope). The following week will be more eventful (data-wise).
|January 18||—||MLK Holiday (markets closed)|
|January 20||—||Inauguration Day|
|January 21||—||Jobless Claims (week ending January 16)|
|—||Building Permits, Housing Starts (December)|
|January 22||—||Existing Home Sales (December)|
|January 27||—||Durable Goods Orders (December)|
|—||FOMC Policy Decision|
|January 28||—||Real GDP (4Q20, advance estimate)|
|January 29||—||Personal Income and Spending (December)|
|—||Employment Cost Index (4Q20)|
|February 5||—||Employment Report (January)|
All expressions of opinion reflect the judgment of the Research Department of Raymond James & Associates, Inc. and are subject to change. There is no assurance any of the forecasts mentioned will occur or that any trends mentioned will continue in the future. Investing involves risks including the possible loss of capital. Past performance is not a guarantee of future results. International investing is subject to additional risks such as currency fluctuations, different financial accounting standards by country, and possible political and economic risks, which may be greater in emerging markets. While interest on municipal bonds is generally exempt from federal income tax, it may be subject to the federal alternative minimum tax, and state or local taxes. In addition, certain municipal bonds (such as Build America Bonds) are issued without a federal tax exemption, which subjects the related interest income to federal income tax. Municipal bonds may be subject to capital gains taxes if sold or redeemed at a profit. Taxable Equivalent Yield (TEY) assumes a 35% tax rate.
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Commodities trading is generally considered speculative because of the significant potential for investment loss. Markets for commodities are likely to be volatile and there may be sharp price fluctuations even during periods when prices overall are rising. Specific sector investing can be subject to different and greater risks than more diversified investments. Gross Domestic Product (GDP) is the annual total market value of all final goods and services produced domestically by the U.S. The federal funds rate (“Fed Funds”) is the interest rate at which banks and credit unions lend reserve balances to other depository institutions overnight. The prime rate is the underlying index for most credit cards, home equity loans and lines of credit, auto loans, and personal loans. Material prepared by Raymond James for use by financial advisors. Data source: Bloomberg, as of close of business January 14, 2021.