Capital Market Implications for the Week of January 8 - 12, 2018
Although there were several economic releases for January last week, it was December’s inflation gauges and retail sales that captured the attention of market participants. On Thursday, the Producer Price Index was reported and it was slightly less than expected, as both headline and core (the index less the more volatile segments of food and energy) wholesale prices declined -0.1% during December. On the other hand, core consumer prices increased 0.3% for the month, which was above expectations, while headline consumer prices rose a more meager 0.1% driven by a decline of -2.7% in gas prices in December. With auto sales, building materials and non-store retail categories all having increased in December, retail sales for the month were solid. Additionally, over the last three months, retail sales grew 8.9% annualized, which was the best quarterly showing since 2003.
For the second week of the year, global stock markets climbed higher making 2018 one the strongest starts to a year for stocks in some time. For the week, the S&P 500 Index gained 1.6% while the Dow Jones Industrial Average increased 2.0%. The week’s best performing equity sector was energy, which rose 3.2%. The worst performing sectors for the week were once again utilities and real estate, which fell -2.1% and -3.4%, respectively. Last week, international markets continued their rally, as the MSCI EAFE Index rose 1.2% and emerging markets gained 0.6%. Conversely, with interest rates have risen and consequently bond prices have fallen, thus far, it has been an inauspicious start to the year for bond investors. For the week overall, the Barclays U.S. Aggregate Bond Index lost -0.2%, ten-year municipal bonds fell -0.5% while both U.S corporate and high yield bonds ended the week relatively unchanged.
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