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‘Santa Claus Rally’ in Full Swing to Close 2019 For the week of December 30, 2019

Key Market Data

12/20/2019 12/27/2019 One Week Change YTD One Year
S&P 500 Index 3,221.22 3,240.02 +0.58% +31.83% +32.82%
MSCI EAFE Index 2,028.25 2,042.90 +0.72% +23.11% +25.49%
Barclays Capital U.S. Aggregate Bond Index 2,221.46 2,228.08 +0.30% +8.87% +9.18%
10-year Treasury Note Rate 1.918% 1.877% -4.1 basis points -80.8 basis points -89.1 basis points

Call it the “Santa Claus Rally” if you want, but markets have been climbing for weeks now as we reach the final days of 2019 — and what a close to the decade it’s been. The S&P 500 inked its fifth straight week of gains on Friday and inched closer to its best year since 1997. The NASDAQ topped 9,000 for the first time ever Thursday, led in large part by upbeat holiday sales news from Amazon and others. Tech stocks, in general, are having their best year since the dot-com boom. And sentiment this week was further bolstered by a lack of major headlines, positive sales reads from other consumer-driven companies (not named after a river), as well as continued trade optimism.

This week, we’ll get another round of key manufacturing and construction data. We’ll also get a final 2019 read on consumer confidence, pending home sales and prices, and advance trade in goods.

WALL STREET WRAP

A holiday shopping season success: Once again U.S. consumers showed they are more than capable of bolstering the economy. Even with six fewer days between Thanksgiving and Christmas Day, shoppers made the holiday season bright for businesses. Amazon, for example, led indexes to record highs Thursday after the online retailer revealed it had a record-breaking holiday season. Mastercard reported total U.S. retail sales from Nov. 1 to Christmas Eve rose 3.4 percent compared to last year. Online sales jumped 18.8 percent, comprising 14.6 percent of total sales.

A strong job market, rising wages and improving confidence about the economy have likely emboldened consumers to open their wallets this year.

More progress on trade: China’s State Council on Monday authorized cutting tariffs on thousands of products with its trading partners as it inches closer to signing the first phase of a trade deal with the U.S. The reductions will go into effect Jan. 1 and apply to 859 product types, including pork, pharmaceuticals and semiconductors. Then, on Christmas Eve, President Donald Trump said he and Chinese President Xi Jinping will have a signing ceremony for the deal. “The deal is done, it’s just being translated right now,” President Trump told reporters.

More good news from China: Industrial profits grew 5.4 percent year over year in November, the fastest pace of growth since March. Still, weak domestic demand remains an overhang going into 2020.

Fed data signals a rebound: The Chicago Fed National Activity Index (CFNAI) rose to 0.56 in November from -0.76 in October. The three-month rolling CFNAI, although still below trend, is also trending upward and improving. The CFNAI is a weighted average of 85 indicators of economic activity that fall into four broad categories: production and income, employment, consumption and sales/orders. The month-over-month increase was attributed to a rise in production-related measures, but all four categories rose in November and point to a rebound in economic growth last month (a reading of zero indicates an economy expanding at its historical trend, while a positive value indicates above-average growth).

THE WEEK AHEAD

Can the momentum continue in the U.S.? The CFNAI indicated signs of a rebound on the production front, and Chinese industrial profits rebounded sharply. We’ll see if that momentum carried through in December with three key indexes this week: the Markit manufacturing PMI, ISM manufacturing index and the Chicago PMI. November’s ISM showed continued contraction although sentiment improved, and we’ll look for signs of stabilization in December.

Other data we’re watching: This week we’ll also get new reads on home prices and pending home sales, as well as construction spending. And, given early signs from December, markets could take kindly to another strong consumer confidence print for December.

Commentary is written to give you an overview of recent market and economic conditions, but it is only our opinion at a point in time and shouldn’t be used as a source to make investment decisions or to try to predict future market performance. To learn more, click here.