Hello, this is Claire Ellerhorst, Senior Portfolio Manager at Fifth Third Bank with this week’s Economic Beat.
Major U.S. equity indices finished last week higher, with the S&P 500 Index continuing to move higher above its 200-day moving average and closing above the 4000 level for the first time since early December. The S&P 500 Index rose 2.5% in total return for the week, while the Nasdaq Composite added 4.3% and the Dow Jones Industrial Average rose 1.8%.
Fourth quarter earnings season continued last week, with reports still missing expectations. The bar for earnings has seemingly been lowered since the end of the quarter. The blended year-over-year earnings growth rate for the S&P 500 is -5.0%, according to data from FactSet. Just under 70% of companies have been beating consensus estimates thus far, a figure lower than the averages for the last one, five and 10 years.
On the economic calendar, the preliminary release of fourth quarter gross domestic product came in at a 2.9% seasonally adjusted annualized rate, ahead of estimates and slightly lower than the 3.2% annualized rate in the third quarter. Core personal consumption expenditures for December rose 4.4% year-over-year, a slower pace than anticipated. Durable goods orders were stronger than expected and core capital goods orders, a proxy for business investment, fell slightly, as anticipated.
Despite recent strength in the stock market, the possibility of a hard landing remains a concern. Market expectations suggest Federal Reserve rate cuts may begin in the second half of the year, despite Fed officials advocating rates will be higher for longer to bring inflation back down.
In the week ahead, the Federal Reserve’s first meeting of the new year will be a focus. The central bank announces its rate decision at 2pm Eastern time on Wednesday, followed by a press conference with Fed Chair Jerome Powell. The European Central Bank and Bank of England also announce policy decisions this week. On Friday, the December labor report will be a key economic release with market participants eyeing job gains, the unemployment rate and wage inflation. Other releases include the Institute for Supply Management’s Manufacturing Purchasing Managers Index and the Job Openings and Labor Turnover Survey, or JOLTS report.
As always, we’ll be watching and reporting back to you. Thank you.
