Coronavirus hopefulness, overall positive corporate earnings, and China’s announcement to cut $75 billion of tariffs on U.S. goods drove the stock market higher after its pullback last week. Consequently, interest rates also moved higher as the 10-year treasury yield rose from 1.52% last week to 1.58% today. The price of gold fell by 1.2% to $1,574 an ounce amid the hopefulness surrounding a coronavirus vaccine. The price of crude oil dropped by 2.5% on the week amid a slowdown in global energy demand.
This Week's Economic Highlights
The ISM manufacturing index rose from 47.8% to 50.9% in January, its first time above 50% in six months. (Any reading above 50% indicates that manufacturing activity is expanding.) Manufacturing had suffered in 2019 amid a U.S. and China trade war and a slowdown in the global economy, but a temporary trade truce could provide support in 2020.
The U.S. trade deficit jumped by 11.9% in December to $48.9 billion, its first increase in four months. However, in 2019 the deficit had shrunk by 1.7%, its first annual decline in six years. Much of the decline can be attributed to the increase in U.S. tariffs on Chinese goods.
The ISM nonmanufacturing index rose from 54.9% to 55.5% in January as the service side of the U.S. economy remains strong. (Readings above 50% indicate growth and anything above 55% is considered exceptional.)
Initial unemployment claims fell by 15,000 to a near 50-year low of 202,000 for the week ending January 31st. However, the less volatile four-week average of initial claims only dropped by 3,000 to 211,750. Continuing unemployment claims, which lags initial claims by a week, increase by 48,000 to 1.75 million.
Hiring ramped up in January as the U.S. added 225,000 jobs, however the unemployment rate rose from a 50-year low of 3.5% to 3.6% as more people enter the work force. The historically tight labor market has put upward pressure on wages which have grown at a strong 3.1% over the past year.
“Spend each day trying to be a little wiser than you were when you woke up.”
– Charlie Munger
Important Disclosures: Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly from The Market Commentator℠, will be profitable, equal any corresponding indicated historical performance level(s), or be suitable for your portfolio. Due to various factors, including changing market conditions, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in The Market Commentator℠ serves as the receipt of, or as a substitute for, personalized investment advice from The Milwaukee Company™.
In addition, The Market Commentator℠ may contain links to articles or other information that are contained on a third-party website. The Milwaukee Company does not endorse or accept responsibility for the content, or the use, of the website. The Milwaukee Company assumes no liability for any inaccuracies, errors or omissions in or from any data or other information provided on the pages. Thank you.