The Market Week in Review

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.  

Quote

“Spend each day trying to be a little wiser than you were when you woke up.”

– Charlie Munger

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