The U.S. stock market finished the week with strong gains as renewed hopes of trade talks between the U.S. and China progress.  Interest rates also rose with the 10-year treasury increasing 8 basis points to 2.78% amid strong industrial production data.  However, the spread between the 10 year treasury and the 2 year treasury was unchanged at 0.18% as short-term rates also rose.  Optimism around the U.S. and China trade dispute also had the price of gold drop 0.58% to $1,289.40 an ounce and the U.S. Dollar Index (DXY) increase from 95.66 to 96.36.  The price of crude oil jumped 3.92% to $53.73 a barrel as data revealed a drop in the number of U.S. oil rigs.

Index               Started Week         Ended Week         Change         Change %         YTD %
DJIA 24,815.0425,983.941,168.904.71%11.39%
Nasdaq 7,453.157,742.10288.953.88%16.68%
S&P 500 2,752.062,873.34121.284.41%14.62%
Russell 2000 1,465.491,514.3948.903.34%12.30%

This Week’s Economic Highlights

  • The U.S. Producer Price Index (PPI), a measure of wholesale inflation, dropped 0.2% in December, bringing its year-over-year change to 2.5%.  Core PPI, which excludes the volatile food and energy components, dropped 0.1% for a year-over-year change of 2.7%.
  • December U.S. retail sales data was scheduled to be reported, but is being delayed due to the government shutdown.  However, forecasters are expecting retail sales to be unchanged for the month of December.
  • December housing start data was scheduled to be reported, but is also being delayed due to the government shutdown.  Forecasters expect that housing starts will be unchanged for the month.
  • Initial unemployment claims dropped by a moderate 3,000 to a total of 213,000 for the week ending January 12th.  Continuing unemployment claims, which lag initial claims by a week, increased by 18,000 to 1.74 million yet still remains historically low.
  • The Philly Fed manufacturing index rose to 17 in January after reaching a two year low of 9.1 in December (any reading above zero indicates improving conditions).  Driving the index higher was the new orders index, which rose 8 points to 21.3.
  • Industrial production rose 0.3% in December, following a revised 0.4% increase in November.  In the fourth quarter of 2018, industrial production increased at an annualized rate of 3.8%, as compared to the 4.7% increase in the third quarter.

Recommended Reading

This week’s recommended reading illustrates the power of long-term investing, and how the longer the investment horizon the greater the probability of a positive return.  Click Here to read this week’s recommended reading. 

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