The S&P 500 (SPX) fell by 2.08% on the week, its third losing week out of the last four, and the Dow Jones Industrial Average (DJIA) declined by 1.24%. Meanwhile, the tech benchmarks Nasdaq Composite (NDAQ) and Nasdaq-100 (NDX) dropped by 3.15% and 3.42%, respectively.
Stocks lost ground after a slate of data reflected the continued resilience of the U.S. economy. While the CPI was in line with expectations, producer-prices inflation was above estimates on an annual basis. In addition, October’s retail sales report, which included a large upward revision to the prior month’s data, reflected the persistent resilience of consumers, adding question marks over further Fed policy steps.
Jerome Powell’s comments last week indicated that policymakers are now on a more gradual path of monetary easing. The Fed Chair stated that the economy continues to show strength while the job market remains healthy, with the unemployment rate still well below historical averages. The head of the U.S. central bank added that “the economy is not sending any signals that we need to be in a hurry to lower rates,” sparking concern in markets that the Fed may not be cutting rates as much as previously expected.
The loss of the stock market’s post-election momentum was exacerbated by the uncertainty surrounding policy issues in Trump’s second term. The various implications for corporate earnings were reflected by the wide dispersion of sector performances, with financial and energy stocks continuing upwards on the outlook for looser regulations and easier M&A approvals. On the other hand, healthcare stocks were the biggest losers last week following news that Trump has nominated Robert F. Kennedy, Jr. – a vaccine skeptic and a vocal critic of the pharmaceutical industry and public health programs – to head the Health and Human Services Department (HHS).
In addition, the hotter-than-expected PPI report drew investor attention to the incoming administration’s tariff policies, which may add to producer-price volatility in the short term as businesses adjust their supply chain management due to the threat of tariffs. However, tariffs are not necessarily inflationary, as their impact on consumers is industry-specific and generally doesn’t last for more than a few months. Thus, after companies adjusted for Trump’s tariff policies in 2018 and 2019, the prices of the tariffed goods actually fell. Still, the economic setup is different this time around, which muddies the outlook and injects additional uncertainty for investors and analysts to digest.
Three Economic Events
Here are three economic events that could affect your portfolio this week. For a full listing of additional economic events, check out the TipRanks Economic Calendar.
» November’s S&P Global Manufacturing PMI and Services PMI (preliminary readings) – Thursday, 11/21 – PMI indices are leading economic indicators used by economists and analysts to gain timely insights into changing economic conditions, as the direction and rate of change in the PMIs usually precede changes in the overall economy.
» October’s Existing Home Sales Change – Thursday, 11/21 – This report measures the sales volumes and prices of existing single-family homes, condos, and co-ops nationwide. Existing homes account for over 90% of total home sales in the country, so this report provides insights into the health of the housing market which has significant implications for economic activity throughout the U.S.
» November’s Michigan Consumer Sentiment Index and UoM 5-year Consumer Inflation Expectations (preliminary readings) – Friday, 11/22 – These reports portray the results of a monthly survey of consumer confidence levels and consumers’ views of long-term inflation in the United States. The level of confidence affects consumer spending, which contributes about 70% of the U.S. GDP. The inflation expectations index is used as a component of the Fed’s Index of Inflation Expectations calculations.
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