After the long holiday weekend, U.S. investors awoke on Tuesday to geopolitical news out of the U.K. as British Prime Minister Theresa May laid out plans for avoiding a “Hard Brexit” from the European Union. Investors around the globe appeared to take comfort in her speech where she said, “We are leaving the European Union but we are not leaving Europe.” In her plan, she promised to put the final deal to vote in both Houses of Parliament, and said that she would be working toward a “bold and ambitious free-trade agreement” with the EU that would include partial membership in the EU customs union and continued tariff-free trade during the “implementation phase” of the new plan.
As Mrs. May gave her speech the British pound rose roughly 2.9 percent against the U.S. Dollar, the largest one day gain for the currency since 2008.
Here in the U.S., investors appear to be growing more cautious as the U.S. presidential inauguration get’s closer, with U.S. markets flattening out this week. Previously, the stock market has rallied into inauguration day, and this year the stock market still has a couple of days left if it chooses to push higher.
However, this Presidential election has been anything but usual, so its probably wise not to assume that the stock market will behave the same way this time around. This would mean that the major market averages could go against tradition of falling off some once the inauguration is past, and potentially rally next week. Such a move higher next week would really catch a lot of investors off guard.
Laif E. Meidell, CMT
We hope you have a great week,
Pat Meidell, Laif Meidell and Heidi Foster
Weekly Economic Update
RETAIL SALES RISE 0.6%
All of this December gain can be attributed to increased car buying and gasoline purchases; in fact, retail sales were flat with those two categories removed. Analysts surveyed by MarketWatch had projected a 0.8% December advance. Census Bureau data shows that online sales rose 13.2% in 2016, while department store sales fell 8.4%.
CONSUMERS MAINTAIN OPTIMISM AS 2017 BEGINS
The University of Michigan’s preliminary January consumer sentiment index was little changed from the final December edition – just a tenth of a point lower at 98.1. In January 2016, the index was at 92.0. The current conditions component of the index reached 112.5, its highest mark since 2004.3
PRODUCER PRICES CLIMB AGAIN
After heading north 0.4% in November, the Producer Price Index advanced another 0.3% in December, perhaps hinting that an extended period of minimal wholesale inflation is now history. The December increase left both the headline and core PPI up 1.6% year-over-year.1
A GOOD WEEK FOR TECH SHARES
Across January 9-13, the Nasdaq Composite added 0.96% to settle at 5,574.12. Wall Street’s other two major indices went red for the week – the Dow Jones Industrial Average shed 0.39%; the S&P 500, 0.10%. Friday, the Dow settled at 19,885.73; the S&P, at 2,274.64.4
Wall Street observes Martin Luther King, Jr. Day Monday – U.S. stock and bond markets are closed. Morgan Stanley and UnitedHealth Group announce earnings Tuesday. On Wednesday, Federal Reserve chair Janet Yellen speaks about monetary policy goals in San Francisco, the December CPI and a new Fed Beige Book appear, and investors examine earnings from Charles Schwab, Citigroup, Fastenal, Goldman Sachs, Netflix, Northern Trust, Raymond James, and U.S. Bancorp. Earnings from Alaska Air, American Express, BB&T, Celanese, IBM, J.B. Hunt, Nautilus, and Union Pacific arrive Thursday, along with new data on initial claims, housing starts, and building permits; that night, Janet Yellen talks about the U.S. economic outlook in a California speech. Friday is Inauguration Day: federal offices in Washington, D.C. and its vicinity are closed, but Wall Street is open for business as General Electric, Regions Financial, Schlumberger, and SunTrust Banks present earnings.