ND&S Weekly Commentary 12.14.20 – Stocks Take a Breather

December 15, 2020

Stocks took a breather last week as coronavirus cases continued to surge and stimulus talks have led to little tangible results.

For this past week, the S&P 500, DJIA, and NASDAQ lost some ground declining 0.95%, 0.54%, and 0.69%, respectively.  Small company stocks, represented by the Russell 2000, bucked the trend as the index closed higher by 1.03% for the week. International markets were mixed last week as the MSCI EAFE declined 0.51% and emerging markets increased 0.54%.  Bonds had a strong week as the Bloomberg/Barclays Aggregate finished the week up 0.35%.  As a result, the 10 YR US Treasury closed at a yield of 0.90% (down 7 bps from the previous week’s closing yield of 0.97%).  Gold prices were flat last week closing at $1842/oz.  Oil (WTI) moved marginally higher to close at $46.56/barrel.

Economic reports last week were mixed.  Consumer Price Index (CPI) was reported at 0.2% in November, beating estimates of a 0.1% rise.  Over the last twelve months, the CPI has increased 1.2%; this, despite the unprecedented support from monetary policy and disruption to supply chains.  Jobless claims last week rose to 853k, missing estimates of 716k.  Lastly, the producer price index (PPI) for final demand came in at 0.1% in November, matching estimates.  In the week ahead, there will be reports on industrial production, retail sales, housing and manufacturing.  Additionally, the Federal Reserve will conclude their final meeting of the year and will hold a press conference at the conclusion.  Little change is expected from the meeting, as most attention will be on their outlook for short-term rates and price inflation.

The Santa Claus rally for stocks likely came early this year after a big rally that started just before the election.  They have taken a pause recently which we think could be healthy for the markets in 2021.  We will be closely monitoring the roll-out of the Coronavirus vaccines which should help economic growth in 2021. Stay well!

“Courage is being scare to death … and saddling up anyways.”  –  John Wayne