Equity Markets Start New Year Lower

A rise in values last Friday wasn’t enough to prevent stocks from closing generally lower last week. Each of the major benchmark indexes declined to start the new year, with the exception of the Russell 2000. Among the market sectors, only energy, utilities, real estate and health care advanced, while consumer discretionary fell the furthest. Ten-year Treasury yields ended the week where they began. Crude oil prices reached a two-month high, driven by cold weather in Europe and the U.S. coupled with growing optimism over increasing Chinese demand. The dollar remained near its highest levels in two years as investors banked on continuing U.S. economic resilience and fewer interest rate cuts. Gold prices rose following a dip in prices the previous week.

Manufacturing Activity Slowed in December

According to the survey of purchasing managers by S&P Global, the manufacturing sector ended 2024 trending lower. After advancing in November, December saw a sharp reduction in new orders, while the rate of decline in production quickened. Business confidence waned, and input costs to manufacturers rose sharply, prompting an increase in selling prices. One plus is that employment increased modestly for the second straight month. At 49.4, the S&P Global U.S. Manufacturing Purchasing Managers’ Index™ fell from November’s rate of 49.7, indicating that manufacturing declined.

Eye on the Week Ahead

Heading into the new year, all eyes will be on the December employment figures, released at the end of this week. Employment rose by 227,000 in November, although the unemployment rate ticked up 0.1 percentage points to 4.2%. The Federal Reserve pays particular attention to the jobs report as it relates to the Federal Reserve’s primary policy goals of full employment and 2.0% inflation. A favorable jobs report supports moderation in the timing of further interest rate reductions.