December 14 – December 18 Week in Review
It was another positive week for the markets last week. Each of the major indices set fresh all-time highs in a continuation of the market's overall positive trend. The Nasdaq Composite and Russell 2000 both advanced 3.1%, while the S&P 500, up 1.3%, and the Dow Jones Industrial Average, up 0.4%, finished with more modest gains.
As can be expected when the Nasdaq noticeably outperforms, the information technology sector claimed the top spot in the S&P 500, followed by the consumer discretionary and materials sectors. The energy sector succumbed to profit taking with a 4.3% decline, and the communication services sector was the only other negative sector.
Positive factors last week included news that a stimulus deal is close to being reached, the Fed affirming its "extraordinarily accommodative" policy stance, the Pfizer/BioNTech coronavirus vaccine rolling out in the U.S., and news that Apple is planning to increase iPhone production by 30% in the first half of 2021.
As to the stimulus deal the size of a potential package is expected to be around $900 billion, although negotiations extended into the weekend amid continued disagreements. The Fed committed to purchasing at least another $120 billion of Treasury and mortgage-backed securities per month until substantial progress has been made with respect to employment and inflation targets.
The Fed's stance helped investors overlook relatively disappointing retail sales data for November and higher weekly initial jobless claims, and it also put downwards pressure on the U.S. Dollar Index, which fell to its lowest level since April 2018, closing at 89.92 on Friday.
In the bond market the 2 year Treasury fell one basis point and the 10 year Treasury yield increased six basis points to 0.95% amid increased selling interest in part due to the Fed's dovish policy and expectations for new supply of Treasuries needed to finance a potential stimulus deal.
In other markets WTI crude continued its recent advance closing Friday at $49.08 a barrel, its highest level since late February, and gold closed at $1,886.80 an ounce.
December 21 – December 25 Economic Calendar