While many retired clergy choose to enjoy their well-deserved season of rest, some seek ways to continue nurturing their spiritual calling.
Stocks closed January generally higher. Each of the benchmark indexes listed here ended January higher,with the exception of the small caps of the Russell 2000. Historically, positive market returns in January are often a precursor to favorable market performance for the remainder of the year. Of course, past performance is no guarantee of future results. Despite the end results, January proved to be a month of ebbs and flows. It began with stocks closing in the red, only to pick up momentum throughout the rest of the month.
The most recent inflation data showed prices inched higher in December after falling the previous month. Both the Consumer Price Index and the personal consumption expenditures price index increased, both monthly and annually. However, core prices, excluding the more volatile food and energy indexes, declined over the 12 months ended in December.
The Federal Reserve met in January and maintained the federal funds target rate range at its current 5.25%-5.50%. According to the Fed, the economy continued to show strength and job gains were steady. While noting that inflation had slowed, it remained above the Fed's target of 2.0%, all of which bolstered the Fed's reluctance to begin lowering interest rates.
The economy has proven resilient despite the ongoing war in Ukraine and turmoil in the Middle East. Fourth-quarter gross domestic product expanded at an annualized rate of 3.3%, according to the initial estimate. Consumer spending, the largest contributor to GDP, was 2.8%.
Job growth remained steady, with 216,000 new jobs added in December, an increase from November's 173,000. Wages continued to rise, increasing 4.1% over the last 12 months. Unemployment claims increased from a year ago (see below).
Fourth-quarter earnings season for S&P 500 companies has been lackluster so far. While the majority of companies have yet to release earnings data, the percentage of S&P 500 companies that have reported positive earnings surprises is below average according to FactSet, while actual earnings reported have been below estimates in aggregate. Companies in the financial sector have been particularly subpar. Roughly 25% of the S&P 500 companies have reported fourth-quarter earnings. Of these companies, 69% exceeded estimates, which is below the five-year average of 77%. In aggregate, companies reported earnings that are 5.3% below estimates, which is below the five-year average of 8.5%.
Sales of existing homes retreated in December, primarily due to lack of inventory, high prices, and advancing mortgage rates. Sales of new single-family homes increased 8.0% in December and 4.4% over the past 12 months.
Industrial production ticked higher in December after no growth in November and an 0.8% decline in October. Manufacturing ticked up 0.1% in December but declined 2.2% in the fourth quarter. Excluding motor vehicles and parts, factory output declined 0.1% in December and 0.3% in the fourth quarter. According to the latest survey from the S&P Global US Manufacturing Purchasing Managers' Index™, the manufacturing sector slipped further into contraction in December. The services sector saw business accelerate marginally.
Eight of the 11 market sectors ended December higher, led by communication services and information technology. Last month saw real estate, consumer discretionary, materials, and utilities decline.
Bond prices gained some momentum at the end of January, particularly following the Fed's decision to maintain interest rates for longer than some had expected. Despite the late-month surge in bond prices, 10-year Treasury yields generally closed the month higher. The 2-year Treasury yield fell nearly 11.0 basis points to about 4.21% in January. The dollar inched higher against a basket of world currencies. Gold prices rode a topsy-turvy month, ultimately closing lower. Crude oil prices advanced in January on the heels of production cuts and shipping interruptions in the Middle East. The retail price of regular gasoline was $3.095 per gallon on January 29, $0.233 above the price a month earlier but $0.394 lower than a year ago.
|AS OF 1/31
Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.
December saw the federal budget deficit come in at $129.4 billion, down roughly $185.0 billion under the November 2023 deficit. The deficit for the first three months of fiscal year 2024, at $509.9 billion, is $88.5 billion higher than the first three months of the previous fiscal year. So far in fiscal year 2024, total government receipts were $1.1 trillion ($1.0 trillion in 2023), while government outlays were $1.6 trillion through the first three months of fiscal year 2024, compared to $1.4 trillion over the same period in the previous fiscal year.
Eye on the Month Ahead
Entering February, much of the focus will be on the economy, inflation, and global unrest, particularly in the Middle East. Recent data has shown that the economy has weathered the aggressive interest-rate policy adopted by the Federal Reserve, which does not meet again until March. Inflationary pressures continued to slowly recede, prompting speculation as to when the Fed will begin lowering interest rates.
Data sources: Economic: Based on data from U.S. Bureau of Labor Statistics (unemployment, inflation); U.S. Department of Commerce (GDP, corporate profits, retail sales, housing); S&P/Case-Shiller 20-City Composite Index (home prices); Institute for Supply Management (manufacturing/services). Performance: Based on data reported in WSJ Market Data Center (indexes); U.S. Treasury (Treasury yields); U.S. Energy Information Administration/Bloomberg.com Market Data (oil spot price, WTI, Cushing, OK); http://www.goldprice.org (spot gold/silver); Oanda/FX Street (currency exchange rates). News items are based on reports from multiple commonly available international news sources (i.e. wire services) and are independently verified when necessary with secondary sources such as government agencies, corporate press releases, or trade organizations. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results. All investing involves risk, including the potential loss of principal, and there can be no guarantee that any investing strategy will be successful.
The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 largest, publicly traded companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2,000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. The U.S. Dollar Index is a geometrically weighted index of the value of the U.S. dollar relative to six foreign currencies. Market indices listed are unmanaged and are not available for direct investment.
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