Weekly Market Commentary December 16, 2024

Major U.S. equity indices showed mixed performance for the week, with notable divergence among the indexes.

• The S&P 500 down -0.64%

• The Dow Jones Industrial Average was down -1.82%

• The tech-heavy Nasdaq finished up +0.34%

• The 10-Year Treasury yield ended the week at 4.396%

The biggest market news last week was the release of November's Consumer Price Index (CPI) data on Wednesday. While both headline and core CPI met month-over-month expectations, some market participants noted that headline inflation was slightly higher than the previous month (2.7% versus 2.6%). This marked the second consecutive month of year-over-year inflation increases. Market reaction was relatively muted, with the S&P 500 initially rising on Wednesday morning following the news, but it has since retreated.

While markets have expressed concern about rising inflation in recent months, this concern seems to be uneven. On Wednesday, the 10-year notes yield traded was lower than the month prior, suggesting that investors expect lower inflation in the future. This is despite short-term inflation remaining persistent. Long-term bondholders appear confident that the Federal Reserve will eventually achieve its 2% inflation target.

Last week brought important labor reports. Tuesday's Nonfarm Productivity report met expectations at 2.2%, while Unit Labor Costs came in significantly lower than projected, at 0.8% instead of 1.9%. These reports suggest that future inflationary pressures from labor costs may be easing. However, Thursday's reports hinted at potential labor market softening. Initial jobless claims were notably higher than expected, and continuing claims also rose slightly. These figures suggest some weaknesses emerging in the labor market. Investors will closely monitor future reports.

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