The Dow (-2.7%), NASDAQ (-4.0%), and S&P 500 (-3.3%) had a rough week, giving back the gains from the prior week. Meanwhile, taxable bonds fell about 0.4%, while tax-free municipal bonds continued their recovery, gaining almost 0.5%.
Economic data reported last week was mixed, but mostly positive for the economy. The ISM Services Index surprised investors by rising in November, and jobless claims still remained low, as these data exhibit a resilient economy. The Producer Price Index (PPI) rose 7.4% over last year, but that is a significant decline from the lofty 11.7% seen in March and 8.1% seen the previous month. Oil prices also fell 11% last week, which should provide some inflation relief, if those prices remain low.
The week ahead brings some important economic reports. The highly regarded Consumer Price Index (CPI) will be reported on Tuesday, and the Fed announces its expected rate hike of 0.5% on Wednesday. It’s not as much what the Fed does on Wednesday by raising rates, but what Fed Chairman Powell says at 2:00 that investors will be focusing on. Will he imply that rate hikes will be slowing, or that the inflation still remains high and needs further rate hike action? I guess we will find out Wednesday, and we can also expect some volatility in the markets on Wednesday afternoon.
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