Commentary
US stocks had a mixed week, with profit-taking early on but solid gains on Friday helping recover some losses. Despite a December slump, the S&P 500 achieved its second consecutive annual gain of over 20%, marking its best two-year performance in 25 years. The Nasdaq also rose over 20% for the sixth time in 8 years. Economic data was mixed. The Chicago PMI dropped to 36.9, signaling ongoing manufacturing weakness in Chicago region, and the Atlanta Fed cut its Q4 GDP growth forecast to 2.6%. However, jobless claims fell to 211,000, the lowest in 8 months. In bonds, falling Treasury yields boosted municipal and corporate markets. Investment-grade corporate bonds saw strong new issuance, while high-yield bonds posted modest gains amid light trading.
European stocks saw light activity, with the STOXX Europe 600 rising 0.2%. Germany’s DAX fell 0.39%, France’s CAC 40 dropped 0.99%, and Italy’s FTSE MIB slipped slightly, while the UK’s FTSE 100 gained 0.91%, boosted by a weaker pound supporting overseas revenues. In Spain, December inflation rose to 2.8% due to higher fuel costs, with core inflation at 2.6%, exceeding forecasts. ECB hawks pushed for slower rate cuts, while President Christine Lagarde remained optimistic about reaching the 2% inflation target over 2025. In the UK, house prices grew 0.7% in December, marking a 4.7% annual increase—the fastest since 2022. Mortgage approvals dipped slightly to 65,700 but stayed above the yearly average.
