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Mixed Day to End the Holiday-Shortened Week


U.S. equities were mixed with the Dow pushing further into record territory, while the NASDAQ and S&P took a breather. Volume was light amid a dormant economic calendar. The biggest news of the day came from an upbeat reading on Chinese industrial profits. Treasury yields fell on the day and pressured the U.S. dollar. Oil and gold were little changed. Back from a two-day break, European markets rallied; Asian equities were more mixed.

The Dow Jones Industrial Average rose 24 points (0.1%) to 28,645, the S&P 500 was down 1 point to 3,239 and the NASDAQ shed 16 points (0.2%) to 9,007. 479 million shares were traded on the NYSE and 1.8 billion shares changed hands on the NASDAQ. WTI oil fell $0.01 to $61.67 per barrel and wholesale gasoline shed $0.01 to $1.74 per gallon. Elsewhere, the Bloomberg gold spot price shed $0.26 to $1,511.27 per ounce and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was down 0.5% to 97.02.

News on the equity front was light on the final Friday of 2019 that will close out the Christmas holiday-shortened week that saw the stock markets continue to grind higher and post record highs, with the Nasdaq breaching the 9,000 level for the first time. Four catalysts have led the rally in the stock markets and put the positive final touches on 2019, with the U.S. and China reaching a "phase one" trade agreement, the U.S. consumer continuing to do the heavy lifting of economic output, global growth showing signs of bottoming, and central banks around the world maintaining highly accommodative monetary policy stances.

Consumer discretionary stocks paced the gains for the week, along with technology issues, the energy sector and materials, while the defensively-natured consumer staples and utilities have underperformed and are on pace for red figures. For our commentary of the major stock market sectors, check out the Schwab Center for Financial Research’s latest, Schwab Sector Views: 'Tis the Season for Consumer Discretionary … or Not?

Treasury yields fall and U.S. dollar sees pressure as week comes to a close

Treasuries were higher after the curve experienced a bull steepener, in which short-term yields fall faster than long term yields. The yield on the 2-year note fell 5 basis points (bps) to 1.58%, the 10-year yield dropped 2 bps to 1.87% and the 30-year rate fell 1 bp to 2.31%. For analysis of bond investing ahead of the New Year, check out Schwab's Chief Fixed Income Strategist Kathy Jones' 2020 Market Outlook: Fixed Income. Kathy says that ten-year Treasury yields should move higher in 2020 as recession fears ease, pointing out the lagged impact of the Federal Reserve's interest rate cuts, signs of stabilization in the global economy and a modest uptick in inflation expectations that should provide a boost to intermediate- and long-term bond yields. However, she cautions that the risk to our outlook is the ongoing threat of trade tariffs weighing on business investment.

The U.S. dollar saw some pressure from the lower yields, European markets returning from a two-day break and with Chinese economic data relatively positive. The holiday-shortened week saw U.S. economic data light but paint a mixed picture, with durable goods orders falling, new home sales coming in a bit shy of estimates, and manufacturing activity in Richmond unexpectedly remaining in contraction territory, but jobless claims fell for a second-straight week after jumping earlier in the month. Crude oil prices continued to rally and gold prices moved noticeably to the upside.

For a look at the markets as the New Year approaches, read Schwab’s Chief Investment Strategist Liz Ann Sonders' 2020 U.S. Market Outlook: Ramble On? in which she notes that next year is set to start on a high note, with consumers and the Fed keeping the economy and market afloat; but risks remain elevated, including trade and elections.

Next week will also be shortened by the New Year holiday break on Wednesday, but the economic docket is slated to deliver some key data points, such as a preliminary read on the trade balance, the Chicago PMI, Consumer Confidence and jobless claims. However, the global manufacturing front will be on full display with Manufacturing PMIs being released out of China, the Eurozone and the U.K., which will be accompanied by the December releases of the U.S. ISM Manufacturing Index and Markit's final Manufacturing PMI. Schwab’s Liz Ann Sonders discusses in her article, Split Personality: U.S. Economy's Bifurcation Persists, the ongoing bifurcation in the economy between weak manufacturing/capex and stronger services/consumption. She adds that the bifurcation is also seen in the stark differential between CEO and consumer confidence, while noting that profitability and employment data continues to be key to watch for any signs of the bifurcation breaking down.

Europe mostly higher following holiday break; Asia mixed

European equities finished mostly higher in a return to action following the two-day holiday break, even as the euro and British pound rallied versus the U.S. dollar. Global economic data was relatively light in the final Friday of 2019, but China reported a solid rebound in industrial profits. Japan's retail sales missed estimates and the nation's industrial production fell by a smaller amount than expected for last month. Spanish retail sales came in stronger than expected for last month. European bond yields were mostly lower, while Japan saw higher rates. With some uncertainties appearing to fade and heading into the New Year, Schwab's Chief Global Investment Strategist Jeffrey Kleintop, CFA, delivers his latest article, 2020 Global Market Outlook: New Heroes Needed, noting that in 2020, global economic growth may depend on comprehensive trade deals and fiscal stimulus rather than actions by central bankers to reverse last year’s slowdown in manufacturing and business investment. And for a look at the potential implications of a U.S-China trade deal, see Schwab's Jeffrey Kleintop's commentary, Tied to Trade: What's Next for Emerging Market Stocks?

The U.K. FTSE 100 Index rose 0.2%, France's CAC-40 Index added 0.1%, Germany's DAX Index gained 0.3%, Spain's IBEX 35 Index advanced 0.4% and Switzerland's Swiss Market Index ticked 0.1% higher, while Italy's FTSE MIB Index lost 0.6%. Japan's Nikkei 225 Index declined 0.4%, with the yen regaining some of yesterday's drop, while the Hong Kong Hang Seng Index advanced 1.3%. China's Shanghai Composite Index dipped 0.1% and South Korea's Kospi Index moved 0.3% higher. Australia's S&P/ASX 200 Index gained 0.4% and India's S&P BSE Sensex 30 Index rebounded with a 1.0% increase.

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