US Economy and Credit Markets Ended Jan. 6, 2017

The yield curve flattened last week as markets continued to digest a rate increase and the Federal Reserve's intention to increase rates slowly through 2017.  Economic data remains strong and equity markets seem to be anticipating increased acceleration of the U.S. economy. Tuesday's ISM December Manufacturing Index reading exceeded expectations and came in at 54.7 for the month (Levels higher than 50 signal expansion; levels below 50 signal contraction.). This represented the highest reading in two years and fourth consecutive month of increase. Thursday's Non-Manufacturing Index reading for the month of December was unchanged at 57.2, however, but as this is still well above 50, it is indicative of improving sentiment. Taken together, both the ISM manufacturing and non-manufacturing readings signal expansion as we enter 2017.  The December payroll numbers for December were released on Friday and underwhelmed relative to expectations and the unemployment rate picked up to 4.7% from 4.6% in the prior month. On Friday the trade deficit was smaller than expected but this followed November's deficit which was a nine-month high as the stronger dollar is making foreign goods cheaper for U.S. consumers and U.S. made goods more expensive for foreign buyers. Major economic reports (and related consensus forecasts) for the upcoming week include: Tuesday: November Final Wholesale Inventories (.9%, unch); Wednesday: Prior week MBA Mortgage Applications; Thursday: Prior week Initial Jobless Claims (255K, +20K); Friday: December Final PPI Demand (.3%, -.1%), December Retail Sales (.6%, +.5%) and January preliminary University of Michigan Sentiment (98.5, +.3).
Posted on Monday, January 9, 2017 @ 8:13 AM

These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.