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James Hyerczyk
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Bullish Stock Market

The major U.S. stock indexes posted solid gains last week, bringing them to within striking distance of their all-time highs. Appetite for risk was strong, driven by continued optimism over a U.S.-China trade deal and an agreement to avert another government shutdown. There were a few pitfalls along the way, however, caused by mixed economic data.

For the week, the benchmark S&P 500 Index settled at 2775.60, up 2.5%. It’s also up 10.7% for the year. The blue chip Dow Jones Industrial Average closed at 25883.25, up 3.1%. It’s up 11.0% in 2019. The tech-based NASDAQ Composite finished at 2472.41, up 2.4%. In 2019, it’s up 12.6%.

Mixed Economic Signals

On the strong side, the Bureau of Labor Statistics reported a surge in Job openings The JOLTS Job Openings report showed that U.S. job openings rebounded, reaching a record in December as the rate of those leaving jobs held steady, underscoring robust demand for workers.

According to the report, the number of positions waiting to be filled rose by 169,000 to 7.34 million, from an upwardly revised 7.17 million in the prior month. Furthermore, the quits rate remained at 2.3 percent, indicating confidence that job prospects remain strong.

January also marked the 10th consecutive month in which there were more job openings than unemployed workers, more evidence of a tight labor market.

On the weak side, U.S. Retail Sales and Industrial Production disappointed. Retail sales fell in December, dropping 1.2% over the prior month. This was also the biggest decline since 2009. Industrial Production fell 0.6%, missing the 0.1% estimate by a wide margin. Furthermore, the previous month was revised lower to 0.1%.

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Trade Talk Optimism Overcomes Mixed Data Concerns

A positive outlook for U.S.-China trade relations encouraged investors to overlook the noise created by worries over a slowing economy and earnings growth. The retail sales and industrial production declines represented only one occurrence and not a trend. Furthermore, the data was taken during the government shutdown which may have skewed the results. If so, then the effects of any short-term disruptions will smooth out over the long-term.

Additionally, earnings season is nearly over and the results were basically mixed, however, the general outlook for growth was reassuring to investors. As the trade talks progressed last week, the price action suggested that investors were growing more optimistic that continuing progress would eventually lead to a resolution of the simple issues causing the trade tensions. However, it is going to take time for the two economic powerhouses to come to an agreement on a few of the major issues like intellectual property.

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