U.S. equities rose for the fourth straight week and for the eighth time in the past nine weeks since the pre-Christmas low. The S&P 500 is now higher on the year by 11.4 percent and sits just 5 percent below its September 20 record high. Rising optimism regarding a trade deal between the U.S. and China was more than enough to offset another round of mediocre economic reports. And Sunday’s news that the White House has extended Friday’s negotiating deadline will only reinforce that sense of optimism. The dollar eased slightly last week, and Treasury yields were little changed, as the two-year note fell three basis points to 2.49 percent and the ten-year yield fell by one to 2.65 percent. The result was a modest steepening of the curve to 15 basis points, keeping it in the 14 to 19 basis point range in which it has traded since the start of the year.
Driven by rising optimism that a trade deal with China may actually happen, stocks surged higher last week. The S&P 500 climbed 2.5 percent, its third straight weekly gain. In the process, the index closed above its 200-day moving average on Tuesday for the first time since December 3, and remained above it through Friday, and now sits 10.7 percent higher on the year.
With little domestic news on either the policy or economic front, U.S. equities were virtually unchanged last week. The S&P 500 did close fractionally higher but failed to push above its 200-day moving average. Not helping matters were reminders from the White House that trade talks with China were far from any agreement, and from Europe concerning its ongoing economic slowdown and the challenges for monetary policy of Brexit uncertainty. While investors await further developments on these issues, the dearth of market-moving news resulted in the VIX index ending the week at 15.7, well down from the 36.1 reading of Christmas Eve.
The post-Christmas rally in stocks resumed last week, after a one-week interruption. The S&P 500 rose 1.6 percent, for its fifth gain in the past six weeks, and has risen 15.1 percent since it hit bottom on Christmas Eve. In the process, the S&P 500 has pushed above the 50-day moving average, after spending a month and a half below it. On Friday, it flirted with the 100-day moving average but ended the day fractionally short. It has been almost four months since the index closed above the 100-day moving average. It remains 7.6 percent below its September peak.