The Week on Wall Street
A late-week, two-day rally left stocks higher, adding to November’s gains as the last month of trading for 2023 began.
The Dow Jones Industrial Average was flat (+0.01%), while the Standard & Poor’s 500 gained 0.21%. The Nasdaq Composite index advanced 0.69% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, was up 0.37%.1,2,3
Stocks Extend Gains
The relationship between the bond and stock markets–which pushed stocks higher in November (i.e., falling bond yields, rising stock prices)–disappeared last week, with stocks falling in the first three days of the week despite declining yields. Yields dropped following a weak job openings report, the ADP employment update, and a substantial productivity revision.
On Thursday, investor enthusiasm returned with force on Artificial Intelligence (AI) related news. One AI chip manufacturer announced a new AI chip, followed by a mega-cap tech company unveiling an enhanced version of its AI model for business use. Stocks continued their climb on Friday despite rising yields, as investors viewed a stronger-than-expected employment report as increasing the potential for a soft landing.
Productivity Surges
Higher productivity may be the most effective and preferred way to reduce inflation. Last week’s revised third-quarter productivity report saw an upward revision of the annualized productivity growth from the initial report of 4.7% to 5.2%; this was welcome news on the inflation front and an encouraging development for future corporate profits.4
The 5.2% jump in productivity represented the fastest pace since the third quarter of 2020. The report also showed unit labor costs falling at a 1.2% annualized pace, reflecting a cooling of wage-growth inflationary pressures. Productivity has increased for two straight quarters, potentially allowing the Fed to ease its restrictive monetary policy.5
Weekly Riddle
My first is twice in apple but not once in tart. My second is in liver but not in heart. My third is in giant and also in ghost. Whole I’m best when I am roast. What am I?
Last week’s riddle: It has no body, but it has a copper head and copper tail. It can be found in the street and in just about any store. What is it?
Answer: A penny.
John Dombroski Jr. may be reached at (480) 991-1055 or [email protected]
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