TheMoneyGeek Unplugged

In another volatile holiday-shortened week, the S&P 500 index closed 0.5% lower as the euphoric end-of-year rally lost all momentum. The NASDAQ index closed down 0.75%, while the small capitalization stocks finally showed some strength and closed up 0.9%. The traditional year-end Santa Claus rally was MIA as more signs of institutional distribution (selling) emerged.

The Institute for Supply Management’s (ISM) Purchasing Managers (PMI) Index (1) for Manufacturing came in at 49.3%, just 0.9 percentage points higher than November’s reading but still in contraction. While manufacturing is still in contraction overall, it is moving slower. Additionally, the New Orders Index improved in December.

However, the report also showed that the Employment Index decreased and fell deeper into contraction while the Prices Index rose and grew faster. If manufacturing employment continues to decline while prices climb and overall contraction persists, even an increase in new orders may not keep the manufacturing sector afloat.

Pending Home Sales (2) from the National Association of Realtors increased by 2.2%, suggesting buyers may no longer be willing to wait for lower mortgage rates. The 30-year fixed rate is still increasing and nearing 7%.

The 20-City Adjusted Case-Shiller Home Price Index for October was up 0.3% versus September (4.2% year over year), slightly higher than expected.

Monitoring additional housing metrics in the coming weeks will be essential to gauge the housing market’s health in 2025.

Weekly jobless claims came in at 211,000, lower than expectations for 225,000, showing continued stability. This data tends to be volatile around the holidays.

The U.S. Bureau of Labor Statistics will release its monthly jobs report for December on Friday, January 10.

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(1) The Institute for Supply Management (ISM) Manufacturing Purchasing Managers’ Index (PMI), released on the first business day of each month for the previous month, surveys purchasing and supply executives around the country on new orders, production, employment, and much more. Manufacturing supply executives are polled on their view of the current economic climate concerning their respective businesses. The ISM Manufacturing PMI is a diffusion index – “they have properties of leading indicators and are convenient summary measures showing the prevailing direction of change and the scope of change.” A reading above 50 percent indicates that the manufacturing economy is generally expanding, while a reading below 50 percent indicates that it is typically declining. The ISM Manufacturing PMI is considered a highly reliable gauge of current business conditions for the manufacturing sector.

(2) The Pending Home Sales Index from the National Association of Realtors (NAR) is a leading indicator for the housing sector based on pending sales of existing homes. A sale is pending if a contract has been signed but has not yet closed. Typically, these sales close within two months of a contract signing.

Source: InvesTech Research