Stocks Finish Week Strongly, With Nasdaq Up for Three Straight Weeks

Good evening:

Major market indices slipped slightly at the beginning of the shortened trading week, fell more sharply on Wednesday and Thursday in response to recession worries, and finished by rebounding on Friday. Investors worried that the Fed would overtighten in its inflation battle, despite increasingly visible progress. This week, December PPI core came in at +0.1% vs +0.4% last month. Headline PPI also fell, coming in at 6.2%, down from November and below expectations of 6.8%.

However, Fed officials continued to warn that the fight was not over. Vice Chair Lael Brainard said, “Inflation remains high, and policy will need to be sufficiently restrictive for some time.” Similarly, Federal Reserve Governor Christopher Waller told an audience at the Council for Foreign Relations in New York that “we still have a considerable way to go,” though he confirmed his support for a 25bp increase at the next FOMC meeting.

Disappointing retail numbers for November and December contributed to worries about the economy. Data showed that retail sales slipped in December, falling 1.1% from November to $677.1 billion. Economists were forecasting a contraction of 0.8%. Retail sales during November and December grew 5.3% year over year to $936.3 billion, failing to keep up wi...