Chief Economist Scott Brown discusses the latest market data.

Investor optimism remained strong in the first day of trading 2020, but news that the US. Military had assassinated an Iranian general sent share prices lower. The price of oil rose and bond yields fell in response to heightened uncertainty.

The ISM Manufacturing Index fell to 47.2 in December, vs. 48.1 in November. New orders, production, and employment contracted for the fifth consecutive month. Order backlogs fell for the eighth month in a row (not a good sign). “Global trade remains the most significant cross-industry issue, but there are signs that several industry sectors will improve as a result of the phase-one trade agreement between the U.S. and China,” according to the report.

The Conference Board’s Consumer Confidence Index edged down to 126.5 in the initial estimate for December, vs. 126.8 in November (revised from 125.5). Consumers’ assessments of current conditions improved, but their expectations declined, driven by a softening in the outlook regarding jobs and financial prospects. “While the economy hasn’t shown signs of further weakening, there is little to suggest that growth, and in particular consumer spending, will gain momentum in early 2020,” according to the report.

Next week, geopolitical developments are expected to drive financial markets. The ISM Non-Manufacturing Index (Tuesday) should remain consistent with moderate growth in the overall economy. The Employment Report (Friday) will be subject to possible seasonal distortions, but we should see a moderation in the trend in job growth. Prior to seasonal adjustment, we can expect to lose jobs in construction and education in December and gain (temporary) jobs in retail and deliveries. Annual benchmark revisions to the household survey data (the unemployment rate) are not expected to change the picture. Revisions to the establishment survey data (payrolls, hours, and earnings) will be released on February 7.