What I’m Watching This Week – 8 September 2015

The Markets (as of market close September 4, 2015)

While the stock markets gained some momentum during the last week of August, they could not maintain that positive trend for the first week of September. Each of the indices listed here lost week-on-week, with the large-cap S&P 500 dropping almost 68 points, and the Global Dow falling more than 91 points. All of these indices are now in negative territory year-to-date, led by the Dow, which lost 9.65% from the 2014 market close.

The price of gold (COMEX) dropped again, selling at about $1,122.30 by late Friday afternoon compared to $1,133.30 a week earlier. Crude oil (WTI) prices remained relatively the same, selling at $45.77/barrel by week’s end. The national average retail regular gasoline price decreased to $2.510 per gallon on August 31, 2015, $0.127 under last week’s price of $2.637 per gallon and $0.949 below a year ago.

Market/Index 2014 Close Prior Week As of 9/4 Weekly Change YTD Change
DJIA 17823.07 16643.01 16102.38 -3.25% -9.65%
Nasdaq 4736.05 4828.32 4683.92 -2.99% -1.10%
S&P 500 2058.90 1988.87 1921.22 -3.40% -6.69%
Russell 2000 1204.70 1162.91 1136.17 -2.30% -5.69%
Global Dow 2501.66 2373.32 2281.91 -3.85% -8.78%
Fed. Funds 0.25% 0.25% 0.25% 0% 0%
10-year Treasuries 2.17% 2.18% 2.12% -6 bps -5 bps

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

Last Week’s Headlines

  • The nation’s trade gap closed a bit in July, according to the U.S. Bureau of Economic Analysis report on international trade of goods and services. The goods and services deficit was $41.9 billion in July, down $3.3 billion from June. The narrowing of the deficit is reflective of increased exports in July ($188.5 billion, $0.8 billion more than June exports) and decreased imports ($230.4 billion, $2.5 billion less than June imports). Year-to-date, the goods and services deficit increased $10.6 billion, or 3.6%, from the same period in 2014.
  • The Institute for Supply Management (ISM) Manufacturing Index is based on a monthly survey of purchasing managers at about 300 or so manufacturing firms across the United States. An index of 50 or higher signifies growth. The index for August came in at 51.1%, which evidences growth in the manufacturing sector. However, it is 1.6% lower than July, and is expanding at its slowest pace in more than two years.
  • Growth continued in the non-manufacturing sector in August, albeit at a slightly slower pace compared to July. The ISM Non-Manufacturing Index came in at 59% for August, 1.3% lower than July’s reading of 60.3%. The Non-Manufacturing Business Activity Index decreased 1%, the New Orders Index dropped 0.4%, and the Employment Index was 3.6% lower than July, while the Prices Index declined 2.9%.
  • Construction spending has risen to its highest level in seven years, led by private construction growth in both the residential and nonresidential sectors. According to the Department of Commerce, construction spending during July 2015 was estimated at a seasonally adjusted annual rate of $1,083.4 billion, 0.7% above the revised June estimate of $1,075.9 billion. The July figure is 13.7% above the July 2014 estimate of $952.5 billion.
  • Total nonfarm payroll employment increased by 173,000 in August, and the unemployment rate edged down to 5.1%, according to the U.S. Bureau of Labor Statistics’ latest report on the employment situation. Job gains occurred in health care and social assistance and in financial activities. Manufacturing and mining lost jobs. Over the year, the unemployment rate is down 1.0%, and the number of unemployed persons dropped to 1.5 million.
  • Also, the U.S. Bureau of Labor Statistics reported that nonfarm business sector labor productivity increased at a 3.3% annual rate during the second quarter of 2015, as output increased 4.7%, and hours worked increased 1.4%. This is the best quarterly performance since the fourth quarter of 2013. From the second quarter of 2014 to the second quarter of 2015, productivity has increased 0.7%, reflecting increases in output and hours worked of 3.3% and 2.6%, respectively.
  • The U.S. Census Bureau reported that new orders for manufactured goods in July increased a modest $2.0 billion, or 0.4%, to $482.0 billion. This followed a 2.2% June increase. Falling energy prices and the continued strength of the dollar offset a gain in motor vehicle orders (up 4%), and durable goods orders, which increased 2.2% in July from June.
  • For the week ended August 29, new claims for unemployment insurance increased 12,000 to 282,000 from the prior week’s revised level. The seasonally adjusted insured unemployment rate remained at 1.7% for the week ended August 22, with 2.26 million continuing claims.

Eye on the Week Ahead

Job openings and the producer prices–two key indicators considered by the Federal Reserve in determining whether to raise interest rates–are on the docket for next week. The government’s budget deficit is expected to decrease compared to last month when the Treasury’s budget report comes out at the end of the week.