What I’m Watching This Week – 24 April 2017

The Markets (as of market close April 21, 2017)

Better-than-expected earnings reports for the first quarter helped push stocks higher last week. Each of the benchmark indexes listed here posted gains, some for the first time in several weeks. The small-cap Russell 2000, which had fallen below its end-of-year closing value, jumped 2.57% for the week and is now over 1.50% ahead of last year’s closing value. Gains in the industrial sector were reflected in an almost 1.0% advance in the S&P 500, while the Nasdaq increased nearly 2.0% for the week. On the other hand, energy companies didn’t fare as well, as oil fell below $50 per barrel.

The price of crude oil (WTI) fell last week, closing at $49.62 per barrel, down from the prior week’s closing price of $52.91 per barrel. The price of gold (COMEX) also dropped, closing at $1,286.40 by late Friday afternoon, down from the prior week’s price of $1,290.10. The national average retail regular gasoline price increased to $2.436 per gallon on April 17, 2017, $0.012 higher than the prior week’s price and $0.299 more than a year ago.

Market/Index 2016 Close Prior Week As of 4/21 Weekly Change YTD Change
DJIA 19762.60 20453.25 20547.76 0.46% 3.97%
Nasdaq 5383.12 5805.15 5910.52 1.82% 9.80%
S&P 500 2238.83 2328.95 2348.69 0.85% 4.91%
Russell 2000 1357.13 1345.24 1379.85 2.57% 1.67%
Global Dow 2528.21 2649.04 2661.88 0.48% 5.29%
Fed. Funds target rate 0.50%-0.75% 0.75%-1.00% 0.75%-1.00% 0 bps 25 bps
10-year Treasuries 2.44% 2.23% 2.24% 1 bps -20 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

  • March storms may have played a role in holding back the start of new home construction, according to the latest report from the Census Bureau. Privately owned housing starts in March were at an annual rate of 1,215,000 — 6.8% below the revised February estimate, but 9.2% above the rate for March 2016. On the plus side, building permits were 3.6% above the February rate and 17.0% ahead of March 2016. While the start of new home construction slowed, housing completions maintained a steady pace, with the number of completions 3.2% above February and 13.4% over last March.
  • Sales of existing homes followed a dismal February with a robust March. According to the National Association of Realtors®, existing home sales jumped 4.4% for the month over February — the strongest month since February 2007. March’s pace is 5.9% above March 2016. The median existing-home price for all housing types in March was $236,400, up 6.8% from March 2016 ($221,400). March’s price increase marks the 61st consecutive month of year-over-year gains. Total housing inventory at the end of March increased 5.8% to 1.83 million existing homes available for sale, but is still 6.6% lower than a year ago (1.96 million) and has fallen year-over-year for 22 straight months. Unsold inventory is at a 3.8-month supply at the current sales pace (unchanged from February).
  • According to the Federal Reserve’s report, industrial production increased 0.5% in March over February, primarily bolstered by a jump of 8.6% in the output of utilities — the largest in the history of the index. Unusually warm weather in February gave way to colder conditions, resulting in a spike in demand for heating in March. Manufacturing output fell 0.4% in March, led by a large step-down in the production of motor vehicles and parts; factory output aside from motor vehicles and parts moved down 0.2%. The production at mines edged up 0.1%. For the first quarter as a whole, industrial production rose at an annual rate of 1.5%.
  • In the week ended April 15, the advance figure for seasonally adjusted initial claims was 244,000, an increase of 10,000 from the previous week’s unrevised level of 234,000. The advance seasonally adjusted insured unemployment rate fell to 1.4%. The advance number for seasonally adjusted insured unemployment during the week ended April 8 was 1,979,000, a decrease of 49,000 from the prior week’s unrevised level of 2,028,000. This is the lowest level for insured unemployment since April 15, 2000.

Eye on the Week Ahead

Initial estimates for the first-quarter GDP are out at the end of the week. Final figures for the fourth quarter revealed that the economy increased at an annual rate of 2.1%. A first-quarter rate at or below 2.0% may sway the Fed to hold interest rates at their current levels when the Committee next meets during the first week of May.