What I’m Watching This Week – 21 August 2017

The Markets (as of market close August 18, 2017)

Last week saw domestic and global conflicts heighten investors’ concerns, pushing stocks lower in what was a slow week for trading. The Dow lost over 270 points last Thursday, offsetting robust gains the prior Monday. The S&P 500 fell 0.65%, while the Nasdaq dropped .64% last week. Once again, the biggest fall struck the small-cap Russell 2000, which lost 1.20% for the week and is essentially at its 2016 year-end closing value, having lost all of the gains amassed during 2017. Long-term bond prices remained the same as the yield on 10-year Treasuries was unchanged from the prior week.

The price of crude oil (WTI) closed at $48.73 per barrel, down slightly from the prior week’s closing price of $48.79 per barrel. The price of gold (COMEX) closed last week at $1,290.30 by late Friday afternoon, $4.70 lower than the prior week’s price of $1,295.00. The national average retail regular gasoline price increased for the fourth week in a row to $2.384 per gallon on August 14, 2017, $0.006 higher than the prior week’s price and $0.235 more than a year ago.

Market/Index 2016 Close Prior Week As of 8/18 Weekly Change YTD Change
DJIA 19762.60 21858.32 21674.51 -0.84% 9.67%
Nasdaq 5383.12 6256.56 6216.53 -0.64% 15.48%
S&P 500 2238.83 2441.32 2425.55 -0.65% 8.34%
Russell 2000 1357.13 1374.23 1357.79 -1.20% 0.05%
Global Dow 2528.21 2821.52 2810.24 -0.40% 11.16%
Fed. Funds target rate 0.50%-0.75% 1.00%-1.25% 1.00%-1.25% 0 bps 50 bps
10-year Treasuries 2.44% 2.19% 2.19% 0 bps -25 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 Economic Headlines

  • The volume of retail and food services sales picked up in July, increasing 0.6% over June’s sales figures. Sales were 4.2% above July 2016. Sectors whose sales expanded in July included motor vehicle and parts dealers (1.2%); building materials and garden equipment and supplies dealers (1.2%); and online retailers (1.3%).
  • The dollar is declining in value, which is good news for exporters but not so good for importers. July’s import and export prices report shows that both import and export prices increased over the prior month. Import prices increased 0.1% as petroleum imports jumped 0.7%. Export prices climbed 0.4% following a -0.2% fall in June. Export prices were helped by a 2.1% spike in prices for agricultural products.
  • The momentum created in June for new home construction did not carry over to July. According to the latest figures from the Census Bureau, building permits (-4.1%), housing starts (-4.8%), and housing completions (-6.2%) each decreased from their respective June rates. A slowdown in home building will not help an already dwindling supply and could prove to be a drag on overall economic growth.
  • According to the latest report from the Federal Reserve, industrial production rose 0.2% in July following an increase of 0.4% in June. Overall, total industrial production was 2.2% above its year-earlier level. In July, manufacturing output edged down 0.1%; the production of motor vehicles and parts fell substantially, but that decrease was mostly offset by a net gain of 0.2% for other manufacturing industries. The indexes for mining and utilities in July rose 0.5% and 1.6%, respectively.
  • In the week ended August 12, the advance figure for seasonally adjusted initial claims for unemployment insurance was 232,000, a decrease of 12,000 from the previous week’s unrevised level. The advance seasonally adjusted insured unemployment rate remained 1.4%, unchanged from the previous week’s unrevised rate. During the week ended August 5, there were 1,953,000 receiving unemployment insurance benefits, a decrease of 3,000 from the previous week’s revised level. The previous week’s level was revised up 5,000 from 1,951,000 to 1,956,000.

Eye on the Week Ahead

Stocks were unable to shake a recent slump last week. A week without violence would go a long way toward quelling investor concerns and pushing equities higher. On the economic front, the housing sector is an important gauge of economic momentum. In the first quarter, sales of new and existing homes were robust. However, lack of inventory and rising prices have stymied sales during the second quarter. High demand for housing may be a sign that people are comfortable enough with their financial situation to make a large purchase. However, the lack of inventory means builders can’t keep up with the demand for new housing, and homeowners aren’t inclined to sell their current homes. This week’s reports on sales of new and existing homes in July may shed some light on whether sales are picking up or lagging.