Month: September 2017

The Markets (as of market close September 22, 2017)

The benchmark indexes listed here ended last week mixed, with the large caps of the S&P 500 and Dow posting modest gains, while the tech-heavy Nasdaq fell back a bit. The small-cap Russell 2000 performed the best, gaining 1.33%. Energy stocks climbed as oil prices hit a three-month high. The yield on 10-year Treasuries climbed as prices fell. Overall, trading was rather subdued, probably in response to the strong dialogue between the United States and North Korea.

The price of crude oil (WTI) cracked the $50 mark for the first time in a while, closing at $50.66 per barrel, up from the prior week’s closing price of $49.83 per barrel. The price of gold (COMEX) fell to $1,300.50 by early Friday evening, $23.00 lower than the prior week’s price of $1,323.50. The national average retail regular gasoline price decreased to $2.634 per gallon on September 18, 2017, $0.051 less than the prior week’s price and $0.409 more than a year ago.

Market/Index	2016 Close	Prior Week	As of 9/22	Weekly Change	YTD Change
DJIA	19762.60	22268.34	22349.59	0.36%	13.09%
Nasdaq	5383.12	6448.47	6426.92	-0.33%	19.39%
S&P 500	2238.83	2500.23	2502.22	0.08%	11.76%
Russell 2000	1357.13	1431.71	1450.78	1.33%	6.90%
Global Dow	2528.21	2890.56	2907.95	0.60%	15.02%
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%	2.20%	2.25%	5 bps	-19 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

• Despite strengthening in the labor market and modest economic growth, the Federal Open Market Committee decided to maintain the target range for the federal funds rate at 1.00%-1.25%. In deciding to maintain interest rates at their current level, the Committee noted that inflation has remained below the FOMC’s 2% target and the likelihood that hurricanes Harvey, Irma, and Maria will affect economic activity in the near term. Nevertheless, the Committee indicated that rates could be increased at least one more time before the end of the year.
• Considering the impact of Hurricane Harvey, new home construction in August was solid. Building permits, a direct indicator of future construction, were up 5.7% in August over July, and 8.3% above August 2016. Privately owned housing starts fell 0.8% (still 1.4% above last year), while housing completions were down 10.2% from July, possibly reflecting the impact of Hurricane Harvey.
• Sales of existing homes fell in August for the fourth time in the last five months. Existing home sales, which include single-family homes, townhomes, condominiums, and co-ops, retreated 1.7% to a seasonally adjusted annual rate of 5.35 million in August from 5.44 million in July. Last month’s sales pace is 0.2% above August 2016, and is the lowest since then. According to the National Association of Realtors®, while demand for existing homes is steady, there continues to be a lack of inventory, which is driving prices higher. Total housing inventory at the end of August declined 2.1% to 1.88 million existing homes available for sale and is now 6.5% lower than a year ago. The median existing-home price in August was $253,500, up 5.6% from August 2016 ($240,000). August’s price increase marks the 66th straight month of year-over-year gains.
• Import prices rose 0.6% in August, the first monthly increase since a 0.2% jump in April. This marks the largest advance for import prices since the index rose 0.6% in January. Much of the price increase was due to a 4.2% rise in fuel import prices, which is the first such increase since February and the largest advance since January. Nonfuel prices expanded 0.3% in August, driven by a 3.9% jump in nonfuel industrial supplies and materials import prices. Export prices rose 0.6% in August following a 0.5% increase the previous month. The August advance was the largest monthly rise since the index increased 0.8% in June 2016. Nonagricultural export prices advanced 0.7% in August, which is the largest advance since May 2016. The rise in export prices was driven by expanding export prices for nonagricultural industrial supplies and materials.
• In the week ended September 16, the advance figure for initial claims for unemployment insurance was 259,000, a decrease of 23,000 from the previous week’s revised level. Hurricanes Harvey and Irma impacted this week’s initial claims. The advance insured unemployment rate remained at 1.4%. The advance number of those receiving unemployment insurance during the week ended September 9 was 1,980,000, an increase of 44,000 from the previous week’s revised level.

Eye on the Week Ahead

September and the third quarter come to an end this week. The final figures for the second-quarter gross domestic product are released this week, as is the August report on consumer income and spending.

 

The Markets (as of market close September 15, 2017)

Stocks followed the prior week’s plunge by surging to record highs last week. The Dow, S&P 500, and Nasdaq reached new all-time highs during the week, as each of the indexes listed here posted impressive gains. The small caps of the Russell 2000 led the way, gaining over 2.3%, followed by the Dow, S&P 500, Nasdaq, and the Global Dow. For the year, the Nasdaq still remains in the lead as it closes in on 20%.

The price of crude oil (WTI) closed at $49.83 per barrel, up from the prior week’s closing price of $47.56 per barrel. The price of gold (COMEX) fell to $1,323.50 by early Friday evening, $27.50 lower than the prior week’s price of $1,351.00. The national average retail regular gasoline price increased to $2.658 per gallon on September 11, 2017, $0.006 higher than the prior week’s price and $0.483 more than a year ago.

Market/Index	2016 Close	Prior Week	As of 9/15	Weekly Change	YTD Change
DJIA	19762.60	21797.79	22268.34	2.16%	12.68%
Nasdaq	5383.12	6360.19	6448.47	1.39%	19.79%
S&P 500	2238.83	2461.43	2500.23	1.58%	11.68%
Russell 2000	1357.13	1399.43	1431.71	2.31%	5.50%
Global Dow	2528.21	2853.39	2890.56	1.30%	14.33%
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%	2.05%	2.20%	15 bps	-24 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 lack of inflationary price pressure in the economy has persisted throughout the summer months. According to the Consumer Price Index, consumer prices rose 0.4% in August and are up 1.9% over the past 12 months. However, much of the monthly increase is attributable to a spike in energy prices, particularly gasoline, which increased 6.3% in August and has increased 10.4% over the past 12 months. The index less food and energy rose a more modest 0.2% for the month and is up 1.7% over the past 12 months. According to the report, Hurricane Harvey had a very small effect on survey response rates in August.

• The prices producers received for goods and services increased 0.2% in August compared to July’s 0.1% decrease. For the last 12 months ended in August, producer prices have increased 2.4%. The index for producer prices less foods, energy, and trade services also increased 0.2% in August following no change in July. Over the last 12 months, producer prices less foods, energy, and trade services rose 1.9%.

• Retail sales to consumers scaled back in August, decreasing 0.2% from the previous month. In-store sales were down 0.3%, while nonstore (online) sales were down 1.1% for the month, but are up 8.4% over the prior 12 months.

• The federal deficit was $107.7 billion in August, an increase of $65 billion from July. Through 11 months of fiscal 2017, the total deficit sits at $674 billion — up from $619 billion over the same period last year. Compared to last year, total expenditures are up 3.1% while total receipts are ahead 1.9%.

• Hurricane Harvey impacted industrial production in August, according to the Federal Reserve’s Industrial Production and Capacity Utilization report. Industrial production declined 0.9% in August following six consecutive monthly gains. The index for manufacturing decreased 0.3%. The manufacturing industries with the largest estimated storm-related effects were petroleum refining, organic chemicals, and plastics materials and resins. The output of mining fell 0.8% in August, as Hurricane Harvey temporarily curtailed drilling, servicing, and extraction activity for oil and natural gas. The output of utilities dropped 5.5%, as unseasonably mild temperatures, particularly on the East Coast, reduced the demand for air conditioning.

• The Job Openings and Labor Turnover Summary for July revealed the number of job openings increased from 6.12 million in June to 6.17 million in July. The number of hires and total separations in July were little changed from the prior month. Some of the areas seeing notable job increases include transportation, warehousing, and utilities and educational services. Job openings decreased in health care and social assistance and state and local government. Over the 12 months ended in July, hires totaled 63.6 million and separations totaled 61.5 million, yielding a net employment gain of 2.1 million.

• In the week ended September 9, the advance figure for initial claims for unemployment insurance was 284,000, a decrease of 14,000 from the previous week’s unrevised level. Hurricanes Harvey and Irma impacted this week’s initial claims. The advance insured unemployment rate remained at 1.4%. The advance number of those receiving unemployment insurance during the week ended September 2 was 1,944,000, a decrease of 7,000 from the previous week’s revised level.

Eye on the Week Ahead

The Federal Open Market Committee meets this week following a break in August. Committee members will cull a mixed bag of economic information, with job growth steady but little inflationary pressure. The FOMC may opt to leave interest rates as they are for the time being, with a possible increase in October in anticipation of more noticeable economic growth during the fall months.

The Markets (as of market close September 8, 2017)

Retail gas prices surged as Hurricane Harvey forced refineries to shut down, leading to curtailed petroleum shipments. Higher gas prices cut into investors’ pockets, prompting them to move money from stocks to bonds. Each of the indexes listed here lost value last week, with the exception of the Global Dow, which posted a modest gain. Hurricanes Harvey and Irma, plus continued tensions between the United States and North Korea, didn’t help equities. The yield on 10-year Treasuries fell 11 basis points as prices rose.

The price of crude oil (WTI) closed at $47.56 per barrel, up slightly from the prior week’s closing price of $47.35 per barrel. The price of gold (COMEX) reached $1,351.00 by early Friday evening, $21.10 higher than the prior week’s price of $1,329.90. The national average retail regular gasoline price increased to $2.679 per gallon on September 4, 2017, $0.280 higher than the prior week’s price and $0.456 more than a year ago.

The Markets (as of market close September 1, 2017)

Equities were back in the black last week, with each of the indexes listed here posting end-of-week gains. The Nasdaq soared to its largest weekly gain of the year. The large caps of the Dow and S&P 500 enjoyed noticeable gains, despite last Friday’s mundane jobs report. Even the Russell 2000, which had been lagging of late, climbed over 2.50% for the week and is now 4.16% ahead of its 2016 closing value.

The price of crude oil (WTI) closed at $47.35 per barrel, down from the prior week’s closing price of $47.87 per barrel. The price of gold (COMEX) reached $1,329.90 by early Friday evening, $33.40 higher than the prior week’s price of $1,296.50. The national average retail regular gasoline price decreased to $2.399 per gallon on August 28, 2017, $0.039 lower than the prior week’s price and $0.162 more than a year ago.

Market/Index	2016 Close	Prior Week	As of 9/1	Weekly Change	YTD Change
DJIA	19762.60	21813.67	21987.56	0.80%	11.26%
Nasdaq	5383.12	6265.64	6435.33	2.71%	19.55%
S&P 500	2238.83	2443.05	2476.55	1.37%	10.62%
Russell 2000	1357.13	1377.45	1413.57	2.62%	4.16%
Global Dow	2528.21	2834.52	2852.47	0.63%	12.83%
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%	2.17%	2.16%	-1 bps	-28 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 latest report on the second-quarter gross domestic product proved to be very solid, as the GDP climbed to 3.0% — 0.4 percentage point higher than the first estimate. The first-quarter GDP increased 1.2%. Economic growth was led by increases in consumer spending, nonresidential (business) fixed investment, federal government spending, and private inventory investment. Downturns occurred in residential fixed investment, state and local government spending, and a deceleration in exports. Increased consumer spending could be related to weak price inflation. How the Fed views this information when it meets later this month could go a long way in determining whether interest rates are raised.
• The number of new hires took a step back in August with only 156,000 jobs added during the month. Job gains occurred in manufacturing, construction, professional and technical services, health care, and mining. Employment growth has averaged 176,000 per month thus far this year, down from the average monthly gain of 187,000 in 2016. The unemployment rate ticked up 0.1 percentage point to 4.4%. The labor force participation rate, at 62.9%, was unchanged in August and has shown little movement on net over the past year. The employment-population ratio, at 60.1%, was little changed over the month and thus far this year. The average workweek for all employees on private nonfarm payrolls declined by 0.1 hour to 34.4 hours in August. Average hourly earnings for all employees on private nonfarm payrolls rose by $0.03 to $26.39, after rising by $0.09 in July. Over the past 12 months, average hourly earnings have increased by $0.65, or 2.5%.
• Consumers’ income and spending increased in July but not prices, according to the latest report from the Bureau of Economic Analysis. Personal (pre-tax) income increased $65.6 billion (0.4%) in July while disposable (after-tax) personal income (DPI) increased $39.6 billion (0.3%). Personal consumption expenditures (PCE) increased $44.7 billion (0.3%). Prices for consumer goods and services as measured by the PCE price index increased a marginal 0.1%, as did core (excluding food and energy) PCE.
• The international trade in goods deficit expanded to $65.1 billion in July, up $1.1 billion from $64.0 billion in June. Exports of goods for July were $127.1 billion, $1.6 billion less than June exports. Imports of goods for July were $192.2 billion, $0.5 billion less than June imports.
• According to the August survey from IHS Markit, manufacturing output was the weakest since June 2016. U.S. Manufacturing Purchasing Managers’ Index™ (PMI™) registered 52.8 in August, down slightly from July’s reading of 53.3. Since a reading over 50 signifies growth, manufacturing output grew in August, but at a slower pace than July’s growth. The purchasing managers index from the Institute for Supply Management showed output increased last month. The August PMI® registered 58.8%, an increase of 2.5 percentage points from the July reading of 56.3%. The survey sample size for the purchasing managers’ index of the ISM is generally smaller than the one used by Markit, which may explain discrepancies between the reports.
• The Conference Board Consumer Confidence Index® increased to 122.9 in August, up from July’s reading of 120.0. Survey respondents were bullish on current economic conditions, while their short-term expectations were tepid. The Index of Consumer Sentiment from the University of Michigan’s Surveys of Consumers increased from July’s 93.4% to 96.9% in August.
• In the week ended August 26, the advance figure for initial claims for unemployment insurance was 236,000, an increase of 1,000 from the previous week’s revised level. The previous week’s level was revised up by 1,000 from 234,000 to 235,000. The advance insured unemployment rate remained at 1.4%. The advance number of those receiving unemployment insurance during the week ended August 19 was 1,942,000, a decrease of 12,000 from the previous week’s unrevised level of 1,954,000.

Eye on the Week Ahead

The Gulf region continues to recover from the effects of Hurricane Harvey. It will be several weeks before the economic impact of that devastating storm can be measured. July’s report on international trade for goods and services is out this week. Last week’s report showed that the goods trade deficit expanded in July. Despite efforts on the part of the current administration to control foreign trade, imports continue to expand at a faster rate than exports, pushing the trade deficit higher.

The Markets (as of market close August 31, 2017)

Equities in August saw many peaks and valleys throughout the month, finally rallying at the end of the month. Strong second-quarter GDP figures, steady job gains, and increased consumer spending sent stocks higher, despite stagnant inflation and heavy personal and financial losses caused by Hurricane Harvey. The large caps of the S&P 500 and Dow posted marginal monthly gains with the tech-heavy Nasdaq leading the way closing August up 1.27%. The small caps of the Russell 2000 continued to lag, falling 1.39% from its July closing value. The Global Dow inched down 0.32% for the month, but is still strong year-to-date, up over 12.50%. The prices of 10-year Treasuries climbed, sending yields lower.

By the close of trading on August 31, the price of crude oil (WTI) was $47.07 per barrel, down from the July 31 price of $50.18 per barrel. The national average retail regular gasoline price was $2.399 per gallon on August 28, up from the July 31 selling price of $2.352 and $0.162 more than a year ago. The price of gold increased by the end of August, closing at $1,327.20 on the last trading day of the month, up $51.60 from its July 31 price of $1,275.60.

Market/Index	2016 Close	Prior Month	As of August 31	Month Change	YTD Change
DJIA	19762.60	21891.12	21948.10	0.26%	11.06%
NASDAQ	5383.12	6348.12	6428.66	1.27%	19.42%
S&P 500	2238.83	2470.30	2471.65	0.05%	10.40%
Russell 2000	1357.13	1425.14	1405.28	-1.39%	3.55%
Global Dow	2528.21	2856.10	2846.93	-0.32%	12.61%
Fed. Funds	0.50%-0.75%	1.00%-1.25%	1.00%-1.25%	0 bps	50 bps
10-year Treasuries	2.44%	2.29%	2.12%	-17 bps	-32 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 Month’s Economic News

• Employment: The second half of the year began with a strong showing in the employment sector. In July, job growth expanded by 209,000 and the unemployment rate slid 0.1 percentage point to 4.3%, representing about 7.0 million unemployed persons. Employment growth has averaged 184,000 per month thus far this year, in line with the average monthly gain of 187,000 in 2016. Notable employment gains occurred in health care, professional and business services, and food services and drinking places. The labor participation rate was essentially unchanged at 62.9%. The average workweek for all employees was unchanged from June at 34.5 hours. Average hourly earnings rose by $0.09 to $26.36. Over the year, average hourly earnings have risen by $0.65, or 2.5%.
• FOMC/interest rates: The Federal Open Market Committee did not meet in August, so the target federal funds rate range remained at 1.00%-1.25%. If upward price inflation continues to stagger, the Committee may be hard-pressed to raise interest rates when it next meets in mid-September.
• GDP/budget: The gross domestic product expanded over the second quarter at an annual rate of 3.0%, according to the second estimate from the Bureau of Economic Analysis. The first-quarter GDP grew at an annualized rate of 1.2%. Consumer and government spending and business investment were positives in the report, offset by deceleration in residential investment and net exports. As to the government’s budget, the federal deficit for July was $42.9 billion, $47.3 billion lower than the June deficit. Through the first 10 months of the fiscal year, the deficit sits at $566 billion, which is about 10.6% above the deficit over the same period last year.
• Inflation/consumer spending: Upward price inflation continues to be weak. Consumer spending, on the other hand, is increasing. The personal consumption expenditures (PCE) price index (a measure of what consumers pay for goods and services) ticked up only 0.1% in July. The core PCE (excluding energy and food) price index also inched ahead 0.1% for the month. Personal (pre-tax) income climbed 0.4% and disposable personal (after-tax) income increased 0.3% from the prior month. With increased income, consumer expenditures rose, climbing 0.3% in July.
• The prices companies receive for goods and services fell 0.1% in July from June, according to the Producer Price Index. Year-over-year, producer prices have increased 1.9%. Over 80% of the July decrease in prices is attributable to services, which fell 0.2%. Prices for goods edged down 0.1%. Prices less food, energy, and trade were unchanged in July from the prior month and are up 1.9% over the last 12 months.
• Consumer prices rose a scant 0.1% in July, after recording no change in June. For the 12 months ended in July, consumer prices are up 1.7%, a mark that remains below the Fed’s 2.0% target for inflation. Core prices, which exclude food and energy, edged up 0.1% in July, the same increase as June, and are up 1.7% year-over-year.
• Housing: Scant inventory and rising prices have slowed sales of new and existing homes in July. Total existing-home sales slipped 1.3% for the month and are up only 2.1% from a year ago. The July median price for existing homes was $258,300, which is 2.1% below June’s median price of $263,800 but up 6.2% from the price last July. Housing inventory declined 1.0% for the month and is now 9.0% lower than a year ago. The Census Bureau’s latest report reveals sales of new single-family homes fell 9.4% in July to an annual rate of 571,000 — down from June’s upwardly revised rate of 630,000. The median sales price of new houses sold in July was $313,700 ($310,800 in June). The average sales price was $371,200 ($379,500 in June). The seasonally adjusted estimate of new houses for sale at the end of July was 276,000. This represents a supply of 5.8 months at the current sales rate, which is an increase in inventory from May and June (5.2 months).
• Manufacturing: Industrial production expanded by 0.2% in July following an increase of 0.4% in June, according to the Federal Reserve’s monthly report on Industrial Production and Capacity Utilization. Manufacturing output edged down 0.1% after increasing 0.2% in June. Contributing to the recession in manufacturing output was a drop in production of motor vehicles and parts, which decreased 3.5%. Mining output was again strong, posting a gain of 0.5% in July after increasing 1.6% in June. The index for utilities rose 1.6% after remaining stagnant in June. Capacity utilization for the industrial sector was unchanged in July to 76.7%, a rate that is 3.2 percentage points below its long-run average. New orders for durable goods fell in July on the heels of a steep drop in aircraft orders. The Census Bureau reports new orders decreased $16.7 billion, or 6.8%, from June, which saw new orders increase 6.4%. However, excluding the transportation segment, new durable goods orders increased 0.5%. Orders for core capital goods (excluding defense and transportation) jumped 0.4% in July. Over the 12 months ended in July, core capital goods orders are up 3.5%.
• Imports and exports: The advance report on international trade in goods revealed that the trade gap widened 1.7% in July over June. The overall trade deficit was $65.1, up $1.1 billion from the prior month. The total volume of exports of goods decreased $1.6 billion to $127.1 billion. Imports of goods fell $0.5 billion to $192.2 billion. Prices for U.S. imports edged up 0.1% in July, led by higher fuel prices, which more than offset lower prices for nonfuel imports. The July increase in import prices followed declines in each of the two previous months. U.S. export prices advanced 0.4% in July, after decreasing 0.2% in June.
• International markets: In anticipation of its departure from the European Union, the United Kingdom’s Department for Business, Energy, and Industrial Strategy published a set of reforms aimed at strengthening the country’s image as a leader in corporate governance. Negotiations between the UK and the EU continued with nothing of substance resolved to date. China’s stocks surged on strong corporate earnings reports. Otherwise, world markets were mixed, particularly at the end of August as investors wait for the economic impact of Hurricane Harvey.
• Consumer sentiment: The Conference Board Consumer Confidence Index® for August rose to 122.9, up from July’s revised 120.0. Consumers expressed growing confidence in current economic conditions but were reticent about future economic prospects.

Eye on the Month Ahead

Investors will look for stock values to continue to climb in September following a bumpy August. The month kicks off with the jobs report for August, which comes out the first day of September. The FOMC meets in September following a break last month. Slowing inflation has tempered the Committee’s push for higher interest rates. The final second-quarter GDP figures come out at month’s end.