Month: January 2018

The Markets (as of market close January 26, 2018)

Major stock market indexes continue to set records, as the S&P 500 broke its 14th record in January. Favorable corporate earnings reports, a congressional stopgap measure to fund the federal government, and a 2.6% annual rate of growth for the fourth-quarter GDP helped buoy investors’ confidence in equities. Overall, the benchmark indexes listed here posted their fourth consecutive week of gains, led by the Nasdaq, followed by the S&P 500, the Dow, and the Global Dow, each of which gained over 2.0%. On the other hand, at 2.66%, the yield on 10-year Treasuries rose to its highest level in over four years as demand for long-term bonds fell, while the dollar continued to spiral downward.

The price of crude oil (WTI) climbed to $66.24 per barrel last Friday, up from the prior week’s closing price of $63.57 per barrel. The price of gold (COMEX) also rose last week to $1,353.30 by early Friday evening, ahead of the prior week’s price of $1,338.30. The national average retail regular gasoline price increased for the fifth consecutive week to $2.567 per gallon on January 22, 2018, $0.010 above the prior week’s price and $0.241 more than a year ago.

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

• According to the initial, or advance, estimate, the gross domestic product increased at an annual rate of 2.6% in the fourth quarter of 2017. As more data is accumulated, this rate will likely change over the next two readings released in February and March. Consumer spending rose a strong 3.8% in the fourth quarter, highlighted by a 14.2% spike in durable goods spending. Current-dollar personal income increased $178.9 billion in the fourth quarter, compared with an increase of $112.3 billion in the third. Disposable (after-tax) personal income increased $139.0 billion, or 3.9%, in the fourth quarter, compared with an increase of $73.8 billion, or 2.1%, in the third. Overall, the GDP increased 2.3% in 2017 (that is, from the 2016 annual level to the 2017 annual level), compared with an increase of 1.5% in 2016.
• As referenced in the GDP report, new orders for manufactured durable goods in December increased $7.0 billion, or 2.9%, to $249.4 billion, the U.S. Census Bureau announced. This increase, up four of the last five months, followed a 1.7% November increase. However, excluding transportation, durable goods orders increased only 0.6% last month. Shipments of manufactured durable goods in December, up seven of the last eight months, increased $1.5 billion, or 0.6%, to $246.8 billion, following a 1.3% November increase. Unfilled orders and inventories also increased in December over November.
• Home resales slowed in December, according to the latest report from the National Association of Realtors®. Total existing-home sales fell 3.6% in December from November’s total. However, sales increased 1.1% in 2017 to a 5.51 million sales pace — the highest rate in 11 years. A prime reason for the slip in December’s sales is the lack of available inventory, which dropped 11.4% in December and is now 10.3% lower than a year ago. Unsold inventory is at a 3.2-month supply, which is down from 3.6 months a year ago. The paucity of inventory has helped drive up the median home price, which climbed to $246,800 in December — 5.8% higher than December 2016.
• Sales of new single-family homes plummeted 9.3% in December from November, according to the Census Bureau. However, new home sales are up 14.1% compared to December 2016. December’s median sales price increased to $335,400 ($334,900 in November), while the average sales price climbed to $398,900 ($383,600 in November). On the plus side of the report, inventory increased from 4.9 months in November to 5.7 months in December.
• According to the latest report from the Census Bureau, the international trade deficit for goods was $71.6 billion in December, up $1.6 billion from November. Exports of goods were $137.6 billion, $3.6 billion more than November exports. Imports of goods for December were $209.2 billion, $5.2 billion more than November imports.
• In the week ended January 20, initial claims for unemployment insurance was 233,000, an increase of 17,000 from the previous week’s level, which was revised down by 4,000 to 220,000. The advance insured unemployment rate remained 1.4%. The advance number of those receiving unemployment insurance benefits during the week ended January 13 was 1,937,000, a decrease of 28,000 from the prior week’s level, which was revised up by 13,000.

Eye on the Week Ahead

The last few days of January into February include several important economic reports. Personal income, consumer spending, and consumer prices for December are important indicators of economic strength and inflationary pressures in the consumer sector. The latest report on employment is out at the end of the week. The number of hires for new jobs slowed a bit toward the end of 2017. Also, wages are expected to show only marginal growth for December and 2017.

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The Markets (as of market close January 19, 2018)

Corporate earnings season entered its second week with generally favorable results, which likely drove equities last week. Each of the benchmark indexes listed here posted weekly gains, led by the Dow and Nasdaq, which continues to post strong early-year gains in the technology sector. Apparently, the threat (and eventual occurrence) of a federal government shutdown didn’t curb investor enthusiasm. On the other hand, the government shutdown probably did impact long-term bond prices as the yield on 10-year Treasuries climbed 11 basis points (as prices fall, yields rise), while the U.S. dollar also dropped.

The price of crude oil (WTI) fell to $63.57 per barrel last Friday, down from the prior week’s closing price of $64.40 per barrel. The price of gold (COMEX) also declined last week to $1,331.10 by early Friday evening, down from the prior week’s price of $1,338.30. The national average retail regular gasoline price increased for the fourth week in a row to $2.557 per gallon on January 15, 2018, $0.035 above the prior week’s price and $0.199 more than a year ago.

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

• According to the Federal Reserve’s Industrial Production and Capacity Utilization report, industrial production rose 0.9% in December, even though manufacturing output edged up a modest 0.1%. For the fourth quarter as a whole, total industrial production jumped at an annual rate of 8.2%, after being held down in the third quarter by hurricanes Harvey and Irma. The gain in manufacturing output in December was the fourth consecutive monthly increase. Overall, the increase in industrial production was largely driven by the output of utilities, which advanced 5.6% for the month. Mining moved up 1.6%. Capacity utilization for the industrial sector was 77.9%, a rate that is 2.0 percentage points below its long-run average.
• New residential construction slowed in December. According to the latest Census Bureau report, applications for building permits fell 0.1% below November’s rate, while new housing starts dropped 8.2% from November’s revised estimate. On the plus side, housing completions in December were up 2.2% over November’s figures and are 7.4% above the December 2016 rate. A lack of inventory may have propelled home completions in order to get more new homes on the market. This focus on housing completions may have pushed new applications and starts to the back burner.
• In the week ended January 13, initial claims for unemployment insurance was 220,000, a decrease of 41,000 from the previous week’s level. The advance insured unemployment rate rose 0.1 percentage point to 1.4%. The advance number of those receiving unemployment insurance benefits during the week ended January 6 was 1,952,000, an increase of 76,000 from the prior week’s level, which was revised up by 7,000.

Eye on the Week Ahead

The first report on the fourth-quarter gross domestic product is out this week. Economic growth exceeded 3.0% in the third quarter and is expected to remain about the same for the last quarter of 2017. Also, reports on the housing sector for December are available this week.

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The Markets (as of market close January 12, 2018)

Equities continued their strong showing to start the year. Each of the benchmark indexes listed here posted solid gains, led by the Russell 2000. The S&P 500 advanced more than 1.0% for the second week in a row — the first time that’s happened since last July. Investors may be expecting a continuation of strong corporate profits as the fourth-quarter earnings reporting season began Friday. News that China may curtail or even halt its purchase of U.S. Treasuries pushed yields on the 10-year note to their highest level in several months. The price of oil continues to rise, boosting energy stocks. Strong retail sales in December may have encouraged investors to believe that the economy will continue to expand while sending retail stocks higher.

The price of crude oil (WTI) climbed to $64.40 per barrel last Friday, up from the prior week’s closing price of $61.55 per barrel. The price of gold (COMEX) rose to $1,338.30 by early Friday evening, ahead of the prior week’s price of $1,320.90. The national average retail regular gasoline price increased to $2.522 per gallon on January 8, 2018, $0.002 above the prior week’s price and $0.134 more than a year ago.

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

• Consumer prices have remained relatively stable through 2017, according to the Consumer Price Index. The price increase was driven primarily by an increase in housing and medical care costs. For the last month of the year, the CPI increased a marginal 0.1%. Over the year, the index rose 2.1%. Core prices, less food, and energy, increased 0.3% in December — the largest increase since last January. For 2017, core prices have increased 1.8%.
• In yet another sign that price inflationary pressures are stagnant, the Producer Price Index for December fell 0.1% after advancing 0.4% in both October and November. This drop in prices is the first such decline since August 2016. Most of the decline is attributable to a 0.2% decline in the prices for services. Core prices (less food, energy, and trade services) edged up 0.1% in December. For the 12 months ended in December, the PPI rose 2.6% after advancing 1.7% in 2016. Core prices increased 2.3% in 2017, after climbing 1.8% the prior year.
• With prices remaining consistent, it isn’t surprising that retail sales picked up in December, particularly during the holiday shopping season. Advance estimates of U.S. retail and food services sales for December 2017 increased 0.4% from the previous month, and 5.4% from December 2016. Total sales for 2017 were up 4.2%.
• There were 5.9 million job openings on the last business day of November, according to the Job Openings and Labor Turnover report from the Bureau of Labor Statistics. There were 5.5 million hires and 5.2 million separations. The quits rate was 2.2%, while the rate of layoffs and discharges was 1.1%. Job openings increased in retail trade (+88,000), but decreased in other services (-64,000); transportation, warehousing, and utilities (-60,000); and real estate and rental and leasing (-39,000). Over the 12 months ended in November, hires totaled 64.6 million and separations totaled 62.4 million, yielding a net employment gain of 2.1 million.
• The federal deficit was $23.2 billion in December. Over the first three months of fiscal 2018, the total deficit sits at $224.9 billion. For December, government receipts were $325.8 billion, while the government spent about $349 billion.
• Prices for U.S. imports ticked up 0.1% in December, following an 0.8% rise the previous month. Higher fuel prices more than offset a decline in the price index for nonfuel prices in December. In contrast, U.S. export prices edged down 0.1% in December, after advancing 0.5% in November. Nevertheless, export prices rose 2.6% in 2017 following a 1.3% rise in 2016. The 2017 advance was the largest calendar-year increase since 2011 when the index rose 3.6%.
• In the week ended January 6, initial claims for unemployment insurance was 261,000, an increase of 11,000 from the previous week’s level. The advance insured unemployment rate dipped to 1.3%. The advance number of those receiving unemployment insurance benefits during the week ended December 30 was 1,867,000, a decrease of 35,000 from the prior week’s level, which was revised down by 12,000. This is the lowest level for insured unemployment since December 29, 1973, when it was 1,805,000.

Eye on the Week Ahead

The holiday (Martin Luther King Jr. Day) week offers little in terms of economic reports. However, the latest report on new residential construction for December is out this week. Applications for building permits and housing completions were down in November, although housing starts were up. Frigid temperatures and some inclement weather may put a further damper on new home building in December.

The Markets (as of market close January 5, 2017)

The first week of 2018 saw equities enjoy a strong start to the new year. Less than a year after breaking the 20000 mark, the Dow soared past 25000 last week. The wide-ranging S&P 500 also posted a record close while climbing 2.60%. The Nasdaq picked up in 2018 right where it left off in 2017, posting a 3.38% weekly gain, boosted by surging technology stocks. Energy stocks were strong as the price of oil rose again last week. As bond prices fell, bond yields moved higher, with the yield on 10-year Treasuries increasing by 6 basis points.

The price of crude oil (WTI) climbed to $61.55 per barrel last Friday, up from the prior week’s closing price of $60.10 per barrel. The price of gold (COMEX) rose to $1,320.90 by early Friday evening, ahead of the prior week’s price of $1,305.10. The national average retail regular gasoline price increased to $2.520 per gallon on January 1, 2018, $0.048 above the prior week’s price and $0.143 more than a year ago.

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 employment sector finished 2017 in good shape. There were 148,000 new jobs added in December and the unemployment rate, at 4.1%, was unchanged for the third consecutive month. Job gains occurred in health care, construction, and manufacturing. In 2017, payroll employment growth totaled 2.1 million, compared with a gain of 2.2 million in 2016. Over the year, the unemployment rate and the number of unemployed persons were down by 0.6 percentage point and 926,000, respectively. The labor force participation rate, at 62.7%, was unchanged over the month and over the year. The employment-population ratio was unchanged at 60.1% in December but was up by 0.3 percentage point over the year. The average workweek was unchanged at 34.5 hours in December. Average hourly earnings for December rose by $0.09 to $26.63. Over the year, average hourly earnings have risen by $0.65, or 2.5%.
• The international trade deficit for goods and services was $50.5 billion in November, up $1.6 billion from October. November exports were $200.2 billion, $4.4 billion more than October exports. November imports were $250.7 billion, $6.0 billion more than October imports. Year-to-date, the goods and services deficit increased $53.4 billion, or 11.6%, from the same period in 2016.
• Purchasing managers noted an improving manufacturing sector in December, according to the survey conducted by IHS Markit. The U.S. Manufacturing Purchasing Managers’ Index™ registered 55.1 in December, up from 53.9 in November — the highest such reading since March 2015. Greater demand spurred acceleration in new orders, stronger production growth, and cost inflation.
• According to the Manufacturing ISM® Report On Business®, supply managers/respondents also reported that economic activity in the manufacturing sector expanded in December. The December PMI® registered 59.7%, up from November’s 58.2% reading. New orders, production, supplier deliveries, inventories, and prices increased in December. Only employment decreased last month.
• Growth slowed in the services sector in December, according to the Non-Manufacturing ISM® Report On Business®. The Non-Manufacturing Index registered 1.5 percentage points lower than the November reading. Business activity and new orders also decreased last month. On the plus side, business managers reported an uptick in employment and prices. Included in the report are service industries such as retail trade; utilities; arts, entertainment and recreation; health care; accommodation and food services; finance and insurance; and real estate.
• In the week ended December 30, initial claims for unemployment insurance was 250,000, an increase of 3,000 from the previous week’s level, which was revised up by 2,000. The advance insured unemployment rate remained 1.4%. The advance number of those receiving unemployment insurance benefits during the week ended December 23 was 1,914,000, a decrease of 37,000 from the previous week’s level, which was revised up 8,000.

Eye on the Week Ahead

Trading is expected to pick up this week following the prior two holiday-shortened weeks. Inflation indicators for December are available this week, led by the Consumer Price Index. Inflation had been stagnant for much of 2017, although consumer demand for goods and services during the holiday season may nudge prices upward — at least for December.

Overview

The year 2017 was eventful, to say the least. President Trump and Congress tried, without success, to repeal the Affordable Care Act, known as Obamacare. However, the new year-end tax law included the elimination of the individual health insurance mandate. The U.S. economy started slowly but picked up steam as the year progressed. Ten years after its onset, the financial crisis officially came to an end in 2017. The gross domestic product expanded at an annual rate of 3.2% in the third quarter. The unemployment rate fell from 4.7% to 4.1%, while upwards of 2 million new jobs were added. The Federal Reserve, based on the strength of the economy and labor market, began to roll back its stimulus program and raised interest rates three times during the year. The stock market reached several historic highs in 2017. Consumer income rose and purchases increased, but inflation remained stubbornly below 2.0%. Business investment expanded in 2017 and is expected to surge in 2018. The year ended with the passage of sweeping tax reform legislation.

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.

Snapshot 2017

The Markets

• Equities: The stock market saw several benchmark indexes reach record highs throughout 2017. Market growth occurred despite several events that could have been challenging, such as the Russian probe, Federal interest rate increases, damaging hurricanes, domestic violence, and a potential struggle over the debt ceiling. Nevertheless, strong corporate profits and a general upswing in domestic and global economic growth helped push equities to new highs. Market volatility was generally low throughout the year, as the benchmark indexes saw very few weeks of negative returns. The large caps of the Dow closed the year with gains exceeding 25%, while the S&P 500 expanded over 19%. The small caps of the Russell 2000, which grew over 19% in 2016, enjoyed a more modest, yet noteworthy, year-over-year climb of over 13%. The Nasdaq gained nearly 30% over last year’s closing value, driven by robust performances from the technology sector. Globally, stocks were also higher. The Global Dow and the MSCI EAFE each closed 2017 up over 20%, while the Stoxx Europe 600 posted a year-over-year gain of about 10%.
• Bonds: As stock prices soared for much of 2017 and interest rates moved incrementally higher, the demand for long-term bonds was marginal. Yields on 10-year Treasuries were volatile for the second straight year, ultimately falling below their 2016 year-end totals. The yield on the benchmark 10-year Treasuries closed 2017 at 2.41%, down from the 2016 yield of 2.44%. During the early part of the year, bond prices rose as yields sunk below 2.30%. However, as investors saw a strengthening economy and rising interest rates, a period of bond sales occurred, which peaked during the last quarter, ultimately pushing yields closer to last year’s final value.
• Oil: It took almost the entire year, but oil prices began to surge at the end of 2017, reaching over $60.00 per barrel. Oil prices dipped below $45.00 per barrel, eventually hovering around $51.00 per barrel for much of the early part of the year. However, U.S. oil prices soared nearly 27% since September as OPEC limited supplies while demand increased. Retail regular gasoline prices closed the year around $2.472 per gallon on December 25, about $0.163 more than a year ago.
• FOMC/interest rates: The Federal Open Market Committee raised interest rates three times during 2017. The first increase occurred in March, followed by a rate increase in June and another in December. Each rate increase was 25 basis points for a total rate increase of 75 basis points. Following each rate increase, the Committee expressed the expectation that the labor market would remain strong and the economy would continue to expand while noting that inflation has not risen as quickly as anticipated. The Committee forecasts three 25 basis point rate increases in 2018.
• Currencies: The dollar weakened in 2017, particularly against its performance for much of 2016. The Wall Street Journal Dollar Index, which measures the U.S. currency against the currencies of 16 other countries, closed 2017 at $85.98, down from its 2016 year-end mark of $93.26 — a decrease of almost 9%. This marks the first annual decline in the value of the dollar in five years. Stagnant inflation and positive economic strengthening in other parts of the world weighed on the U.S. currency. A weakening dollar could help exports, particularly if this trend continues into 2018. However, consumers may not be so happy because the cost of imports should rise with the dwindling value of the dollar.
• Gold: Gold rose roughly 15% on the year, closing 2017 at $1,305.10. A weakening U.S. dollar, political unrest, and minimal impact of the Fed’s interest rate hikes contributed to the surge in gold prices.

The Economy (through November 2017)

• Employment: Overall, the U.S. labor market endured a few bumps during the year, but closed 2017 in relatively good shape. Despite destructive hurricanes that likely impacted new hires over the latter part of the summer into the fall, employment growth averaged 174,000 new jobs per month in 2017, compared with an average monthly increase of 187,000 new jobs in 2016. The unemployment rate ended the year (as of November 2017) at 4.1% — lower than the 4.6% rate at the close of 2016. According to the Bureau of Labor Statistics, there were 6.6 million unemployed persons in November 2017, down from 7.4 million unemployed in November 2016. The employment participation rate remained the same in 2017 as it was in 2016 — 62.7%. The employment to population ratio was 60.1% in 2017, up slightly from 59.7% in 2016. In 2017, the average workweek was 34.5 hours (34.3 hours in 2016). Average hourly earnings in 2017 increased 2.5%, or $0.64, to $26.55 (the same percentage gain as occurred between 2015 and 2016).

• GDP: Economic growth, as measured by the gross domestic product, expanded throughout the year, increasing at an annual rate of 3.2% in the third quarter of 2017. The third-quarter annual rate of growth is the highest since the first quarter of 2015. The first-quarter GDP rose 1.2%, followed by a 3.1% gain in the second quarter. Gross domestic product essentially measures what the economy produces, such as goods and services. On the other hand, gross domestic income measures all income earned from the production of goods and services, such as wages, profits, and taxes. GDI rose 2.0% in the third quarter of 2017, compared to a 4.1% increase in the third quarter of 2016. The average of gross domestic product and gross domestic income, a supplemental measure of U.S. economic activity that equally weights GDP and GDI, increased 2.6% in the third quarter, compared with an average annual increase of 1.2% in 2016.
• Inflation/consumer spending: Inflationary trends did not keep up with economic growth in 2017. Inflation, as it relates to the consumer, remained below the Federal Reserve’s stated target rate of 2.0%. Indications are that inflation is expanding, albeit at a deliberate pace. The personal consumption expenditures (PCE) price index is the measure of the increase in the prices of goods and services purchased by consumers. The PCE price index was 1.8% higher in November 2017 compared to November 2016. Core PCE, which excludes the volatile food and energy components, expanded at an annual rate of 1.5%. Personal (pre-tax) income increased 2.8% in the third quarter of 2017 compared to a rate of 3.0% for the third quarter of 2016. After-tax income (disposable personal income) increased 2.1% in the third quarter of 2017 after expanding at an annual rate of 2.5% in the third quarter of 2016. Another measure of inflation, the Consumer Price Index, measures the price level of a basket of consumer goods and services purchased by individuals. Over the 12 months ended November 2017, the CPI rose 2.2%.
• Housing: The housing market had been relatively strong for much of the year, although a lack of inventory may have impacted sales and prices. Through November, existing home sales are up 3.8% over a year ago. The November annual sales rate of 5.81 million is the highest since December 2006. The median existing-home price for all housing types in November was $248,900, up 5.8% from November 2016 ($234,400). November’s price increase marks the 69th consecutive month of year-over-year gains. Total housing inventory was 1.67 million existing homes for sale — 9.7% lower than last November (1.85 million). According to the National Association of Realtors®, the expected increase in mortgage rates in 2018 could cut into the affordability of new homes in many markets if inventory remains low. New home sales jumped 26.6% above the November 2016 annual rate of sales. The median sales price of new houses sold in November 2017 was $318,700 ($305,400 in 2016); the average sales price was $377,100 ($359,900 in 2016). The seasonally adjusted estimate of new houses for sale at the end of November was 283,000, representing a supply of 4.6 months at that sales rate. Over the same period in 2016, there were 250,000 homes for sale for a supply of 5.1 months.
• Manufacturing: Manufacturing and industrial production performed better in 2017 than the prior year. The Federal Reserve’s index of industrial production revealed that total industrial production rose 3.4% over the 12 months ended in November. Over the same period, the output of consumer goods increased 2.2% and production of business equipment expanded 5.2%. Capacity utilization for manufacturing increased 1.1% over the past year. New orders for manufactured durable goods (expected to last at least three years) increased by 5.4% from 2016. Shipments were up 4.1%. Capital goods — tangible assets used by manufacturers to produce consumer goods — also expanded in 2017. New orders for capital goods increased by 6.9% and shipments of capital goods expanded by 4.5%.
• Imports and exports: Through October, the goods and services trade deficit had increased $49.1 billion, or 11.9%, compared to the same period in 2016. Exports increased $97.5 billion, or 5.3%. Imports increased $146.6 billion, or 6.5%. The prices of both import and export goods and services expanded by 3.1% over the 12 months ended November 2017. However, excluding energy, import prices were up only 1.4%.
• International markets: The global economy was relatively stable in 2017 amid low inflation and easing of accommodative monetary policies. In Europe, negotiations continued to progress, leading to Britain’s exit from the European Union. Possibly impacted by the impending Brexit, Britain’s economy expanded at a subdued 1.5% rate, effectively pushing its economy behind that of France in the world rankings. Eurozone inflation increased by 1.5% over a year earlier, prompting a reduction in stimulus measures including an interest rate hike. Germany, Italy, and Finland saw their third-quarter GDPs expand at a rate exceeding expectations, while economic growth slowed in France, Spain, and the Netherlands. The Japanese economy also pushed toward its 2.0% target inflation goal. A jump in capital spending helped propel Japan’s third-quarter GDP to an annualized 2.5% growth rate. The world’s second-largest economy continued to expand as China’s GDP enjoyed a 6.5% annualized growth rate. The Chinese government continued to maintain its grip on economic activity, particularly considering President Trump’s tough anti-China trade rhetoric.

Eye on the Year Ahead

The year 2018 is off to a rousing start, with the passage of major tax overhaul legislation that could impact consumer and business income and equities. The U.S. economy, which got off to a slow start in 2017, picked up steam throughout the year and enters 2018 in pretty good shape. The U.S. economy, as well as major world economies, are expected to continue to grow this year. The Fed has indicated that it expects to raise interest rates three times this year despite stubborn inflationary expansion. The housing market should continue to grow, especially if builders pick up the pace of new residential construction to add to dwindling inventory. However, political unrest continues to plague Washington, with the cloud of the Russian investigation hanging overhead as we begin 2018.

The Markets (as of market close December 29, 2017)

While 2017 surely was a strong year for equities overall, the last week of the year was lackluster at best. Each of the benchmark indexes listed here posted week-over-week losses, except for the Global Dow, which increased 0.23%. Much of last week’s performance could be attributable to nothing more than light trading during the holiday-shortened week. The Nasdaq, which led the way for the year, lost the most ground, followed by the small-cap Russell 2000. The large-cap indexes of the Dow and S&P 500, which had been consistent gainers all year, pulled back the last week of 2017. Long-term bond prices rose, pushing yields on the 10-year Treasuries down more than 7 basis points by the end of the week.

The price of crude oil (WTI) climbed to $60.10 per barrel last Friday, up from the prior week’s closing price of $58.35 per barrel. The price of gold (COMEX) rose to $1,305.10 by early Friday evening, ahead of the prior week’s price of $1,279.10. The national average retail regular gasoline price increased to $2.472 per gallon on December 25, 2017, $0.022 above the prior week’s price and $0.163 more than a year ago.

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 international trade deficit was $69.7 billion in November, up $1.6 billion, or 2.3%, from $68.1 billion in October. Exports of goods for November were $133.7 billion, $3.8 billion more than October exports. Imports of goods for November were $203.4 billion, $5.4 billion more than October imports.
• The Conference Board Consumer Confidence Index® fell to 122.1 in December, down from 128.6 in November. The Present Situation Index, which measures consumers’ views on the present state of the economy, increased from 154.9 to 156.6, although the Expectations Index declined from 111.0 in November to 99.1 in December.
• In the week ended December 23, initial claims for unemployment insurance was 245,000, unchanged from the previous week’s level. The advance insured unemployment rate remained 1.4%. The advance number of those receiving unemployment insurance benefits during the week ended December 16 was 1,943,000, an increase of 7,000 from the previous week’s level, which was revised up 4,000.

Eye on the Week Ahead

The first week of 2018 should see trading pick up. The December 2017 employment report is out this Friday, which could reveal a slight drop in the unemployment rate.