What I’m Watching This Week – 30 April 2018

The Markets (as of market close April 27, 2018)

An avalanche of corporate earnings reports impacted the market last week. Unfortunately, there were enough lackluster corporate earnings statements to prompt investors to exercise caution, resulting in a relatively flat week for equities. The Dow fell the most — over 0.5% — while the S&P 500 essentially broke even. The remaining indexes listed here lost some value by last week’s end. As it stands, only the Nasdaq and the Russell 2000 are ahead of their year-end values, while the Dow has lost over 1.5% as of last Friday. On the other hand, long-term bond yields soared as prices fell (bond prices and yields move in opposite directions). By midweek, the yield on 10-year Treasuries surpassed 3.0% for the first time in several years, ultimately falling back to where yields began the week.

The price of crude oil (WTI) climbed again last week, closing at $68.26 per barrel early Friday evening, up from the prior week’s closing price of $67.39 per barrel. The price of gold (COMEX) fell to $1,337.60 by early Friday evening, down from the prior week’s price of $1,348.60. The national average retail regular gasoline price increased to $2.798 per gallon on April 23, 2018, $0.051 higher than the prior week’s price and $0.349 more than a year ago.

Market/Index 2017 Close Prior Week As of 4/27 Weekly Change YTD Change
DJIA 24719.22 24462.94 24311.19 -0.62% -1.65%
Nasdaq 6903.39 7146.13 7119.80 -0.37% 3.13%
S&P 500 2673.61 2670.14 2669.91 -0.01% -0.14%
Russell 2000 1535.51 1564.12 1556.24 -0.50% 1.35%
Global Dow 3085.41 3083.28 3075.04 -0.27% -0.34%
Fed. Funds target rate 1.25%-1.50% 1.50%-1.75% 1.50%-1.75% 0 bps 25 bps
10-year Treasuries 2.41% 2.96% 2.95% -1 bps 54 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 first, or “advance,” estimate of the gross domestic product for the first quarter of 2018 showed economic growth at an annual rate of 2.3%. The fourth-quarter GDP increased at an annualized rate of 2.9%. Business and service spending helped drive the GDP in the first quarter. The price index for gross domestic purchases increased 2.8% in the first quarter, compared with an increase of 2.5% in the fourth quarter. The personal consumption price index increased 2.7%, the same increase as in the fourth quarter. Excluding food and energy prices, the PCE price index increased 2.5%, compared with an increase of 1.9% in the fourth quarter. Personal income increased $182.1 billion in the first quarter, compared with an increase of $186.4 billion in the fourth quarter. Disposable (after-tax) personal income increased $222.1 billion, or 6.2%, in the first quarter, compared with an increase of $136.3 billion, or 3.8%, in the fourth quarter. Personal saving was $462.1 billion in the first quarter, compared with $379.8 billion in the fourth quarter.
  • While not at the pace set last year, sales of existing homes grew for the second consecutive month in March. Total existing home sales rose 1.1% over February, but are 1.2% below their sales pace of a year ago. While interest in existing home purchases remains solid, weak inventories and increasing prices may be keeping some potential buyers out of the market. Total housing inventory climbed 5.7% last month, but is 7.2% lower than March 2017. Unsold inventory is at a 3.6-month supply at the current sales pace. The median existing-home price for all housing types in March was $250,400, up 5.8% from March 2017. Single-family home sales rose only 0.6% in March — a pace that’s 1.0% below last year. The median existing price for single family home sales was $252,100 in March, up 5.9% from March 2017.
  • New home sales also improved in March, jumping up by 4.0% over February’s revised rate. Sales of new homes are 8.8% ahead of their March 2017 pace. The median sales price of new houses sold in March 2018 was $337,200. The average sales price was $369,900. There’s a 5.2-month inventory of new homes available for sale in March, which is down slightly from the 5.4-month supply in February.
  • New orders for manufactured durable goods in March increased $6.4 billion, or 2.6%, following a 3.5% gain in February. Transportation equipment drove the March gain, as orders for durable goods excluding transportation showed no increase from February. Shipments of durable goods climbed 0.3% in March, while unfilled orders rose 0.8%. Inventories of manufactured durable goods in March, up 20 of the last 21 months, increased $0.3 billion, or 0.1%.
  • The international trade deficit was $68.0 billion in March, down $7.8 billion from February. Exports of goods for March were $140.1 billion, $3.4 billion more than February exports. Imports of goods for March were $208.1 billion, $4.4 billion less than February imports.
  • Confidence in the economy picked up in April after falling in March. According to The Conference Board Consumer Confidence Index®, consumer confidence increased for present and future economic conditions.
  • In the week ended April 21, there were 209,000 initial claims for unemployment insurance, a decrease of 24,000 from the previous week’s level, which was revised up by 1,000. This is the lowest level for initial claims since December 6, 1969, when it was 202,000. The advance insured unemployment rate remained at 1.3%. The advance number of those receiving unemployment insurance benefits during the week ended April 14 was 1,837,000, a decrease of 29,000 from the prior week’s level, which was revised up by 3,000.

Eye on the Week Ahead

Several potential market-moving reports are out this week. The release of the latest report on consumer income and spending is out, which is an inflation indicator relied upon by the Federal Open Market Committee. Speaking of which, the FOMC also meets this week. The Committee raised the federal funds target rate following its last meeting in March, and hinted at more rate hikes by the end of the year. The week closes with the employment report for April.

To view the What I’m Watching This Week Portfolio, please click here. (Free Membership is required) https://www.barchart.com/my/featured-portfolios

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Quarterly Market Review – January – March 2018

The Markets (as of market close March 29, 2018)

The first quarter of 2018 began as the fourth quarter of 2017 ended: with strong market gains. The Nasdaq led the way by the end of January, posting a monthly increase of almost 7.40%, followed by the large caps of the Dow (5.79%) and the S&P 500 (5.62%). The employment sector remained strong, with 239,000 new jobs added in January and average hourly earnings climbing 0.3%. Consumer prices rose 0.5% in January, while personal income increased 0.4%. The trade gap continued to widen, which has proven to be a focal point of the current administration. Nevertheless, consumer confidence in the economy increased in January with expectations for continued strengthening in the coming months.

Volatility returned to the stock market in February, with each of the benchmark indexes listed here posting notable losses from the prior month. Nasdaq, while down, fared better than the large caps of both the S&P 500 and the Dow. Investor concerns over rising inflation and interest rates seemed to trigger volatility. A strong labor report in February revealed a 2.9% increase in average hourly wages over a year earlier, the addition of 313,000 new jobs, and decreasing unemployment insurance claims. These factors combined to prompt investors to conclude that higher labor costs may eat into corporate profits, which might prompt the Fed to raise interest rates at a faster pace. February also saw long-term bond yields surge as evidenced by a 16-basis-point increase in yields for 10-year Treasuries, as bond prices fell.

While many markets closed for Good Friday, March was not a good month for the benchmark indexes listed here, except for the small caps of the Russell 2000. Otherwise, each of the indexes closed March in the red, led by the Dow, which was followed by the Global Dow, Nasdaq, and the S&P 500. March brought more concerns for investors with the administration’s imposition of tariffs on steel and aluminum imports and the threat of a trade war with China. Much of the month saw retaliatory threats lobbed across the Pacific.

The first quarter as a whole saw only the Nasdaq post modest gains. The Dow fell by almost 2.50% by the end of the quarter, far outpacing losses suffered by the other indexes listed here. The Global Dow fell nearly 2.0%, followed by the S&P 500 and the Russell 2000. Prices for 10-year Treasuries fell by the end of the quarter, pushing yields up by 32 basis points. Crude oil prices closed the month and quarter at about $64.91 per barrel by the end of March. Oil began the quarter at $61.55 per barrel and remained over $60.00 for much of the first quarter. Gold closed the quarter at roughly $1,329.60 — ahead of where it opened the quarter ($1,305.10). Regular gasoline, which was $2.548 per gallon on February 26, soared to $2.648 on the 26th of March.

Market/Index 2017 Close As of March 29 Month Change Quarter Change YTD Change
DJIA 24719.22 24103.11 -3.70% -2.49% -2.49%
NASDAQ 6903.39 7063.44 -2.88% 2.32% 2.32%
S&P 500 2673.61 2640.87 -2.69% -1.22% -1.22%
Russell 2000 1535.51 1529.43 1.12% -0.40% -0.40%
Global Dow 3085.41 3026.70 -3.06% -1.90% -1.90%
Fed. Funds 1.25%-1.50% 1.50%-1.75% 25 bps 25 bps 25 bps
10-year Treasuries 2.41% 2.73% -13 bps 32 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.

Monthly Economic News

  • Employment: Total employment rose by 313,000 in February following January’s upwardly revised total of 239,000. Employment gains occurred in retail trade, construction, professional and business services, and manufacturing. The unemployment rate remained at 4.1%. In February, total employment rose by 785,000. Over the year, the number of long-term unemployed was reduced by 369,000. The labor participation rate rose to 63.0%. The employment-population ratio increased to 60.4% in February. The average workweek for all employees increased by 0.1 hour to 34.5 hours in February. Average hourly earnings increased by $0.04 to $26.75. Over the year, average hourly earnings have risen $0.68, or 2.6%.
  • FOMC/interest rates: The Federal Open Market Committee, meeting for the first time under new chair Jerome Powell, increased the federal funds target rate range by 25 basis points to 1.50%-1.75%. The Committee said the labor market is strong, but economic activity was described as “moderate.” Inflation has moved little since the beginning of the year, yet the Committee expects prices to move up gradually over the next 12 months. The Committee forecasts more rate hikes throughout the remainder of 2018.
  • GDP/budget: The third and final estimate of the fourth-quarter gross domestic product showed expansion at an annual rate of 2.9%, according to the Bureau of Economic Analysis. The third-quarter GDP grew at an annualized rate of 3.2%. Consumer spending rose 4.0%, with notable increases in durable goods spending (13.7%). As to the government’s budget, February’s deficit surged to $215.25 billion, compared to January’s deficit of $49.2 billion. The fiscal 2018 deficit (which began in October 2017) is $390.97 billion — an increase of $40.35 billion, or 11.5%, above the deficit over the same period last year.
  • Inflation/consumer spending: Inflationary pressures continued to show upward momentum in February. The personal consumption expenditures (PCE) price index (a measure of what consumers pay for goods and services) ticked up 0.2% for February following a January gain of 0.4%. The core PCE price index (excluding energy and food) also jumped ahead 0.2% in February. Personal (pre-tax) income increased 0.4% and disposable personal (after-tax) income climbed 0.4% over the prior month. Personal consumption expenditures (the value of the goods and services purchased by consumers) climbed 0.2% in February, the same increase as the prior month.
  • The Consumer Price Index rose 0.2% in February after climbing 0.5% in January. Over the last 12 months ended in February, consumer prices are up 2.2%. Core prices, which exclude food and energy, are up 1.8% for the year.
  • The Producer Price Index showed the prices companies receive for goods and services also jumped 0.2% in February. Year-over-year, producer prices have increased 2.8%. Prices less food and energy increased 0.2% for the month and are up 2.5% over the last 12 months.
  • Housing: Home sales were a mixed bag in February. Total existing-home sales jumped 3.0% in February following a 3.2% dip in January. Year-over-year, existing home sales are up 1.1%. The February median price for existing homes was $241,700, which is 5.9% higher than the February 2017 price of $228,200. Inventory of existing homes for sale rose 4.6%, representing a 3.4-month supply. New home sales fell in February. The Census Bureau’s latest report reveals sales of new single-family homes fell 0.6% in February. The median sales price of new houses sold in January was $326,800 ($323,000 in January). The average sales price was $376,700 ($382,700 in January). There were 305,000 houses for sale at the end of February, which represents a supply of 5.9 months at the current sales rate.
  • Manufacturing: Industrial production edged up in February, increasing 1.1% compared to a downward-revised 0.3% drop in January. Manufacturing output grew at a rate of 1.2% — its largest gain since October. Capacity utilization for manufacturing also rose 0.7 percentage point in February, coming in at 78.1% — its highest reading since January 2015. New orders for manufactured durable goods climbed 3.1% in February following a 3.5% revised January decrease. For the year, new durable goods orders are up 8.9%.
  • Imports and exports: The advance report on international trade in goods revealed that the trade gap increased in February from January, rising from $75.3 billion to $75.4 billion. Exports of goods for February jumped 2.2% following January’s 2.4% drop. Imports of goods increased 1.4% after falling 0.2% in January. Still, total imports ($211.9 billion) far exceeded exports ($136.5 billion). Prices for both imported and exported goods and services advanced in February. Import prices rose only 0.4% for the month, while export prices increased 0.2%. For the year, import prices climbed 3.5%, while export prices jumped 3.3%.
  • International markets: Heightened worries of a trade war dominated international markets, as tariffs imposed by the United States on steel and aluminum went into effect. Trade with China became testy as President Trump announced tariffs on Chinese goods, prompting China to impose tariffs on U.S. imports. Elsewhere, the Bank of England maintained its monetary policy, leaving interest rates at 0.50%. The bank rate has not increased since last November. However, it appears interest rates are going up at some point this year. Most foreign stock indexes were subdued for March, with only a few countries’ indexes making marginal gains. European stocks dipped to lows approaching early 2017 values. Most major Japanese indexes are well in the red year-to-date, while China’s benchmark stock index has felt the brunt of the apparent trade war with the United States.
  • Consumer sentiment: Consumer confidence, as measured by The Conference Board Consumer Confidence Index®, decreased in March following an increase in February. The index sits at 127.7, down from 130.8 in February (an 18-year high). According to the report, consumer expectations were less positive in their assessment of current economic conditions, while consumers’ short-term expectations were tempered as well.

Eye on the Month Ahead

Moving to the second quarter of the year, the economy is expected to maintain its course of relative strength. However, if news out of Washington continues to concern investors, market volatility is likely to prevail.

What I’m Watching This Week – 23 April 2018

The Markets (as of market close April 20, 2018)

Favorable first-quarter earnings reports helped push stocks higher for the second consecutive week. Led by the small caps of the Russell 2000, each of the benchmark indexes listed here posted gains by the end of last week. The energy sector continued to post strong returns, boosted by rising crude oil prices, which are approaching $70 per barrel. Treasury yields climbed as prices fell following a sell-off of Treasury bonds.

The price of crude oil (WTI) climbed again last week, closing at $68.26 per barrel early Friday evening, up from the prior week’s closing price of $67.39 per barrel. The price of gold (COMEX) fell to $1,337.60 by early Friday evening, down from the prior week’s price of $1,348.60. The national average retail regular gasoline price increased to $2.747 per gallon on April 16, 2018, $0.053 higher than the prior week’s price and $0.311 more than a year ago.

Market/Index 2017 Close Prior Week As of 4/20 Weekly Change YTD Change
DJIA 24719.22 24360.14 24462.94 0.42% -1.04%
Nasdaq 6903.39 7106.65 7146.13 0.56% 3.52%
S&P 500 2673.61 2656.30 2670.14 0.52% -0.13%
Russell 2000 1535.51 1549.51 1564.12 0.94% 1.86%
Global Dow 3085.41 3057.98 3083.28 0.83% -0.07%
Fed. Funds target rate 1.25%-1.50% 1.50%-1.75% 1.50%-1.75% 0 bps 25 bps
10-year Treasuries 2.41% 2.82% 2.96% 14 bps 55 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

  • Sales at the retail level grew 0.6% in March from the previous month, and 4.5% above March 2017. Motor vehicle and parts dealers saw a monthly sales increase by 2.0%, while health and personal care sales advanced 1.4% in March over February. Nonstore (internet) retail sales increased 0.8% for the month and are up 9.7% over March 2017.
  • New residential construction enjoyed a favorable March as building permits and housing starts surged. Residential building permits were 2.5% above February’s rate and are 7.5% ahead of March 2017. Privately owned housing starts in March were 1.9% above February’s estimate and 10.9% above the rate a year ago. Housing completions for all types of residential construction slowed in March, falling 5.1% below the prior month. Most of the March strength in the report is attributable to multifamily construction — single-family permits (-5.5%), starts (-3.7%), and completions (-4.7%) each fell off from February. Demand for housing continues to be solid, however, a dearth of labor coupled with escalating materials costs may be hampering new construction.
  • Industrial production rose 0.5% in March after increasing 1.0% in February. The output of consumer goods advanced 0.5% in March. After having climbed 1.5% in February, manufacturing production edged up 0.1% in March. Mining output rose 1.0%, mostly as a result of gains in oil and gas extraction and in support activities for mining. Total industrial production was 4.3% higher in March than it was a year earlier. Capacity utilization for the industrial sector moved up 0.3 percentage point in March.
  • In the week ended April 14, there were 232,000 initial claims for unemployment insurance, a decrease of 1,000 from the previous week’s level. The advance insured unemployment rate remained at 1.3%. The advance number of those receiving unemployment insurance benefits during the week ended April 7 was 1,863,000, a decrease of 15,000 from the prior week’s level, which was revised up by 7,000.

Eye on the Week Ahead

Several important economic reports are out this week. Information on new and existing home sales in March is revealed. Last month, existing home sales fared better than sales of new homes. The first look at the gross domestic product for the first quarter comes at week’s end. The fourth-quarter GDP grew at a rate of 2.9%.

To view the What I’m Watching This Week Portfolio, please click here. (Free Membership is required) https://www.barchart.com/my/featured-portfolios

What I’m Watching This Week – 16 April 2018

The Markets (as of market close April 13, 2018)

Surging energy stocks led a market rebound last week as each of the benchmark indexes listed here posted gains. Although stocks closed higher by week’s end, volatility continued to be the benchmark during the week as investors remain uneasy amidst the turbulent political climate. The trade war rhetoric may have been replaced by escalating strife in Syria. Of the indexes listed here, the Nasdaq climbed the highest, followed by the Russell 2000. The large caps of the S&P 500 and the Dow each posted strong gains of almost 2.0%.

The price of crude oil (WTI) soared last week, closing at $67.39 per barrel early Friday evening, up from the prior week’s closing price of $61.95 per barrel. The price of gold (COMEX) rose to $1,348.60 by early Friday evening, ahead of the prior week’s price of $1,337.30. The national average retail regular gasoline price decreased to $2.694 per gallon on April 9, 2018, $0.006 lower than the prior week’s price but $0.270 more than a year ago.

Market/Index 2017 Close Prior Week As of 4/13 Weekly Change YTD Change
DJIA 24719.22 23932.76 24360.14 1.79% -1.45%
Nasdaq 6903.39 6915.11 7106.65 2.77% 2.94%
S&P 500 2673.61 2604.47 2656.30 1.99% -0.65%
Russell 2000 1535.51 1513.30 1549.51 2.39% 0.91%
Global Dow 3085.41 3002.47 3057.98 1.85% -0.89%
Fed. Funds target rate 1.25%-1.50% 1.50%-1.75% 1.50%-1.75% 0 bps 25 bps
10-year Treasuries 2.41% 2.77% 2.82% 5 bps 41 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

  • A potential trade war with China hasn’t been reflected in consumer prices, at least not in March. According to the latest report from the Bureau of Labor Statistics, the Consumer Price Index actually fell 0.1% after increasing 0.2% in February. Over the last 12 months, the CPI has risen 2.4%. A closer look at prices reveals that a decline in gasoline prices (-4.9%) more than offset increases in prices for shelter, medical care, and food. In fact, prices less food and energy actually rose 0.2% in March.
  • Wholesale (producer) prices for both goods and services rose 0.3% in March, according to the latest report from the Bureau of Labor Statistics. For the last 12 months, producer prices have advanced 3.0%. In March, prices less food, energy, and trade rose 0.4% — the same increase as in January and February. April should have a surplus as income taxes for 2017 provide a boost to government receipts.
  • The government’s deficit was $208.7 billion in March, following a deficit of $215.2 billion in February. Over the first five months of the fiscal year, the deficit sits at $599.7 billion. The deficit was $526.9 billion over the same period in fiscal 2017.
  • The price index for goods imported into the United States showed no change in March compared to February. A 1.6% drop in fuel prices helped keep import prices down, as non-fuel import prices actually increased 0.2%. The price index for goods exports rose 0.3%. For the 12 months ended in March, the import price index has risen 4.1%, while export prices have increased 3.6%.
  • There were 6.1 million new job openings in February, down slightly from the 6.2 million openings the prior month. Job openings increased in finance and insurance (69,000) and state and local government education (31,000). Job openings decreased in a number of industries, with the largest decreases being in accommodation and food services (91,000), construction (56,000), and wholesale trade (38,000). There were 1.6 million layoffs and discharges in February, slightly less than the 1.8 million in January. Over the 12 months ended in February, hires totaled 65.6 million and separations totaled 63.3 million, yielding a net employment gain of 2.3 million.
  • In the week ended April 7, there were 233,000 initial claims for unemployment insurance, a decrease of 9,000 from the previous week’s level. The advance insured unemployment rate remained at 1.3% for the week ended March 31. The advance number of those receiving unemployment insurance benefits during the week ended March 31 was 1,871,000, an increase of 53,000 from the prior week’s level, which was revised up by 10,000.

Eye on the Week Ahead

Another indicator of inflationary trends is the retail sales report, which is out this week. In February, retail sales fell 0.1% due, primarily, to a drop in auto sales. However, motor vehicle sales are expected to show improvement in March, and sales overall are expected to increase as well.

To view the What I’m Watching This Week Portfolio, please click here. (Free Membership is required) https://www.barchart.com/my/featured-portfolios

What I’m Watching This Week – 9 April 2018

The Markets (as of market close April 6, 2018)

In likely reaction to the potential trade war with China, stocks fell last week, stripping away the previous week’s gains. Last week, China responded to the Trump administration’s proposal to increase tariffs on Chinese goods by announcing that it would impose 25% tariffs on several American imports, including soybeans and big-ticket items like automobiles and aircraft. In total, over 100 U.S. exports to China were included in the increased tariffs, affecting upwards of $50 billion of Chinese imports of U.S. products. Later last week, President Trump maintained that he is considering an additional $100 billion in tariffs on Chinese goods. It is worth noting that the tariffs from the global giants haven’t taken effect yet.

Each of the benchmark indexes listed here suffered losses last week and, except for the Nasdaq, are in the red year-to-date. A trade war between the world’s two largest economies could raise prices, boosting inflation — another potential ramification concerning investors.

The price of crude oil (WTI) dropped again last week, closing at $61.95 per barrel early Friday evening, down from the prior week’s closing price of $64.91 per barrel. The price of gold (COMEX) rose to $1,337.30 by early Friday evening, climbing ahead of the prior week’s price of $1,329.60. The national average retail regular gasoline price increased to $2.700 per gallon on April 2, 2018, $0.052 higher than the prior week’s price and $0.340 more than a year ago.

Market/Index 2017 Close Prior Week As of 4/6 Weekly Change YTD Change
DJIA 24719.22 24103.11 23932.76 -0.71% -3.18%
Nasdaq 6903.39 7063.44 6915.11 -2.10% 0.17%
S&P 500 2673.61 2640.87 2604.47 -1.38% -2.59%
Russell 2000 1535.51 1529.43 1513.30 -1.05% -1.45%
Global Dow 3085.41 3026.70 3002.47 -0.80% -2.69%
Fed. Funds target rate 1.25%-1.50% 1.50%-1.75% 1.50%-1.75% 0 bps 25 bps
10-year Treasuries 2.41% 2.73% 2.77% 4 bps 36 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 labor sector continued adding new jobs and average hourly earnings crept higher in March, according to the latest report from the Bureau of Labor Statistics. There were 103,000 new jobs added last month, with manufacturing, as well as healthcare and social assistance leading the way in new hires. The unemployment rate remained at 4.1%. The labor force participation rate, at 62.9%, changed little in March, and the employment-population ratio held at 60.4%. The average workweek was unchanged at 34.5 hours in March, but average wages rose by $0.08 to $26.82. Over the year, average hourly earnings have increased by $0.71, or 2.7%.
  • The IHS Markit final U.S. Manufacturing Purchasing Managers’ Index™ (PMI™) registered 55.6 in March, up from 55.3 in February. The latest PMI™ reading indicated the strongest improvement in manufacturing business conditions since March 2015. According to the report, manufacturing output and new orders rose markedly, and job creation was strong. Inflationary pressures strengthened as costs for materials used in manufacturing increased, as did prices for manufactured products.
  • According to the Institute for Supply Management® Manufacturing ISM® Report On Business®, manufacturing slowed in March. The March PMI® dropped 1.5 percentage points from February’s reading. New orders fell 2.3 percentage points, while production and employment also lost ground for the month. Nevertheless, February’s manufacturing growth was the highest in 14 years, so a slight drop-off was to be expected. Overall, the ISM® survey is still very positive in the manufacturing sector.
  • Growth slowed in the non-manufacturing (services) sector, according to the Institute for Supply Management®. Business activity and new orders slowed, while employment and prices increased.
  • The goods and services trade deficit continue to expand through February. According to the latest report from the Bureau of Economic Analysis, the goods and services deficit was $57.6 billion in February, up $0.9 billion, or 1.6%, from January. Both exports and imports increased by approximately 1.7% for the month. Year-to-date, the goods, and services deficit increased $21.1 billion, or 22.7%, from the same period in 2017. Exports increased $22.4 billion, or 5.9%. Imports increased $43.6 billion, or 9.1%.
  • In the week ended March 31, there were 242,000 initial claims for unemployment insurance, an increase of 24,000 from the previous week’s level, which was revised up by 3,000. The advance insured unemployment rate remained at 1.3% for the week ended March 24. The advance number of those receiving unemployment insurance benefits during the week ended March 24 was 1,808,000, a decrease of 64,000 from the prior week’s level, which was revised up by 1,000. This is the lowest level for insured unemployment since December 29, 1973, when it was 1,805,000.

Eye on the Week Ahead

This week, inflationary measures for March are found in both the Consumer Price Index and the Producer Price Index. Also, import and export prices for March are available. This report may begin to reflect the impact, if any, of the tariffs and trade policies initiated by the present administration.

To view the What I’m Watching This Week Portfolio, please click here. (Free Membership is required) https://www.barchart.com/my/featured-portfolios

What I’m Watching This Week – 2 April 2018

The Markets (as of market close March 29, 2018)

Each of the benchmark indexes listed here posted weekly gains last week, as stocks recovered from the prior week’s steep losses. The S&P 500 and Dow posted returns exceeding 2.0%, respectively, followed by the Russell 2000 and the Nasdaq. While many of the markets were closed for Good Friday, last week was relatively slow in trading overall, albeit somewhat fruitful.

The price of crude oil (WTI) fell last week, closing at $64.91 per barrel early Thursday evening, off from the prior week’s closing price of $65.74 per barrel. The price of gold (COMEX) also dropped to $1,329.60 by early Friday evening, falling from the prior week’s price of $1,352.90. The national average retail regular gasoline price increased to $2.648 per gallon on March 26, 2018, $0.050 higher than the prior week’s price and $0.333 more than a year ago.

Market/Index 2017 Close Prior Week As of 3/29 Weekly Change YTD Change
DJIA 24719.22 23533.20 24103.11 2.42% -2.49%
Nasdaq 6903.39 6992.67 7063.44 1.01% 2.32%
S&P 500 2673.61 2588.26 2640.87 2.03% -1.22%
Russell 2000 1535.51 1510.08 1529.43 1.28% -0.40%
Global Dow 3085.41 2988.62 3026.70 1.27% -1.90%
Fed. Funds target rate 1.25%-1.50% 1.50%-1.75% 1.50%-1.75% 0 bps 25 bps
10-year Treasuries 2.41% 2.81% 2.73% -8 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 Week’s Economic Headlines

  • Gross domestic product increased at an annual rate of 2.9% in the fourth quarter of 2017, according to the third and final estimate released by the Bureau of Economic Analysis. GDP increased 3.2% in the third quarter. The deceleration in real GDP growth in the fourth quarter reflected a downturn in private inventory investment that was partly offset by accelerations in personal consumption expenditures, exports, state and local government spending, nonresidential (business) fixed investment, and federal government spending, and an upturn in residential fixed investment. Imports, which are a subtraction in the calculation of GDP, increased. For the fourth quarter, consumer spending increased 4.0%, nonresidential (commercial/business) investment grew 6.8%, and residential investment expanded at a rate of 12.8%. 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. Overall, economic growth, as measured by GDP, was solid in 2017. However, heading into 2018, a slowdown in consumer spending may curtail growth in the first quarter.
  • Personal (pre-tax) income and disposable (after-tax) personal income increased 0.4%, respectively, in February. Of particular note, wages and salaries increased 0.5% over January. Personal consumption expenditures, which measures how much consumers are spending for goods and services, jumped 0.2% in February, matching January’s increase. Of that total, purchases of durable goods rose by 0.2%, while services climbed 0.3%. The prices paid by consumers for goods and services, as measured by the PCE price index and core PCE price index (excluding food and energy) each increased by 0.2% in February. While consumer prices for goods and services rose a bit in February, consumer spending remained somewhat subdued. Consumer saving, as expected, increased 0.2% to 3.4%.
  • The international trade deficit increased by $0.1 billion in February to $75.4 billion. Exports expanded by $2.9 billion (2.2%), while imports increased by $3.0 billion (1.4%).
  • Consumers lost a little faith in the economy in March, according to the latest report from The Conference Board. The Consumer Confidence Index® fell to 127.7 in March after reaching an 18-year high of 130.0 in February. Consumers’ confidence waned in their assessment of present economic conditions as well as short-term economic growth.
  • In the week ended March 24, there were 215,000 initial claims for unemployment insurance, a decrease of 12,000 from the previous week’s level, which was revised down by 2,000. This is the lowest level for initial claims since January 27, 1973, when it was 214,000. The advance insured unemployment rate remained at 1.3% for the week ended March 17. The advance number of those receiving unemployment insurance benefits during the week ended March 17 was 1,871,000, an increase of 35,000 from the prior week’s level, which was revised up by 8,000.

Eye on the Week Ahead

The latest employment report for March is out the end of this week. Job growth has been strong in 2018, although wage inflation has been rather subdued. A strong employment report could provide further assurance of economic strength, propelling investors back to the market.

 

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