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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