What I’m Watching This Week – 25 June 2018

The Markets (as of market close June 22, 2018)

The benchmark indexes listed here closed flat to lower last week amid fears that trade penalties will hurt domestic companies’ exports. Only the Russell 2000 closed the week ahead of its prior week’s value. The Dow was hit particularly hard as investors fled stocks of companies that could suffer due to the impending trade wars. President Trump may be targeting an additional $200 billion of Chinese imports and European-made automobiles for higher tariffs. A smaller-than-expected increase in production from OPEC sent oil prices up at the end of last week, pushing the price of some energy stocks higher.

The price of crude oil (WTI) surged last week, closing at $69.32 per barrel, up from the prior week’s closing price of $64.38 per barrel. The price of gold (COMEX) fell to $1,271.70 by early Friday evening, down from the prior week’s price of $1,282.00. The national average retail regular gasoline price fell to $2.879 per gallon on June 18, 2018, $0.032 lower than the prior week’s price but $0.561 higher than a year ago.

Market/Index 2017 Close Prior Week As of 6/22 Weekly Change YTD Change
DJIA 24719.22 25090.48 24580.89 -2.03% -0.56%
Nasdaq 6903.39 7746.38 7692.82 -0.69% 11.44%
S&P 500 2673.61 2779.66 2754.88 -0.89% 3.04%
Russell 2000 1535.51 1683.91 1685.58 0.10% 9.77%
Global Dow 3085.41 3044.16 3007.73 -1.20% -2.52%
Fed. Funds target rate 1.25%-1.50% 1.75%-2.00% 1.75%-2.00% 0 bps 50 bps
10-year Treasuries 2.41% 2.92% 2.89% -3 bps 48 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 May report on new residential construction was a mixed bag of good and not-so-good news. On the plus side, housing starts (5.0%) and housing completions (1.9%) each expanded over their April totals. That should get more homes on the market, which should increase inventory. On the other hand, building permits were down 4.6% in May from the prior month, which doesn’t necessarily bode well for future construction.
  • Existing home sales, which had been a strong segment of the housing sector earlier in the year, have fallen back for the second consecutive month. May’s sales of existing homes decreased 0.4% from April’s totals, and are now 3.0% lower than a year ago. The median existing-home price for all housing types in May was $264,800, an all-time high and up 4.9% from May 2017 ($252,500). May’s price increase marks the 75th straight month of year-over-year gains. Inventory of existing homes for sale rose 2.8% in May, yielding a 4.1-month supply at the current sales pace. While inventory is expanding somewhat, it’s still well below (6.1%) the number of homes available for sale this time last year.
  • In the week ended June 16, there were 218,000 initial claims for unemployment insurance, a decrease of 3,000 from the previous week’s level, which was revised up by 3,000. The advance insured unemployment rate remained at 1.2%. The advance number of those receiving unemployment insurance benefits during the week ended June 9 was 1,723,000, an increase of 22,000 from the prior week’s level, which was revised up by 4,000.

Eye on the Week Ahead

The last week of June brings with it some notable economic reports, led by the final estimate of the first-quarter gross domestic product. The report on personal income will show whether wage inflation is mirroring consumer price increases.

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