What I’m Watching This Week – 16 July 2018

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

Stocks posted gains for the second week in a row following some good corporate earnings reports. Each of the indexes listed here improved, except for the small caps of the Russell 2000, which dipped less than a half a point. Year-to-date, only the Global Dow remains behind its 2017 closing value. For the week, the Dow climbed a solid 2.30%, followed by the Nasdaq, the S&P 500, and the Global Dow.

The price of crude oil (WTI) dipped again last week, closing at $70.62 per barrel, down from the prior week’s closing price of $73.92 per barrel. The price of gold (COMEX) fell to $1,241.30 by early Friday evening, down from the prior week’s price of $1,255.90. The national average retail regular gasoline price climbed to $2.857 per gallon on July 9, 2018, $0.013 higher than the prior week’s price and $0.560 higher than a year ago.

Market/Index 2017 Close Prior Week As of 7/13 Weekly Change YTD Change
DJIA 24719.22 24456.48 25019.41 2.30% 1.21%
Nasdaq 6903.39 7688.39 7825.98 1.79% 13.36%
S&P 500 2673.61 2759.82 2801.31 1.50% 4.78%
Russell 2000 1535.51 1694.05 1687.08 -0.41% 9.87%
Global Dow 3085.41 3007.63 3029.17 0.72% -1.82%
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% 2.82% 2.83% 1 bps 42 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

  • Consumer prices increased a scant 0.1% in June following a 0.2% bump in May. Over the last 12 months, consumer prices have risen 2.9%. Prices less food and energy rose 0.2% for the month and are up 2.3% for the 12 months ended in June. For the month, fuel oil rose 2.9%, while gasoline increased 0.5%. Medical care services (0.5%), used motor vehicles (0.7%), and new automobiles (0.4%) expanded in June.
  • Producer prices rose 0.3% in June after climbing 0.5% in May. Prices have risen 3.4% for the 12 months ended in June — the largest 12-month increase since November 2011. Prices less foods, energy, and trade services moved up 0.3% in June after rising 0.1% in May. For the 12 months ended in June, prices less foods, energy, and trade services increased 2.7%. Prices for services rose 0.4% while goods increased 0.1%. The jump in services prices is attributable to a 21.8% jump in fuels and lubricants.
  • The federal budget deficit for June was $74.9 billion, down from May’s deficit of $146.8 billion. For the fiscal year, the deficit sits at $607.1 billion. Over the same period last year, the deficit was $523.1 billion. Of note, individual income taxes net receipts sit at $1,305.5 billion this year, compared to $1,199.2 billion over the same period last year; corporate income taxes net receipts are $161.7 billion this year versus $223.3 billion in 2017.
  • The number of job openings edged down to 6.6 million on the last business day of May, the U.S. Bureau of Labor Statistics reported. The number of job openings in April was 6.8 million. Job openings increased in the federal government (+12,000) and mining and logging (+10,000) but decreased in information (-60,000) and arts, entertainment, and recreation (-27,000). The number of hires increased in May (5.8 million) over April (5.6 million), while total separations were essentially unchanged at 5.5 million. The quits rate increased to 2.4% as people are leaving their current jobs in search of better jobs and/or higher wages.
  • U.S. import prices decreased 0.4% in June following a 0.9% advance in May. The June decline was the largest monthly drop since the index decreased 0.5% in February 2016. Despite the downturn in June, overall import prices advanced 4.3% between June 2017 and June 2018. Prices for U.S. exports rose 0.3% in June, after rising 0.6% the previous month. Prices for overall exports advanced 5.3% over the past 12 months, the largest over-the-year increase since the index rose 6.3% in October 2011.
  • In the week ended July 7, there were 214,000 initial claims for unemployment insurance, a decrease of 18,000 from the previous week’s level, which was revised up 1,000. The advance insured unemployment rate remained at 1.2%. The advance number of those receiving unemployment insurance benefits during the week ended June 30 was 1,739,000, a decrease of 3,000 from the prior week’s level, which was revised up by 3,000.

Eye on the Week Ahead

This week’s retail sales report for June is another indicator of consumer spending. What effect, if any, will the trade wars have on prices for consumer goods and services? Price changes can impact retail sales, particularly food and energy sales.

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