What I’m Watching This Week – 23 July 2018

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

Last week stocks held their own for the most part, with the Dow and S&P 500 posting marginal gains. The tech-heavy Nasdaq fell slightly, while the small caps of the Russell 2000 gained better than half a percent and the Global Dow jumped ahead about a quarter of a percent. Both the dollar and government bond prices reacted to President Trump’s criticism of the Fed for raising interest rates while claiming the European Union and China were “manipulating their currencies and interest rates lower.” The dollar fell nearly 7.0% and the yield on 10-year Treasuries increased 6 basis points as bond prices fell.

The price of crude oil (WTI) dipped again last week, closing at $70.31 per barrel, down from the prior week’s closing price of $70.62 per barrel. The price of gold (COMEX) continued to fall last week, closing at $1,231.30 by early Friday evening, down from the prior week’s price of $1,241.30. The national average retail regular gasoline price climbed to $2.865 per gallon on July 16, 2018, $0.008 higher than the prior week’s price and $0.587 higher than a year ago.

Market/Index 2017 Close Prior Week As of 7/20 Weekly Change YTD Change
DJIA 24719.22 25019.41 25058.12 0.15% 1.37%
Nasdaq 6903.39 7825.98 7820.20 -0.07% 13.28%
S&P 500 2673.61 2801.31 2801.83 0.02% 4.80%
Russell 2000 1535.51 1687.08 1696.81 0.58% 10.50%
Global Dow 3085.41 3029.17 3037.08 0.26% -1.57%
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% 2.83% 2.89% 6 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

  • Consumers spent more at the retail level last month. Retail and food services sales in June increased 0.5% over May’s totals, and are up 6.6% over June 2017. Sales at the retail level are up 0.3% for the month and 6.4% above last year. Gasoline station sales are up a noteworthy 21.6% from June 2017. Online retail sales have increased 10.2% from last year. Retail sales less auto and gas are up 0.3%. Motor vehicle and parts dealer sales jumped 0.9% for the month and 4.6% from last June. Restaurants and bars saw sales increase 1.5% in June and 8.0% over last year.
  • New home construction slowed in June, according to the latest report from the Census Bureau. Building permits (-2.2%) and housing starts (-12.3%) fell to their lowest rates since last September. Housing completions were essentially unchanged in June.
  • According to the Federal Reserve, industrial production rose 0.6% in June after declining 0.5% in May. For the second quarter as a whole, industrial production advanced at an annual rate of 6.0%, its third consecutive quarterly increase. Manufacturing output moved up 0.8% in June. Factory output increased 0.3% in June, while mining (1.2%) and utilities (1.5%) also expanded.
  • In the week ended July 14, there were 207,000 initial claims for unemployment insurance, a decrease of 8,000 from the previous week’s level, which was revised up 1,000. This is the lowest level for initial claims since December 6, 1969, when it was 202,000. The advance rate for insured unemployment claims remained at 1.2%. The advance number of those receiving unemployment insurance benefits during the week ended July 7 was 1,751,000, an increase of 8,000 from the prior week’s level, which was revised up by 4,000.

Eye on the Week Ahead

Several important economic indicators are released this week, including June reports on new and existing home sales. The latest figures on international trade in goods may be impacted by the ongoing trade wars. Durable goods orders also could be influenced by increased tariffs on both imports and exports. Finally, the latest report on gross domestic product for the second quarter is released at the end of the week.

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