What I’m Watching This Week – 22 January 2019

The Markets (as of market close January 18, 2019)

Rhetoric that trade tensions between the United States and China may be easing helped quell investors’ concerns, prompting a stock market rally last week. The large caps of the S&P 500 and the Dow led the way, followed by the Nasdaq, the Russell 2000, and the Global Dow. This marks the fourth consecutive week of positive returns, the longest such streak since last August. For the month (and year), each of the benchmark indexes listed here are well ahead of their 2018 closing values. The small-cap Russell 2000 is nearly 10.0% above its 2018 closing value, while the Nasdaq is ahead by almost 8.0% since the end of December.

Oil prices climbed again last week, closing at $53.83 per barrel by late Friday, up from the prior week’s closing price of $51.67 per barrel. The price of gold (COMEX) fell for the first time in several weeks, closing at $1,280.60 by last Friday evening, down from the prior week’s price of $1,288.50. The national average retail regular gasoline price was $2.247 per gallon on January 14, 2019, $0.010 higher than the prior week’s price but $0.310 less than a year ago.

Market/Index 2018 Close Prior Week As of 1/18 Weekly Change YTD Change
DJIA 23327.46 23995.95 24706.35 2.96% 5.91%
Nasdaq 6635.28 6971.48 7157.23 2.66% 7.87%
S&P 500 2506.85 2596.26 2670.71 2.87% 6.54%
Russell 2000 1348.56 1447.38 1482.50 2.43% 9.93%
Global Dow 2736.74 2847.60 2901.05 1.88% 6.00%
Fed. Funds target rate 2.25%-2.50% 2.25%-2.50% 2.25%-2.50% 0 bps 0 bps
10-year Treasuries 2.68% 2.69% 2.78% 9 bps 10 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

Note:  Due to the partial government shutdown, some reports have not been updated. If and when this information becomes available, it will be included in the corresponding market report.

  • Prices producers receive for goods and services fell 0.2% in December after rising 0.1% and 0.6% in November and October, respectively. Producer prices climbed 2.5% in 2018, the same increase as in 2017. A closer look shows that prices for goods dropped 0.4%, largely due to a 13.1% decrease in gasoline prices. Overall, energy prices fell 5.4% in December. Prices for services edged down 0.1% last month following three straight months of increases. The drop in prices for services was led by a 0.3% decrease in trade services (the margin between wholesale prices and retail prices) and a 0.2% drop in transportation and warehousing services.
  • Prices paid for imported goods decreased 1.0% in December after falling 1.9% in November. Lower fuel prices drove the decline in December, as nonfuel prices recorded no change. Prices received for exported goods fell 0.6% last month following a 0.8% drop in November. For 2018, import prices decreased 0.6% following a 3.2% increase in 2017. The decline in 2018 was the first calendar-year drop since import prices fell 8.3% in 2015. On the other hand, export prices increased 1.1% in 2018, and have not recorded a calendar year decrease since falling 6.6% in 2015.
  • According to the Federal Reserve, industrial production increased 0.3% in December after rising 0.4% in November. Manufacturing output increased 1.1% last month, its largest gain since February 2018. The output of mines rose 1.5%, but the index for utilities fell 6.3%, as warmer-than-usual temperatures lowered the demand for heating. Overall, total industrial production was 4.0% higher in December than it was a year earlier.
  • For the week ended January 12, there were 213,000 new claims for unemployment insurance, a decrease of 3,000 from the previous week’s level. According to the Department of Labor, the advance rate for insured unemployment claims remained at 1.2% for the week ended January 5. The advance number of those receiving unemployment insurance benefits during the week ended January 5 was 1,737,000, an increase of 18,000 from the prior week’s level, which was revised down by 3,000.

Eye on the Week Ahead

The housing sector is front and center next week with reports on new and existing home sales in December. Also of interest is the December report on durable goods orders. November saw orders for core capital goods (excluding aircraft and goods produced for the Defense Department) fall 0.6% in November — not a good sign for manufacturers moving forward.

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