What I’m Watching This Week – 25 February 2019

The Markets (as of market close February 22, 2019)

The benchmark indexes listed here posted modest gains last week, led by the small caps of the Russell 2000. With another weekly gain, the Dow has enjoyed its longest streak in almost 25 years. Volatility was moderate last week as the Cboe Volatility Index® hit its lowest level in several months. Long-term bond prices moved very little as yields have remained fairly stable for much of this month. For the year, investors have been bullish on small-cap stocks, pushing the Russell 2000 to an almost 18% gain over its 2018 closing value. The Nasdaq is next, followed by the large caps of the Dow and the S&P 500. Even the Global Dow is 10% ahead of last year’s closing mark.

Oil prices rose again last week, closing at $57.16 per barrel by late Friday, up from the prior week’s closing price of $55.80 per barrel. The price of gold (COMEX) climbed higher last week, jumping to $1,330.20 by last Friday evening, up from the prior week’s price of $1,324.60. The national average retail regular gasoline price was $2.317 per gallon on February 18, 2019, $0.041 higher than the prior week’s price but $0.240 less than a year ago.

Market/Index 2018 Close Prior Week As of 2/22 Weekly Change YTD Change
DJIA 23327.46 25883.25 26031.81 0.57% 11.59%
Nasdaq 6635.28 7472.41 7527.54 0.74% 13.45%
S&P 500 2506.85 2775.60 2792.67 0.62% 11.40%
Russell 2000 1348.56 1569.25 1590.06 1.33% 17.91%
Global Dow 2736.74 2981.11 3010.94 1.00% 10.02%
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% 2.66% 2.65% -1 bps -3 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 government shutdown, some affected federal agencies are providing reports for December, while others have information available for January. These monthly reporting differences are noted below.

  • New orders for manufactured durable goods in December increased $3.0 billion, or 1.2%, to $254.4 billion, according to the latest Census Bureau report. This increase, up two consecutive months, followed a 1.0% November increase. Excluding transportation, new orders increased 0.1%. Excluding defense, new orders increased 1.8%. However, a closer look at the report reveals that business investment in new orders for durable capital goods is lagging. New orders for core capital goods (excluding defense and transportation) fell 0.7% in December, following a revised November drop of 1.0%. Capital goods include buildings, machinery, vehicles, tools, and equipment.
  • Sales of existing homes fell for the third consecutive month in January, according to the National Association of Realtors®. Of the four major geographical regions of the United States, only the Northeast saw sales climb higher in January over December. Overall, sales fell 1.2% for the first month of the year and are now down 8.5% from a year ago. The median existing-home price in January was $247,500, up 2.8% from January 2018 ($240,800), but down from December’s median price of $253,600. According to the report, home price growth is the slowest since February 2012. Inventory for existing homes for sale edged up from 3.7 months in December to 3.9 months in January.
  • For the week ended February 16, there were 216,000 new claims for unemployment insurance, a decrease of 23,000 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 February 9. The advance number of those receiving unemployment insurance benefits during the week ended February 9 was 1,725,000, a decrease of 55,000 from the prior week’s level.

Eye on the Week Ahead

With the threat of another government shutdown apparently behind us, several economic reports are out during the last week of the month, not the least of which is the gross domestic product report for the fourth quarter of 2018. Inflation has been held in check at the consumer level, a trend that is likely to be reflected in the latest report on personal income and outlays. Delayed by the aforementioned shutdown, January figures on income will be available, but spending and savings information is available only for December.

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What I’m Watching This Week – 19 February 2019

The Markets (as of market close February 15, 2019)

Stocks extended their streak last week, as each of the benchmark indexes listed here posted gains of at least 2.0%. Positive developments in the trade talks between the United States and China, coupled with avoidance of another government shutdown, gave investors the confidence to continue trading. Robust market gains came despite weak retail sales numbers for January. Oil prices climbed over $55 per barrel for the first time in many weeks as OPEC and Russia agreed to cut production. Small caps led the way last week as the Russell 2000 gained over 4.0%. The Dow registered its eighth consecutive week of gains and is now almost 11.0% ahead of its December closing value.

Oil prices rose last week, closing at $55.80 per barrel by late Friday, up from the prior week’s closing price of $52.71 per barrel. The price of gold (COMEX) rebounded last week, jumping to $1,324.60 by last Friday evening, up from the prior week’s price of $1,317.90. The national average retail regular gasoline price was $2.276 per gallon on February 11, 2019, $0.022 higher than the prior week’s price but $0.331 less than a year ago.

Market/Index 2018 Close Prior Week As of 2/15 Weekly Change YTD Change
DJIA 23327.46 25106.33 25883.25 3.09% 10.96%
Nasdaq 6635.28 7298.20 7472.41 2.39% 12.62%
S&P 500 2506.85 2707.88 2775.60 2.50% 10.72%
Russell 2000 1348.56 1506.39 1569.25 4.17% 16.36%
Global Dow 2736.74 2920.60 2981.11 2.07% 8.93%
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% 2.63% 2.66% 3 bps -2 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 government shutdown, some affected federal agencies are providing reports for December, while others have information available for January. These monthly reporting differences are noted below.

  • For the third consecutive month consumer prices, as measured by the Consumer Price Index, remained unchanged in January. Prices less food and energy inched up 0.2%. Energy prices fell 3.1% in January, after falling 2.6% in December. For the 12 months ended in January, the CPI is up 1.6%, while the CPI less food and energy is ahead 2.2%. A 10.1% drop in gas prices over the last 12 months has pulled consumer prices lower.
  • December was not a good month at the retail level, as sales suffered their largest drop in nine years. Evidencing signs that economic growth slowed during the last quarter of 2018, total sales fell 1.2% in December, following a downwardly-revised 0.1% increase in November. The good news is that total sales for 2018 were up 5.0%. Nevertheless, some retail sectors were hit hard in December, including furniture and home furnishings stores (-1.3%); sporting goods, hobby, musical instrument, and book stores (-4.9%); health and personal care stores (-2.0%); and gasoline stations (-5.1%). Also of note, for the first time in several months, nonstore (online) retailers saw sales fall, declining 3.9% in December.
  • Prices received by domestic producers of goods and services, as measured by the Producer Price Index, fell 0.1% in January after declining 0.1% (revised) in December. Goods plummeted 0.8% for the month, while services actually increased 0.3% in January. Overall, producer prices advanced 2.0% for the 12 months ended in January. The index less foods, energy, and trade services rose 0.2% in January following no change in December. For the 12 months ended in January, prices less foods, energy, and trade services moved up 2.5%.
  • Inflationary indicators has been soft so far this year and import and export prices are no exception. In January, United States import prices fell 0.5% and export prices decreased 0.6% for the second consecutive month. Import prices have fallen 3.1% over the first three months of 2019, the largest drop over a 3-month period since February 2016. The January decrease in import prices was driven by a drop in natural gas prices. Import prices, excluding fuel, edged down 0.2% in January. Exports have recorded only one price increase since June. Decreases in both agricultural and nonagricultural prices contributed to the overall decline.
  • According to the latest treasury budget statement, the government deficit was $13.5 billion in December. For the first three months of the fiscal year, the deficit sits at $318.9 billion — more than 40% higher than the $225 billion deficit over the same period in fiscal year 2018. Individual income taxes accounted for $373 billion of income in December, while corporation income taxes totaled $53 billion. On the other side of the ledger, the largest expenditures last December were for Social Security ($251 billion) and national defense ($188 billion).
  • Industrial production decreased 0.6% in January after rising 0.1% in December. In January, manufacturing production fell 0.9%, primarily as a result of a large drop in motor vehicle assemblies; factory output, excluding motor vehicles and parts, decreased 0.2%. The indexes for mining and utilities moved up 0.1% and 0.4%, respectively. Compared to last January, total industrial production is 3.8% higher in the first month of 2019.
  • According to the Job Openings and Labor Turnover report, job openings continued to expand at a faster rate than hires. December saw job openings reach a high of 7.3 million and the job openings rate was 4.7%. Job opening increased in construction, accommodation and food services, and health care and social assistance. Job openings decreased in nondurable goods manufacturing, federal government, and real estate and rental and leasing. December hires increased to 5.907 million from November’s 5.812 million. Hires increased in retail trade, educational services, and mining and logging. Hires fell in information and in federal government. Over the 12 months ended in December, hires totaled 68.5 million and separations totaled 65.9 million, yielding a net employment gain of 2.6 million.
  • For the week ended February 9, there were 239,000 new claims for unemployment insurance, an increase of 4,000 from the previous week’s level, which was revised up by 1,000. According to the Department of Labor, the advance rate for insured unemployment claims remained at 1.2% for the week ended February 2. The advance number of those receiving unemployment insurance benefits during the week ended February 2 was 1,773,000, an increase of 37,000 from the prior week’s level.

Eye on the Week Ahead

This week offers a couple of noteworthy economic reports. The National Association of Realtors® releases its figures on existing home sales in January. Sales took a big dive in December and look to rebound. Also, the December report on durable goods orders should be out this week. This report was delayed last month due to the government shutdown.

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What I’m Watching This Week – 11 February 2019

The Markets (as of market close February 8, 2019)

Most of the benchmark indexes listed here posted gains for the seventh consecutive week. Only the Global Dow lagged behind. Utilities and information technology shares performed well last week, while oil and energy shares did not fare quite so favorably. International trade once again was in the news as negotiations between the United States and China continue with no apparent resolution in sight. Investors will be keeping their eyes on the rhetoric from both of the global economic giants as the deadline for the tariff truce draws nearer. Of the indexes listed here, the Nasdaq led the way, followed by the Russell 2000, which continued to perform best since the beginning of the year.

Oil prices fell last week, closing at $52.71 per barrel by late Friday, down from the prior week’s closing price of $55.37 per barrel. The price of gold (COMEX) dipped for the first time in several weeks, dropping to $1,317.90 by last Friday evening, off from the prior week’s price of $1,322.00. The national average retail regular gasoline price was $2.254 per gallon on February 4, 2019, $0.002 lower than the prior week’s price and $0.383 less than a year ago.

Market/Index 2018 Close Prior Week As of 2/8 Weekly Change YTD Change
DJIA 23327.46 25063.89 25106.33 0.17% 7.63%
Nasdaq 6635.28 7263.87 7298.20 0.47% 9.99%
S&P 500 2506.85 2706.53 2707.88 0.05% 8.02%
Russell 2000 1348.56 1502.05 1506.39 0.29% 11.70%
Global Dow 2736.74 2947.87 2920.60 -0.93% 6.72%
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% 2.68% 2.63% -5 bps -5 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

  • Some government agencies are playing catch-up as they post information not available during the shutdown. Such is the case with the release of the international trade deficit, which is for November. According to the Bureau of Economic Analysis, the goods and services deficit was $49.3 billion, down $6.4 billion from October. November exports were $209.9 billion, $1.3 billion less than October exports. November imports were $259.2 billion, $7.7 billion less than October imports. The November decrease in the goods and services deficit reflected a decrease in the goods deficit of $6.7 billion to $71.6 billion and a decrease in the services surplus of $0.3 billion to $22.3 billion. Year-to-date, the goods, and services deficit increased $51.9 billion, or 10.4%, from the same period in 2017. Exports increased $157.1 billion, or 7.3%. Imports increased $208.9 billion, or 7.9%.
  • Economic activity in the services sector slowed in January. According to the Non-Manufacturing ISM® Report On Business®, the non-manufacturing index fell 1.3% from its December reading. Business activity and new orders also regressed, while employment and prices increased. Survey respondents expressed concern about the impacts of the government shutdown but remained generally optimistic about overall business conditions.
  • For the week ended February 2, there were 234,000 new claims for unemployment insurance, a decrease of 19,000 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 26. The advance number of those receiving unemployment insurance benefits during the week ended January 26 was 1,736,000, a decrease of 42,000 from the prior week’s level, which was revised down by 4,000.

Eye on the Week Ahead

More economic information should be forthcoming as government agencies try to catch up following the shutdown. Inflation indicators are front and center this week with reports on the Consumer Price Index and the retail sales report. Also, the Treasury budget report should be out this week, which should be for last December.

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What I’m Watching This Week – 4 February 2019

The Markets (as of market close February 1, 2019)

The benchmark indexes listed here rose for the week, particularly last Wednesday and Thursday. Strong corporate earnings reports, especially in the communication services sector, helped push stock prices higher. However, the biggest boost to the market may have come following the Federal Reserve’s meeting last Wednesday. The Fed decided to keep interest rates at their current spread and removed any reference to future rate increases. For the year, the small caps of the Russell 2000 lead the way, followed by the Nasdaq, the S&P 500, the Global Dow, and the Dow.

Oil prices rose slightly last week, closing at $55.37 per barrel by late Friday, up from the prior week’s closing price of $53.55 per barrel. The price of gold (COMEX) continued to surge, climbing to $1,322.00 by last Friday evening, up from the prior week’s price of $1,308.20. The national average retail regular gasoline price was $2.256 per gallon on January 28, 2019, $0.005 higher than the prior week’s price but $0.351 less than a year ago.

Market/Index 2018 Close Prior Week As of 2/1 Weekly Change YTD Change
DJIA 23327.46 24737.20 25063.89 1.32% 7.44%
Nasdaq 6635.28 7164.86 7263.87 1.38% 9.47%
S&P 500 2506.85 2664.76 2706.53 1.57% 7.97%
Russell 2000 1348.56 1482.85 1502.05 1.29% 11.38%
Global Dow 2736.74 2919.57 2947.87 0.97% 7.71%
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% 2.76% 2.68% -8 bps 0 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.

  • Two important economic reports scheduled for release last week were not available as some government agencies try to catch up following the shutdown. The initial report on the fourth-quarter gross domestic product has been delayed, as has the report on personal income and outlays.
  • Following its meeting last week, the Federal Open Market Committee decided to maintain the target range for the federal funds rate at 2.25%-2.50%. The FOMC noted that slowing global growth requires patience as it determines whether or when to change rates in the future. Of importance is the fact that the Committee did not indicate a predetermined number of rate increases as it had done previously.
  • Due to the government shutdown, the report on new home sales, released on January 31, is for the month of November. Sales of new homes climbed sharply in November, up 16.9% over October’s figures. New home sales are still off 7.7% from November 2017. The median sales price of new houses sold in November was $302,400. The average sales price was $362,400. The estimate of new houses for sale at the end of November was 330,000, which represents an inventory of 6.0 months.
  • Manufacturing picked up the pace in January, according to the Manufacturing ISM® Report On Business®. New orders, production, and inventories each moved higher in January over their December figures. Employment, deliveries, and prices all fell, however.
  • The IHS, Markit US Manufacturing PMI™ also saw manufacturing improve in January. Domestic demand drove new business growth, as new export orders rose only marginally and at the weakest rate since last October. Business confidence about the year ahead also picked up markedly to reach a three-month high.
  • For the week ended January 26, there were 253,000 new claims for unemployment insurance, an increase of 53,000 from the previous week’s level, which was revised up by 1,000. This is the highest level for initial claims since September 30, 2017, when it was 254,000. According to the Department of Labor, the advance rate for insured unemployment claims remained at 1.2% for the week ended January 19. The advance number of those receiving unemployment insurance benefits during the week ended January 19 was 1,782,000, an increase of 69,000 from the prior week’s level.

Eye on the Week Ahead

This week is a slow one for economic news. However, with more corporate earnings reports out, the market could continue its strong showing.

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Monthly Market Review – January 2019

The Markets (as of market close January 31, 2019)

Investors celebrated a month in which several indexes posted their best January performance in three decades. A strong labor market, low inflation, and a more “patient” Federal Reserve Board all sent encouraging messages to investors who were hungry for good news after last December’s precipitous plunge. The Russell 2000 led the charge, closing the month more than 11% higher than its 2018 close, followed by a nearly 10% gain in the Nasdaq, while the S&P 500, Dow, and Global Dow all topped 7%.

By the close of trading on January 31, the price of crude oil (WTI) was $53.95 per barrel, up from the December 31 price of $45.81 per barrel. The national average retail regular gasoline price was $2.256 per gallon on January 28, down slightly from the December 31 selling price of $2.266 and $0.351 lower than a year ago. The price of gold rose by the end of January, reaching $1,325.70 by close of business on the 31st, up from $1,284.70 at the end of December.

Market/Index 2018 Close Prior Month As of January 31 Month Change YTD Change
DJIA 23327.46 23327.46 24999.67 7.17% 7.17%
NASDAQ 6635.28 6635.28 7281.74 9.74% 9.74%
S&P 500 2506.85 2506.85 2704.10 7.87% 7.87%
Russell 2000 1348.56 1348.56 1499.42 11.19% 11.19%
Global Dow 2736.74 2736.74 2945.73 7.64% 7.64%
Fed. Funds 2.25%-2.50% 2.25%-2.50% 2.25%-2.50% 0 bps 0 bps
10-year Treasuries 2.68% 2.68% 2.63% -5 bps -5 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 Month’s Economic News

Note:  Due to the partial government shutdown earlier this month, some reports were delayed.

  • Employment: Total employment rose by 312,000 in December after adding 176,000 (revised) new jobs in November. Notable employment increases for the month occurred in health care (50,000), food services and drinking places (41,000), construction (38,000), manufacturing (32,000), and transportation and warehousing (25,000). The unemployment rate advanced from 3.7% in November to 3.9% in December. The number of unemployed persons increased by 276,000 to 6.3 million. A year earlier, the jobless rate was 4.1%, and the number of unemployed persons was 6.6 million. The labor participation rate rose 0.2% from November to 63.1% in December. The employment-population ratio remained at 60.6%. The average workweek increased 0.1 hour to 34.5 hours in December. Average hourly earnings increased by $0.11 to $27.48. Over the last 12 months, average hourly earnings have risen $0.84, or 3.2%.
  • FOMC/interest rates: At its two-day meeting on January 29 and 30, the Federal Open Market Committee decided to leave rates unchanged, and, in an apparent reversal from opinions expressed last month, did not predict whether future hikes were in the future. “In light of global economic and financial developments and muted inflation pressures, the Committee will be patient as it determines what future adjustments to the target range for the federal funds rate may be appropriate to support these outcomes.” The next FOMC meeting is scheduled for March 19 and 20.
  • GDP/budget: The advance estimate of the fourth-quarter gross domestic product, scheduled for release earlier this week, was delayed.
  • Inflation/consumer spending: The Consumer Price Index fell 0.1% in December after being unchanged in November. Over the previous 12 months, the CPI rose 1.9%. Core prices, which exclude food and energy, climbed 0.2% for the month and were up 2.2% over the previous 12 months. According to the Producer Price Index, the prices companies received for goods and services dropped 0.2% in December following a 0.1% increase in November. Producer prices increased 2.5% over the 12 months ended in December. Prices less food, energy, and trade services were unchanged in December after rising 0.3% the prior month, and were up 2.8% over the previous 12 months. The Personal Income and Outlays report, scheduled for release earlier this week, was delayed.
  • Housing: The housing sector has been slow to pick up speed primarily due to higher mortgage rates and scant inventory. Sales of existing homes plunged 6.4% in December from November. Year-over-year, existing home sales were down 10.3%. The December median price for existing homes was $253,600, down from $257,700 in November. However, existing home prices were up 2.9% from December 2017. Total housing inventory for existing homes for sale fell from 1.74 million in November to 1.55 million in December, rendering a 3.7-month supply at the then-current sales pace. By contrast, sales of new single-family homes jumped by 17% from October to November 2018, but were nearly 7.7% lower than in November 2017. The median sales price for new homes was $302,400, down from $325,100 in October and $41,000 lower than a year prior.
  • Manufacturing: The manufacturing sector gained momentum in December. Industrial production edged up 0.3% following a 0.4% advance in November. For the fourth quarter, industrial production advanced at an annual rate of 3.8%. Manufacturing output increased 1.1% — its largest gain since February 2018. The index for mining increased 1.5%, but utilities dropped 6.3%, as warmer-than-usual temperatures lowered the demand for heating. The advance report on durable goods, scheduled for release on January 25, was delayed.
  • Imports and exports: The advance report on international trade in goods, scheduled for release earlier this week, was delayed.
  • International markets: Global stocks responded well to news that the Federal Reserve was hitting the pause button on interest rate hikes, closing out a strong month. And after two days of high-level trade discussions between U.S. and Chinese officials, President Trump confirmed plans to meet with Chinese President Xi Jinping to try to finalize a deal between the two countries by March 1. He also announced that U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin would travel to China to further the negotiations in the interim. In the eurozone, fourth-quarter growth was tepid, with reports indicating that Italy had fallen into a recession. Global investors were also concerned about reports that China’s manufacturing sector had dipped for the second month in a row, and have been monitoring what happens with Brexit as the March 2019 deadline approaches for a deal to pave the way for the United Kingdom’s exit from the European Union.
  • Consumer confidence: The Conference Board Consumer Confidence Index® declined in January, following a dip in December. The index now stands at 120.2, down from 126.6 in December. The Present Situation Index, which gauges how consumers feel about current business and labor market conditions, dropped by a minimal 0.3. By contrast, the Expectations Index, which measures how consumers view the short-term outlook for income, business, and labor market conditions, dropped more than 10 points. Lynn Franco, Senior Director of Economic Indicators at the organization, attributed the decline to concerns surrounding financial market volatility and the government shutdown.

Eye on the Month Ahead

With the federal government now back at full staff (for at least a few weeks), investors look forward to receiving additional data as it becomes available, offering a more comprehensive view of the nation’s economy. Ears will also be carefully attuned to news of any progress in the U.S.-China trade talks.

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