What I’m Watching This Week – 29 April 2019

The Markets (as of market close April 26, 2019)

The S&P 500 and Nasdaq reached record highs last week on the heels of an unexpectedly strong GDP report. Tech shares got a boost from strong quarterly earnings reports from a major player in that sector. Of the benchmark indexes listed here, only the Dow and the Global Dow failed to post gains by the end of the week. The small caps of the Russell 2000 rebounded by gaining over 1.50%, while the S&P 500 closed the week up 1.20%. For the year, each of the indexes listed here are well ahead of their 2018 year-end closing values, led by the Nasdaq and the Russell 2000.

Oil prices dipped for the first time in several weeks, closing at $62.80 per barrel by late Friday, down from the prior week’s closing price of $64.00 per barrel. The price of gold (COMEX) increased last week, closing at $1,288.40 by Friday evening, up from the prior week’s price of $1,277.90. The national average retail regular gasoline price was $2.841 per gallon on April 22, 2019, $0.013 higher than the prior week’s price and $0.043 more than a year ago.

Market/Index 2018 Close Prior Week As of 4/26 Weekly Change YTD Change
DJIA 23327.46 26559.54 26543.33 -0.06% 13.79%
Nasdaq 6635.28 7998.06 8146.40 1.85% 22.77%
S&P 500 2506.85 2905.03 2939.88 1.20% 17.27%
Russell 2000 1348.56 1565.75 1591.82 1.67% 18.04%
Global Dow 2736.74 3094.67 3084.44 -0.33% 12.70%
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% 2.56% 2.49% -7 bps -19 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 nation’s economy grew at an annualized rate of 3.2% in the first quarter of 2019, according to the initial, or “advance,” estimate of the gross domestic product from the Bureau of Economic Analysis. In the fourth quarter, the GDP expanded at an annualized rate of 2.2%. Increases in government spending, private inventory investment, and exports helped drive the growth in the first quarter. On the downside, first-quarter figures showed that residential investment slowed, as did consumer spending and business fixed investment (e.g., machinery used in production, such as computers, software, heavy equipment, etc.) compared to the prior quarter. A couple of points to note from this report are that consumers spent less, particularly on big-ticket items such as motor vehicles, and net exports (i.e., the trade deficit) increased as exports accelerated while purchases of imports slowed.
  • New orders for manufactured durable goods in March increased $6.8 billion, or 2.7%, according to the Census Bureau. This increase, up four of the last five months, followed a 1.1% February decrease. Excluding transportation, new orders increased 0.4%. Excluding defense, new orders increased 2.3%. Transportation equipment, also up four of the last five months, led the March increase, up 7.0% over February’s figures. Shipments of durable goods increased 0.3% following a similar jump in February. Unfilled orders (0.3%) and inventories (0.3%) increased, while new orders for capital goods, used by businesses to produce goods or services, surged 6.5% in March over February.
  • Sales of existing homes pulled back in March after posting robust sales figures in February. Existing home sales fell 4.9% last month and are down 5.4% from a year ago. The median price for existing homes for sale in March was $259,400 ($249,500 in February), 3.8% ahead of the price last March. Total inventory is at a 3.9-month supply — slightly ahead of the 3.6-month supply in February.
  • New home sales increased 4.5% in March over the previous month as housing prices fell. The median sales price of new houses sold in March was $302,700 ($315,200 in February). The average sales price was $376,000 ($385,300 in February). The estimate of new houses for sale at the end of March was 344,000. This represents a supply of 6.0 months at the current sales rate.
  • For the week ended April 20, there were 230,000 claims for unemployment insurance, an increase of 37,000 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 April 13. The advance number of those receiving unemployment insurance benefits during the week ended April 13 was 1,655,000, an increase of 1,000 from the prior week’s level, which was revised up by 1,000.

Eye on the Week Ahead

Several important economic- and market-moving reports are out this week. Information on consumer income and spending for March is out on Monday. Consumer income rose only 0.2% in February. The employment figures for March are out at the end of the week. The unemployment rate has remained 3.8% for quite some time, while hourly earnings nudged up 0.1% in February. The Federal Open Market Committee meets next week. It is not expected that the Committee will increase interest rates, however its statement on economic conditions will be closely watched.

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What I’m Watching This Week – 22 April 2019

The Markets (as of market close April 19, 2019)

Stocks moved very little during the holiday-shortened week (markets were closed in observance of Good Friday). The large caps of the Dow inched up a little over 0.5%, while the S&P 500 dropped less than 0.1%. With light trading, the Cboe Volatility Index® fell to an eight-month low last week. Favorable earnings reports helped push industrial shares higher, offset by dipping health-care stocks. The yield on 10-year Treasuries stayed stagnant last week. Year-to-date, each of the benchmark indexes listed here are comfortably ahead of their respective 2018 closing values, led by the Nasdaq, followed by the Russell 2000, the S&P 500, the Dow, and the Global Dow.

Oil prices rose again last week, closing at $64.00 per barrel by late Friday, up from the prior week’s closing price of $63.77 per barrel. The price of gold (COMEX) fell again last week, closing at $1,277.90 by Friday evening, down from the prior week’s price of $1,293.70. The national average retail regular gasoline price was $2.828 per gallon on April 15, 2019, $0.083 higher than the prior week’s price and $0.081 more than a year ago.

Market/Index 2018 Close Prior Week As of 4/19 Weekly Change YTD Change
DJIA 23327.46 26412.30 26559.54 0.56% 13.86%
Nasdaq 6635.28 7984.16 7998.06 0.17% 20.54%
S&P 500 2506.85 2907.41 2905.03 -0.08% 15.88%
Russell 2000 1348.56 1584.80 1565.75 -1.20% 16.11%
Global Dow 2736.74 3079.86 3094.67 0.48% 13.08%
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% 2.56% 2.56% 0 bps -12 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

  • What is hopefully a sign of a strengthening economy, retail sales increased 1.6% in March and are up 3.6% over March 2018. This is the largest monthly increase since September 2017. Excluding motor vehicles and gas station sales, retail sales advanced 0.9% last month. Certain retailers enjoyed a boost in sales, including motor vehicle and parts dealers (3.1%), furniture and home furnishing stores (1.7%), clothing stores (2.0%), and gas stations (3.5%). Online retail sales increased 1.2% in March and are up 11.6% over the past 12 months.
  • Industrial production continues to stagnate, according to the latest report from the Federal Reserve. In March, industrial production edged down 0.1% after inching up 0.1% in February. For the first three months of the year, industrial production has fallen 0.3%. Manufacturing was unchanged in March after receding in both January and February. Motor vehicles and parts production fell 2.5% for the month and 4.5% for the last 12 months. Utilities production rose 0.2% in March, while mining output fell 0.8%. Capacity utilization for the industrial sector decreased 0.2 percentage point in March to 78.8%, a rate that is 1.0 percentage point below its long-run average.
  • The goods and services deficit was $49.4 billion in February, down $1.8 billion from January. February exports increased 1.1% for the month, while imports inched up 0.2%. For the first two months of 2019, the trade deficit sits at $100.5 billion, down roughly $8.3 billion from the deficit over the same period in 2018.
  • Just when it appeared the housing sector was picking up steam, the figures for housing starts for March pointed in the opposite direction. Housing starts fell 0.3% in March from the previous month, according to the latest report from the Census Bureau. Building permits dropped 1.7% and home completions decreased 1.9% in March. Compared to last March, starts are down 14.2% and building permits are off 7.8%, but completions are 6.8% above last year’s rate.
  • For the week ended April 13, there were 192,000 new claims for unemployment insurance, a decrease of 5,000 from the previous week’s level, which was revised up by 1,000. This is the lowest level for initial claims since September 6, 1969, when it was 182,000. According to the Department of Labor, the advance rate for insured unemployment claims remained at 1.2% for the week ended April 6. The advance number of those receiving unemployment insurance benefits during the week ended April 6 was 1,653,000, a decrease of 63,000 from the prior week’s level, which was revised up by 3,000.

Eye on the Week Ahead

The initial, or preliminary, release of the first-quarter gross domestic product is out this Friday. The GDP increased 2.2% in the fourth quarter, and 2.9% for 2018. However, economic growth slowed further into last year, as consumer spending and business investment decreased. Neither sector has picked up much steam during the first quarter of 2019, which could continue to hold down the economy.

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What I’m Watching This Week – 15 April 2019

The Markets (as of market close April 12, 2019)

Trading was fairly light last week as investors await the start of quarterly corporate earnings reports. With several large corporations reporting lower-than-expected profits, investors may be leery of this round of earnings results. However, better-than-expected earnings were reported by a few banking giants last Friday, which should help the market kick off the week on a positive note. While investors watch for more earnings reports, they are also keeping a watchful eye on the world economy. According to European Central Bank President Mario Draghi, Europe’s economic slowdown could continue for a while. For the week, each of the benchmark indexes listed here posted moderate gains, except for the Dow, which essentially broke even. The S&P 500 gained about 0.5%, and the Nasdaq closed near 0.6%.

Oil prices continue to climb, closing at $63.77 per barrel by late Friday, up from the prior week’s closing price of $63.26 per barrel. The price of gold (COMEX) fell again last week, closing at $1,293.70 by Friday evening, down from the prior week’s price of $1,295.90. The national average retail regular gasoline price was $2.745 per gallon on April 8, 2019, $0.054 higher than the prior week’s price and $0.051 more than a year ago.

Market/Index 2018 Close Prior Week As of 4/12 Weekly Change YTD Change
DJIA 23327.46 26424.99 26412.30 -0.05% 13.22%
Nasdaq 6635.28 7938.69 7984.16 0.57% 20.33%
S&P 500 2506.85 2892.74 2907.41 0.51% 15.98%
Russell 2000 1348.56 1582.56 1584.80 0.14% 17.52%
Global Dow 2736.74 3072.23 3079.86 0.25% 12.54%
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% 2.49% 2.56% 7 bps -12 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

  • Inflationary pressures remained weak in March. Consumer prices climbed 0.4% in March after rising 0.2% in February. For the 12 months ended in March, the CPI increased 1.9%. However, driving much of the price increase last month was a 3.5% increase in energy prices (gas prices jumped 6.5%). The CPI less food and energy inched up only 0.1% for the month, and has increased 2.0% over the last 12 months.
  • Surging energy prices also pushed producer prices higher in March. According to the latest report from the Bureau of Labor Statistics, the Producer Price Index rose 0.6% last month, ahead of the 0.1% February increase. Gasoline prices zoomed 16% higher in March. Prices excluding foods, energy, and trade services were unchanged in March following a 0.1% advance in February.
  • The price of imports rose by 0.6% in March following a 1.0% jump in February. Soaring energy prices drove import costs higher. For the first quarter of the year, import prices have risen 1.7% — the largest three-month rise since prices surged 1.9% for the October 2017 through December 2018 stretch. Exports advanced 0.7% last month, the same increase as in February.
  • According to the Federal Reserve, the government deficit in March was $146.9 billion ($208.7 billion in March 2018). For the fiscal year, the deficit sits at $691.2 billion — over 15% greater than the deficit over the same period last year. Big-ticket expenditures last month included Social Security ($87 billion), national defense ($58 billion), income security ($57 billion), and Medicare ($53 billion).
  • The number of job openings fell to 7.1 million (-538,000) on the last business day of February from January’s total, according to the Job Openings and Labor Turnover report. Job openings decreased in a number of industries, with the largest decreases in accommodation and food services (-103,000), real estate and rental and leasing (-72,000), and transportation, warehousing, and utilities (-66,000). The number of job openings fell in the Northeast, South, and Midwest regions. Over the 12 months ended in February, hires totaled 69.3 million and separations totaled 66.6 million, yielding a net employment gain of 2.7 million.
  • For the week ended April 6, there were 196,000 new claims for unemployment insurance, a decrease of 8,000 from the previous week’s level, which was revised up by 2,000. This is the lowest level for initial claims since October 4, 1969, when it was 193,000. According to the Department of Labor, the advance rate for insured unemployment claims remained at 1.2% for the week ended March 30. The advance number of those receiving unemployment insurance benefits during the week ended March 30 was 1,713,000, a decrease of 13,000 from the prior week’s level, which was revised up by 9,000.

Eye on the Week Ahead

Economic indicators have shown that industrial production has slowed during the first quarter of 2019. The Federal Reserve’s March report is out this week, which may (hopefully) show some acceleration in manufacturing. Also, this week, the February figures on the international trade deficit are available. The January trade deficit was over $51 billion, down from December’s nearly $60 billion figure.

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What I’m Watching This Week – 8 April 2019

The Markets (as of market close April 5, 2019)

Stocks marked a second consecutive week of solid gains, led by the small caps of the Russell 2000 and the tech-heavy Nasdaq. The S&P 500 recorded seven consecutive days of gains through last Friday — the longest such streak since 2017. Once again, investors heard positive rhetoric relative to a trade deal with China. This time, President Trump announced that an “epic” deal could be in the not-too-distant future. Long-term bond prices slipped, evidenced by the rise in the yield of 10-year Treasuries (bond prices move in the opposite direction of bond yields). Following the last two weeks of trading, each of the benchmark indexes listed here have reached year-to-date gains comfortably exceeding their 2018 closing values.

Oil prices continue to surge, closing at $63.26 per barrel by late Friday, up from the prior week’s closing price of $60.19 per barrel. The price of gold (COMEX) fell again last week, closing at $1,295.90 by Friday evening, down from the prior week’s price of $1,297.00. The national average retail regular gasoline price was $2.691 per gallon on April 1, 2019, $0.068 higher than the prior week’s price but $0.009 less than a year ago.

Market/Index 2018 Close Prior Week As of 4/5 Weekly Change YTD Change
DJIA 23327.46 25928.68 26424.99 1.91% 13.28%
Nasdaq 6635.28 7729.32 7938.69 2.71% 19.64%
S&P 500 2506.85 2834.40 2892.74 2.06% 15.39%
Russell 2000 1348.56 1539.74 1582.56 2.78% 17.35%
Global Dow 2736.74 3000.81 3072.23 2.38% 12.26%
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% 2.40% 2.49% 9 bps -19 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

  • March saw 196,000 new jobs added, according to the latest information from the Bureau of Labor Statistics. Employment growth averaged 180,000 per month in the first quarter of 2019, compared with 223,000 per month in 2018. The unemployment rate remained at 3.8%. Notable job gains occurred in health care (49,000), professional and technical services (34,000), food services and drinking places (27,000), and construction (16,000). There were approximately 6.2 million unemployed in March, roughly the same total as February. The labor force participation rate was 63.0% in March (63.2% in February), and has changed very little over the prior 12 months. The employment-population ratio was 60.6% in March and has been either 60.6% or 60.7% since October 2018. The average workweek for all employees increased by 0.1 hour to 34.5 hours in March, offsetting a decline of 0.1 hour in February. In March, average hourly earnings for all employees rose by $0.04 to $27.70, following a $0.10 gain in February. Over the past 12 months, average hourly earnings have increased by 3.2%.
  • In February, consumers tightened their wallets, possibly due to rising gas prices at the pumps. After climbing 0.7% in January, retail sales fell 0.2% in February, according to the latest report from the Census Bureau. Sales are up 2.2% from February 2018. Keeping overall sales afloat were strength in auto sales (0.7%) and gas stations (1.0%). Retail sales excluding auto and gas stations fell 0.6% in February.
  • February was not a banner month for manufacturing. According to the latest report from the Census Bureau, durable goods orders decreased 1.6% for the month after three consecutive monthly increases. Transportation equipment, particularly aircraft orders, drove the decrease, falling 4.8% in February. Excluding transportation, durable goods orders inched up 0.1%. Shipments of manufactured durable goods, up three of the last four months, increased 0.2%, as did inventories, which increased 0.3%. Nondefense new orders for capital goods plummeted in February, dropping 6.3%.
  • Purchasing managers reported marginal growth in the manufacturing sector, according to the Manufacturing ISM® Report On Business® for March. The PMI registered 55.3%, an increase of 1.1 percentage points over February’s reading. New orders, production, employment, and prices all increased in March. Deliveries and inventories decreased.
  • The IHS Markit US Manufacturing PMI™ fell in March to its lowest level since June 2017. The PMI™ posted 52.4 in March, down 0.6 percentage point from February’s rate. According to survey respondents, slower output kept manufacturing growth down. Total new orders expanded at a modest pace that was the slowest since June 2017. On the price front, input price inflation softened further to the slowest since August 2017.
  • Economic activity in the non-manufacturing (services) sector slowed in March, according to the latest report from the Institute for Supply Management®. Survey respondents indicated that growth in business activity and new orders slowed in March. On the other hand, employment and prices increased last month.
  • For the week ended March 30, there were 202,000 new claims for unemployment insurance, a decrease of 10,000 from the previous week’s level, which was revised up by 1,000. This is the lowest level for initial claims since December 6, 1969, when it was 202,000. According to the Department of Labor, the advance rate for insured unemployment claims remained at 1.2% for the week ended March 23. The advance number of those receiving unemployment insurance benefits during the week ended March 23 was 1,717,000, a decrease of 38,000 from the prior week’s level, which was revised down by 1,000.

Eye on the Week Ahead

The latest information on inflationary trends is out this week with the release of the March reports on the Consumer Price Index and Producer Price Index. The CPI advanced 0.2% in February, while producer prices rose a mere 0.1%. Neither index is expected to advance significantly as inflationary pressures remain lukewarm through the first quarter of 2019.

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Quarterly Market Review – January – March 2019

The Markets (first quarter through March 29, 2019)

Following a tumultuous close to 2018, stocks enjoyed a robust January. Positive feedback from ongoing negotiations between the United States and China, coupled with strong job growth, low inflation, and stable interest rates, helped fuel investor confidence that pushed the major benchmark indexes to levels not seen in 30 years — despite a partial government work stoppage. Each of the indexes listed here posted notable gains, led by the small-cap Russell 2000, followed by the Nasdaq, S&P 500, Global Dow, and the Dow.

Stocks continued to climb in February, albeit not at the breakneck pace of the previous month. Corporate earnings reports were generally positive, and trade talks between the United States and China continued with no deal being reached, but signs of a favorable resolution in sight. The partial government shutdown ended at the end of January. The Federal Open Market Committee indicated that it was inclined to refrain from increasing the federal funds target interest rate range for the foreseeable future. Investors continued to push stocks higher. The Russell 2000 again led the way for February, increasing its value by over 16% over the first two months of 2019. Of the indexes listed here, only the Global Dow failed to gain at least 3.0% (or very close to it) by the end of February.

March saw stock values fluctuate on a fairly regular basis throughout the month. The large caps of the Dow posted minimal end-of-month gains, while the Russell 2000, which had been riding a solid wave of gains during the first two months of the year, took a bit of a dive in March, falling over 2.20% from its February closing value. The Global Dow moved ever so slightly down by the end of March. Only the Nasdaq and S&P 500 posted notable gains for the month.

Nevertheless, the first quarter of 2019 proved to be a positive one for stocks. Each of the benchmark indexes listed here closed the quarter with gains of more than 10% (except for the Global Dow), kicking the year off on very solid footing. Despite signs of a weakening global economy and low inflation, news that the Fed is backing off its plan to increase interest rates helped quell investors’ concerns. Both the technology and energy sectors enjoyed a strong first quarter. By the close of trading on February 28, the price of crude oil (WTI) was $57.26 per barrel, up from the January 31 price of $53.95 per barrel. The national average retail regular gasoline price was $2.623 per gallon on March 25, up from the February 25 selling price of $2.390 but $0.025 lower than a year ago. The price of gold dipped by the end of February, falling to $1,314.40 by close of business on the 28th, down from $1,325.70 at the end of January.

Market/Index 2018 Close As of March 29 Monthly Change Quarterly Change YTD Change
DJIA 23327.46 25928.68 0.05% 11.15% 11.15%
NASDAQ 6635.28 7729.32 2.61% 16.49% 16.49%
S&P 500 2506.85 2834.40 1.79% 13.07% 13.07%
Russell 2000 1348.56 1539.74 -2.27% 14.18% 14.18%
Global Dow 2736.74 3000.81 -0.01% 9.65% 9.65%
Fed. Funds 2.25%-2.50% 2.25%-2.50% 0 bps 0 bps 0 bps
10-year Treasuries 2.68% 2.40% -31 bps -28 bps -28 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.

Latest Economic Reports

  • Employment: Total employment rose by only 20,000 in February after adding 311,000 new jobs (revised) in January. The average monthly job gain in 2018 was 223,000. Notable employment increases for February occurred in professional and business services (42,000) and health care (21,000). Employment in construction declined by 31,000 in February, partially offsetting an increase of 53,000 in January. The unemployment rate declined by 0.2 percentage point to 3.8% in February, and the number of unemployed persons decreased 300,000 to 6.2 million. Among the unemployed, the number of job losers and persons who completed temporary jobs (including people on temporary layoff) declined by 225,000. This decline reflects, in part, the return of federal workers who were furloughed in January due to the partial government shutdown. The labor participation rate was unchanged at 63.2% in February, as was the employment-population ratio (60.7%). The average workweek fell by 0.1 hour to 34.4 hours for February. Average hourly earnings increased by $0.11 to $27.66. Over the last 12 months ended in February, average hourly earnings have risen 3.4%.
  • FOMC/interest rates: Following its last meeting in March, the Federal Open Market Committee did not increase the federal funds target rate. The Committee’s report was dovish, noting that economic growth appeared to be slowing, as were business and consumer spending. No rate increases are projected for the year, although that could change. The FOMC does not meet again until the end of April, with its report issued on May 1.
  • GDP/budget: The third and final estimate of the fourth-quarter gross domestic product showed the economy grew at an annualized rate of 2.2%. The GDP expanded at a rate of 3.4% in the third quarter. For 2018, the GDP advanced at a rate of 2.9%. Of note, consumer spending (personal consumption expenditures) rose by 2.5% in the fourth quarter, and 2.6% for the year. Also of note, business investment rose 5.4% for nonresidential fixed investment. On the other hand, residential investment was weak, falling by 4.7%. The federal budget deficit was $234 billion in February after enjoying an $8.7 billion surplus in January. Through the first four months of fiscal year 2019, the government deficit is $544.2 billion. Over the same period for fiscal year 2018, the deficit was $391.0 billion.
  • Inflation/consumer spending: The report on consumer income and spending, one that is favored by the Federal Reserve as an inflation indicator, showed personal income decreased 0.1% in January but increased 0.2% in February, while it decreased 0.1% in January (the latest report has income and expenditures for January and only income for February). Disposable (after-tax) income fell 0.2% in January, but increased 0.2% in February. Consumer spending (personal consumption expenditures) decreased 0.1% in January, after plummeting 0.5% the previous month.
  • The Consumer Price Index increased 0.2% in February after being unchanged in January. Over the previous 12 months, the CPI rose 1.5%. Core prices, which exclude food and energy, climbed 0.1% for the month after advancing 0.2% in January. Core prices were up 2.1% over the previous 12 months.
  • According to the Producer Price Index, the prices companies received for goods and services inched up 0.1% in February after falling 0.1% in January. A 1.8% increase in energy prices pushed goods prices 0.4% higher in February. Producer prices increased 1.9% over the 12 months ended in February.
  • Housing: Following a mundane 2018, it’s taken the housing sector some time to pick up steam in 2019. Fortunately, February may be the month where sales pick up the pace. Sales of existing homes vaulted 11.8% in February after plunging 1.2% in January. Year-over-year, existing home sales remain down 1.8%. The February median price for existing homes was $249,500, up from $247,500 in January. Existing home prices were up 3.6% from February 2018. Total housing inventory for existing homes for sale in February increased to 1.63 million, up from 1.59 million existing homes available for sale the prior month. Sales of new homes also improved in February. Sales of new single-family houses in February were 4.9% higher than January’s rate, and 0.6% above the February 2018 estimate. The median sales price of new houses sold in February was $315,300 ($303,900 in January). The average sales price was $379,600 ($358,000 in January). Inventory was at a supply of 6.1 months (6.5 months in January).
  • Manufacturing: The manufacturing sector remained somewhat stagnant in February, as industrial production edged up 0.1% after falling 0.4% in January. In February, manufacturing production dropped 0.4% for its second monthly decline, although manufacturing output is 1.0% above its year-earlier level. Orders for durable goods increased 0.4% in January — the latest figures from the Census Bureau (again, due to the government shutdown). Transportation led much of the increase, as new orders excluding transportation fell 0.1% in January. Shipments of manufactured durable goods decreased for the third consecutive month in January, falling 0.5% from the prior month.
  • Imports and exports: The latest information on international trade in goods and services, out March 27, is for January. For that month, the goods and services deficit was $51.1 billion, down $8.8 billion from December’s figures. January’s exports were $1.9 billion more than December exports. Imports were $6.8 billion less than December imports. Compared to January 2018, the goods and services deficit decreased $1.9 billion, or 3.7%.
  • International markets: In Great Britain, Prime Minister Theresa May was unable to gain parliamentary approval of the exit deal she negotiated with the European Union. Parliament could do no better as it failed to find consensus on any kind of Brexit plan. The European Union agreed to extend the deadline for a deal to April 12, with the proviso that a further extension would be possible only if the United Kingdom agreed to hold European election on May 23, which Prime Minister May does not wish to do. The eurozone’s fourth-quarter GDP advanced at an annual rate of 0.2%, dragged down by sluggish consumer spending. The negotiations between the United States and China continue to drag on. Apparently, the two sides are trying to come up with a plan that provides increased U.S. exports to China, greater access to American companies, and added protection of intellectual property.
  • Consumer confidence: The Conference Board Consumer Confidence Index® dropped from 131.4 in February to 124.1 in March. Consumers expressed growing doubt over the labor market following the latest jobs report (see above). The Present Situation Index, which gauges how consumers feel about current business and labor market conditions, declined in March from 172.8 to 160.6. Consumers’ outlook for income, business, and labor market conditions over the short term also fell.

Eye on the Month Ahead

At the close of February, there was guarded optimism that a trade accord between the United States and China would come to fruition. As we leave March, negotiations are still ongoing with no real signs of progress being made. In any case, April may bring with it a heartier employment report while there’s hope that the residential sector will continue to advance. A big unknown heading into April is the aftermath of the Brexit saga and its impact on the global economy.

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What I’m Watching This Week – 1 April 2019

The Markets (as of market close March 29, 2019)

Stocks rebounded last week to close the final week of March and the first quarter of 2019 in the black. Each of the benchmark indexes listed here gained over 1.0% for the week, except the Global Dow, which inched ahead less than 0.2%. Year-to-date, the tech-heavy Nasdaq leads the way, followed by the small caps of the Russell 2000, the S&P 500, the Dow, and the Global Dow. Technology shares jumped, as did energy stocks, on the heels of rising oil prices. While stock prices rose, long-term bond yields fell (yields fall as bond prices rise) as investors’ demand pushed bond prices higher.

Oil prices climbed higher last week, closing at $60.19 per barrel by late Friday, up from the prior week’s closing price of $58.97 per barrel. The price of gold (COMEX) fell for the first time in several weeks, closing at $1,297.00 by last Friday evening, down from the prior week’s price of $1,313.40. The national average retail regular gasoline price was $2.623 per gallon on March 25, 2019, $0.075 higher than the prior week’s price but $0.025 less than a year ago.

Market/Index 2018 Close Prior Week As of 3/29 Weekly Change YTD Change
DJIA 23327.46 25502.32 25928.68 1.67% 11.15%
Nasdaq 6635.28 7642.67 7729.32 1.13% 16.49%
S&P 500 2506.85 2800.71 2834.40 1.20% 13.07%
Russell 2000 1348.56 1505.92 1539.74 2.25% 14.18%
Global Dow 2736.74 2995.76 3000.81 0.17% 9.65%
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% 2.44% 2.40% -4 bps -28 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 economy slowed at the end of last year. The third and final estimate of the gross domestic product for the fourth quarter of 2018 showed the economy grew at an annual rate of 2.2%. The third-quarter GDP advanced by 3.4%. Consumer spending, business investment, and state and local government spending all slowed during the fourth quarter. Net income generated in the production of goods and services, as measured by gross domestic income, increased 1.7% in the fourth quarter, compared with an increase of 4.6% in the third quarter. The average of GDP and GDI, a supplemental measure of U.S. economic activity that equally weights GDP and GDI, increased 1.9% in the fourth quarter, compared with an increase of 4.0% in the third quarter. After-tax corporate profits fell 1.7% in the fourth quarter — the first such decline since 2017. For 2018, the GDP increased 2.9% (2.2% in 2017).
  • The latest report on consumer income and spending (personal income and outlays) combines estimates for January and February, due to the partial government shutdown. February’s estimates account only for income — information on outlays will be available with April’s report. That said, for January, consumer income fell 0.1% and disposable (after-tax) income dropped 0.2%. Consumer spending increased only 0.1%. The prices consumers paid for goods and services (personal consumption price index) fell 0.1%. In February, personal income increased 0.2%, as did disposable personal income.
  • New home sales advanced in February, climbing 4.9% over January’s estimate. The median sales price of new houses sold in February was $315,300. The average sales price was $379,600. The estimate of new houses for sale at the end of February was 340,000. This represents a supply of 6.1 months at the current sales rate.
  • Still trying to catch up from the temporary government shutdown, the latest information on housing starts is for February. According to the Census Bureau, housing starts fell by 8.7% in February from January. Building permits were also down, falling 1.6%, although new home completions were up a solid 4.5% in February. Cold and stormy weather played a part in February’s figures, which are expected to improve in March.
  • The latest information from the Bureau of Economic Analysis on international trade is also a bit dated. Nevertheless, for January, the trade deficit for goods and services was $51.1 billion — down $8.8 billion, or 14.6%, from the December deficit. Year-over-year, the goods and services deficit decreased $1.9 billion, or 3.7%, from January 2018. Of interest, the trade-in-goods deficit with China decreased $5.5 billion to $33.2 billion; the balance with Canada had a $1.4 billion surplus; and the deficit with the European Union was $13.1 billion.
  • For the week ended March 23, there were 211,000 new claims for unemployment insurance, a decrease of 5,000 from the previous week’s level, which was revised down by 5,000. According to the Department of Labor, the advance rate for insured unemployment claims remained at 1.2% for the week ended March 16. The advance number of those receiving unemployment insurance benefits during the week ended March 16 was 1,756,000, an increase of 13,000 from the prior week’s level, which was revised down by 7,000.

Eye on the Week Ahead

There are plenty of important economic reports on tap this week, led by March’s employment figures. Job gains were moderate in February, and some experts expect March to show a sizable boost in new hires. Also, manufacturing and industrial production reports are available this week, particularly the February figures for durable goods orders.

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