What I’m Watching This Week – 20 May 2019

The Markets (as of market close May 17, 2019)

Investors were heading for the hills early last week as stocks suffered their worst day on Monday following China’s announcement that it would impose an additional $60 billion in retaliatory tariffs on U.S. imports. Stocks for several companies with direct ties to China were hit particularly hard. The markets rebounded, but not enough to overcome the poor start early in the week. Helping to ease investors’ concerns over trade tensions, the Trump administration indicated that it would delay a decision on whether to impose tariffs on auto and parts imports. Then, last Friday afternoon, the administration announced that it had reached an agreement with Canada and Mexico that would end U.S. tariffs on steel and aluminum imports. Nevertheless, each of the benchmark indexes listed here lost value by last week’s end, led by the Russell 2000 and the Nasdaq. Year-to-date, the Nasdaq continues to lead the pack, ahead of its 2018 closing value by almost 18%.

Oil prices inched higher last week, closing at $62.71 per barrel by late Friday, up from the prior week’s closing price of $61.73 per barrel. The price of gold (COMEX) dropped again last week, closing at $1,277.40 by Friday evening, down from the prior week’s price of $1,286.50. The national average retail regular gasoline price was $2.866 per gallon on May 13, 2019, $0.031 lower than the prior week’s price and $0.007 less than a year ago.

Market/Index 2018 Close Prior Week As of 5/17 Weekly Change YTD Change
DJIA 23327.46 25942.37 25764.00 -0.69% 10.44%
Nasdaq 6635.28 7916.94 7816.28 -1.27% 17.80%
S&P 500 2506.85 2881.40 2859.53 -0.76% 14.07%
Russell 2000 1348.56 1572.99 1535.76 -2.37% 13.88%
Global Dow 2736.74 2998.45 2977.45 -0.70% 8.80%
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% 2.46% 2.39% -7 bps -29 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

  • U.S. import prices advanced 0.2% in April, after increasing 0.6% in March. The April advance was driven by higher fuel prices, which more than offset decreasing prices for nonfuel imports. Despite the recent monthly advances, import prices declined 0.2% for the 12-month period ended in April, driven by lower nonfuel prices. Prices for U.S. exports rose 0.2% in April after a 0.6% rise in March, as nonagricultural exports outpaced declining agricultural exports. U.S. export prices rose 0.3% over the 12-month period ended in April. Of particular note, prices for imports from China declined 0.2% in April, and have decreased 1.1% since April 2018 — the largest over-the-year drop since May 2017. On the other hand, prices for exports to China rose 0.6% in April, but have otherwise declined 2.7% over the past 12 months. Increased U.S. tariffs on Chinese imports this month will likely change this scenario in May.
  • Retail sales fell 0.2% in April, but are still 3.1% above April 2018. Food and beverage store sales rose 0.2% in April, and gas station sales jumped 1.8%. However, building material and garden equipment and supplies dealers saw sales drop 1.9% last month, electronics and appliance store sales fell 1.3%, and sales for motor vehicle and parts dealers decreased 1.1%. Nonstore (online) retail sales lost 0.2% in April, but are up 9.0% from April 2018.
  • According to the Federal Reserve, the manufacturing sector slowed considerably in April. Overall, industrial production fell 0.5% last month, as did manufacturing. Not surprisingly, capacity utilization, which estimates sustainable potential output, dropped 0.6 percentage point from its March rate.
  • New home sales should continue to gain traction in May if April’s report on housing starts is any indication. According to the Census Bureau, issued building permits increased by 0.6% in April, while housing starts jumped 5.7% over March’s total. Home completions lagged (down 1.4%), but that could be attributable to April’s inclement weather across much of the country.
  • According to the Department of Labor, there were 212,000 claims for unemployment insurance for the week ended May 11, a decrease of 16,000 from the previous week’s level. The advance rate for insured unemployment claims remained at 1.2% for the week ended May 4. The advance number of those receiving unemployment insurance benefits during the week ended May 4 was 1,660,000, a decrease of 28,000 from the prior week’s level, which was revised up by 4,000.

Eye on the Week Ahead

The housing sector is in the news this week with the April figures for sales of both new and existing homes on tap. New home sales have picked up the past few months, but sales of existing properties have dragged, primarily due to scant inventory and rising prices.

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