Month: June 2019

The Markets (as of market close June 21, 2019)

Stocks enjoyed another week of strong growth as investors were encouraged by the Fed’s decision to keep interest rates unchanged and hope for a resolution to the ongoing trade war between the United States and China. Each of the benchmark indexes listed here posted solid gains last week, led by the Nasdaq and the Global Dow. During the week, the S&P 500 reached a record high, as did the Dow — this despite growing tensions between the United States and Iran. For the year, the Nasdaq is firmly ahead of its 2018 closing value, while the S&P 500 is approaching a gain of 20% for 2019.

Oil prices rose to $57.60 per barrel by late Friday afternoon, up from the prior week’s price of $52.51. On news that interest rates might be in line for a reduction, the price of gold (COMEX) spiked last week, climbing to $1,402.70 by late Friday afternoon, up from the prior week’s price of $1,344.80. The national average retail regular gasoline price was $2.670 per gallon on June 17, 2019, $0.062 lower than the prior week’s price and $0.209 less than a year ago.

Market/Index	2018 Close	Prior Week	As of 6/21	Weekly Change	YTD Change
DJIA	23327.46	26089.61	26719.13	2.41%	14.54%
Nasdaq	6635.28	7796.66	8031.71	3.01%	21.05%
S&P 500	2506.85	2886.98	2950.46	2.20%	17.70%
Russell 2000	1348.56	1522.50	1549.63	1.78%	14.91%
Global Dow	2736.74	2998.79	3081.62	2.76%	12.60%
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%	2.09%	2.06%	-3 bps	-62 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

• Once again, the Federal Open Market Committee decided to maintain the federal funds rate at its current range of 2.25%-2.50%. Interestingly, one member of the voting Committee, St. Louis Fed President James Bullard, dissented in favor of lowering the target range for the federal funds rate by 25 basis points. The Committee noted that job gains have been solid, the unemployment rate has remained low, and household spending has picked up from earlier in the year. However, business fixed investment has been soft and inflation is running below the Committee’s 2% target rate.
• New home construction slowed in May, which could impact available inventory over the summer. Housing starts and home completions fell 0.9% and 9.5%, respectively, in May. On the positive side, building permits increased 0.3%, and permits for single-family homes jumped 3.7% in May over April’s totals.
• The housing market finally may be picking up steam. Sales of existing homes rose 2.5% in May over April’s revised total, which rose from a decline of 0.4%, to no change over March. Over the last 12 months, sales of existing homes are down 1.1%. The median existing-home price in May was $277,700 ($267,300 in April), up 4.8% from May 2018 ($265,100). Total housing inventory at the end of May increased to 1.92 million, up from 1.83 million existing homes available for sale in April. This represents a 4.3-month supply at the current sales pace, up from the 4.2-month supply in April.
• For the week ended June 15, there were 216,000 claims for unemployment insurance, a decrease of 6,000 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 June 8. The advance number of those receiving unemployment insurance benefits during the week ended June 8 was 1,662,000, a decrease of 37,000 from the prior week’s level, which was revised up by 4,000.

Eye on the Week Ahead

The May figures on new home sales are available this week. Prices are rising and sales have been picking up. Also out this week are the final figures on the gross domestic product for the first quarter. The second iteration of the report showed the economy grew at an annualized rate of 3.1%.

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

The Markets (as of market close June 14, 2019)

While not as robust as the prior week, stocks still managed to post gains for the second week in a row. Last week started off with a bang for the benchmark indexes listed here, only to slip lower by Friday as tensions in the Middle East mounted. After getting pummeled in May, stocks have slowly regained some momentum during the early part of June. Year-to-date gains for each of the indexes listed here are in double digits, except for the Global Dow, which is off by less than half a percentage point. Oil prices slipped again last week, while long-term bond yields remained relatively unchanged.

Oil prices decreased to $52.51 per barrel by late Friday, down from the prior week’s price of $54.04. The price of gold (COMEX) fell last week, dropping to $1,344.80 by Friday evening, down slightly from the prior week’s price of $1,345.00. The national average retail regular gasoline price was $2.732 per gallon on June 10, 2019, $0.075 lower than the prior week’s price and $0.179 less than a year ago.

Market/Index	2018 Close	Prior Week	As of 6/14	Weekly Change	YTD Change
DJIA	23327.46	25983.94	26089.61	0.41%	11.84%
Nasdaq	6635.28	7742.10	7796.66	0.70%	17.50%
S&P 500	2506.85	2873.34	2886.98	0.47%	15.16%
Russell 2000	1348.56	1514.39	1522.50	0.54%	12.90%
Global Dow	2736.74	2990.88	2998.79	0.26%	9.58%
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%	2.09%	2.09%	0 bps	-59 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

• Overall, prices producers received for goods and services edged up 0.1% in May after increasing 0.2% in April. Prices for services increased 0.3%, largely due to a 10.1% jump in guestroom rentals. Prices for services actually carried the spurt in producer prices, as the prices for goods actually dropped 0.2% in May following three consecutive monthly increases. A majority of the decrease can be traced to a 1.0% drop in energy prices. Within the energy sector, gas prices fell 1.7% in May.
• According to the Consumer Price Index, prices consumers paid for goods and services inched up 0.1% in May — the same rate increase as producer prices. The CPI rose 0.3% in April. Over the last 12 months ended in May, the CPI has risen 1.8%. Prices less food and energy also increased 0.1% in May for the fourth consecutive month. Prices less food and energy have climbed 2.0% since May 2018. Within consumer prices, food prices increased 0.3% and prices for medical care services jumped 0.5%. On the other hand, energy prices fell 0.6% and used car and truck prices dropped 1.4%. Evidencing marginal inflationary pressures, the scant increases in both the Consumer Price Index and the Producer Price Index could influence the Federal Open Market Committee to keep interest rates at their current level following its meeting later this week.
• Sales at the retail level rose 0.5% in May following a 0.3% increase in April. For the year, retail sales have climbed 3.2% since May 2018. Online sales spiked 1.4% in May and are up 11.4% over the last 12 months. Areas experiencing a good sales month include sporting goods, hobby, musical instrument & book stores (1.1%) and electronics & appliance stores (1.1%).
• The federal budget deficit sat at $207.8 billion in May. There was a surplus of $160.3 billion in April (tax month). Fiscal year-to-date, the government is operating at a deficit of $738.6 billion compared to a deficit of $532.2 billion over the same period last fiscal year. Last month, the largest outlays were for Medicare ($98 billion), Social Security ($88 billion), and national defense ($65 billion). On the other side of the ledger, individual income taxes brought in $104 billion, while corporate taxes accounted for $0.4 billion of total government receipts.
• Industrial production rose 0.4% in May after falling 0.4% in April. The indexes for manufacturing and mining gained 0.2% and 0.1%, respectively, in May, while the index for utilities climbed 2.1%. Total industrial production was 2.0% higher in May compared to a year earlier.
• Prices for U.S. imports declined 0.3% in May following an increase of 0.1% the previous month. This is the first monthly decline in import prices since last December. Import fuel prices fell 1.0%, helping to drive the overall import price decline last month. Over the 12 months ended in May, import prices have decreased 1.5%. Export prices fell for the first time since January, dropping 0.2% in May, after advancing 0.1% in April. Export prices decreased 0.7% over the past 12 months ended in May, the largest year-over-year decline since prices dropped 1.1% for the 12-month period ended in October 2016. Agricultural export prices fell 5.3% over the past year, the largest 12-month drop since the index declined 9.1% in April 2016. All of this information references a period just before the United States increased tariffs on $200 billion of Chinese imports. Next month’s figures should reflect the impact, if any, of those tariffs.
• According to the Job Openings and Labor Turnover report, the number of job openings was little changed at 7.4 million on the last day of April. Job openings increased in federal government (+22,000) and educational services (+20,000). Job openings decreased in professional and business services (-172,000). The number of job openings was little changed in all four regions. Over the month, the number of hires edged up to 5.9 million (+240,000 from March). Total separations, which include quits, layoffs, and discharges, increased by 70,000 to 5.6 million in April. Over the 12 months ended in April, hires totaled 69.6 million and separations totaled 66.8 million, yielding a net employment gain of 2.8 million.
• For the week ended June 8, there were 222,000 claims for unemployment insurance, an increase of 3,000 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 June 1. The advance number of those receiving unemployment insurance benefits during the week ended June 1 was 1,695,000, an increase of 2,000 from the prior week’s level, which was revised up by 11,000.

Eye on the Week Ahead

The Federal Open Market Committee meets this week. Although the stock market has bounced back some, inflation remains stagnant and ongoing economic pressures from the trade war with China are likely to discourage an interest rate hike.

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

The Markets (as of market close June 7, 2019)

Markets rebounded nicely last week on hopes that the Federal Reserve Board will cut interest rates in the near future. Early in the week, chairman Jerome Powell said the Fed was closely watching trade developments and signaled rate cuts may be an option if the economic outlook worsens. And on Friday, a weak jobs report supported the possibility of future rate cuts, further encouraging investors. All the indexes tracked here climbed more than 3%, with the large caps of the Dow and S&P 500 surpassing 4% for the week. With the exception of global stocks, all year-to-date returns topped 10%.

Oil prices rose to $54.04 per barrel by late Friday, up from the prior week’s price of $53.33. The price of gold (COMEX) also rose last week, reaching $1,345.00 by Friday evening, up from the prior week’s price of $1,310.30. The national average retail regular gasoline price was $2.807 per gallon on June 3, 2019, $0.015 lower than the prior week’s price and $0.133 less than a year ago.

Market/Index	2018 Close	Prior Week	As of 6/7	Weekly Change	YTD Change
DJIA	23327.46	24815.04	25983.94	4.71%	11.39%
Nasdaq	6635.28	7453.15	7742.10	3.88%	16.68%
S&P 500	2506.85	2752.06	2873.34	4.41%	14.62%
Russell 2000	1348.56	1465.49	1514.39	3.34%	12.30%
Global Dow	2736.74	2888.03	2990.88	3.56%	9.29%
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%	2.13%	2.09%	-4 bps	-59 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 employment report revealed an increase of just 75,000 jobs in May, compared to a monthly average of 164,000 in 2019. Gains were reported in professional and business services and health care. Little change was noted in construction, mining, manufacturing, wholesale trade, retail trade, transportation and warehousing, information, financial activities, leisure and hospitality, and government. Hourly wages increased by $0.06 to $27.83, bringing the average increase in hourly earnings over the past year to 3.1%. The March and April figures were revised downward by a total of 75,000 jobs.
• At 50.5, the IHS Markit U.S. Manufacturing Purchasing Managers’ Index™ (PMI™) reached its lowest level in May since September 2009, as output slowed and new orders dropped for the first time since August 2009. Weak demand and concerns surrounding ongoing trade negotiations caused manufacturers to express their joint-lowest level of confidence since the outlook was first measured in July 2012. The May reading was 2.1 points lower than April. “The data for the second quarter so far have indicated a distinct slowdown in the manufacturing sector compared to the first three months of 2019,” the report said.
• Although the Institute for Supply Management (ISM) Purchasing Managers Index dropped 0.7 percentage point from its April reading to 52.1% in May, the reading indicates that economic activity in the sector continued to expand (a reading above 42.9% over a period of time indicates expansion). New orders, employment, and prices rose, while production, supplier deliveries, and inventories decreased.
• The ISM’s Non-Manufacturing Index came in at 56.9% in May, 1.4% higher than April. Business activity, new orders, and employment all posted gains, while prices decreased. According to the report, survey respondents “…are optimistic about overall business conditions, but concerns remain about tariffs and employment resources.”
• According to the U.S. Census Bureau “Monthly U.S. International Trade in Goods and Services” report, the deficit fell $1.1 billion from March to April, to $50.8 billion. Exports were $206.8 billion, while imports were $257.6 billion. The April deficit reflected a decrease in the goods deficit of $1 billion and an increase in the services deficit of $0.1 billion. Year-to-date, the goods, and services deficit rose $4.1 billion, or 2%, from the same period in April 2018.
• For the week ended June 1, there were 218,000 claims for unemployment insurance, unchanged from the previous week’s revised level. According to the Department of Labor, the advance rate for insured unemployment claims remained at 1.2% for the week ended May 25. The advance number of those receiving unemployment insurance benefits during the week ended May 25 was 1,682,000, an increase of 20,000 from the prior week’s level, which was revised up by 5,000.

Eye on the Week Ahead

Next week, investors and the Federal Reserve Board will get another perspective on how the economy is faring, as inflation numbers are on tap. Other key reports include the federal budget, retail sales, industrial production, and consumer sentiment.

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

Treasury yields fell to their lowest level in 2019, gold prices soared, oil prices fell, trade tensions wore on investors’ nerves, and stocks fell again last week. Mounting trade tensions between the United States and China, an ongoing saga that has lasted for over a year, may have finally pushed investors to abandon stocks for bonds and precious metals such as gold and silver. Each of the benchmark indexes listed here fell over 2.0% for the week, led by the Russell 2000 and the Dow, each falling over 3.0% for the week. More worrisome is the year-to-date totals. Where once the benchmarks were double digits above their 2018 closing values, now several of the indexes are receding closer to their 2019 starting values, with only the Nasdaq still more than 10% ahead of last year’s closing mark.

Oil prices fell sharply last week, closing at $53.33 per barrel by late Friday, down from the prior week’s closing price of $59.04 per barrel. The price of gold (COMEX) advanced last week, closing at $1,310.30 by Friday evening, up from the prior week’s price of $1,284.20. The national average retail regular gasoline price was $2.822 per gallon on May 27, 2019, $0.030 lower than the prior week’s price and $0.140 less than a year ago.

Market/Index	2018 Close	Prior Week	As of 5/31	Weekly Change	YTD Change
DJIA	23327.46	25585.69	24815.04	-3.01%	6.38%
Nasdaq	6635.28	7637.01	7453.15	-2.41%	12.33%
S&P 500	2506.85	2826.06	2752.06	-2.62%	9.78%
Russell 2000	1348.56	1514.11	1465.49	-3.21%	8.67%
Global Dow	2736.74	2951.46	2888.03	-2.15%	5.53%
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%	2.37%	2.13%	-24 bps	-55 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 second estimate for the first-quarter gross domestic product showed the economy grew at an annualized rate of 3.2% (3.1% according to the first estimate). The GDP grew at an annualized rate of 2.2% in the fourth quarter. Consumer spending and exports were revised slightly higher in the second estimate, while business spending and inventory investment were revised slightly lower compared to the first estimate. Gross domestic income increased 1.4% in the first quarter, compared with an increase of 0.5% (revised) in the fourth quarter. Consumer spending, as measured by personal consumption expenditures, increased 1.3% in the first quarter, compared with an increase of 2.5% in the fourth quarter. Excluding food and energy prices, the PCE price index increased 1.0%, compared with a fourth-quarter increase of 1.8%.
• Consumer spending advanced 0.3% in April over March, as did the prices for consumer goods and services. As an indication of inflation, consumer prices are up 1.5% over the last 12 months ended in April. Personal income rose 0.5% for the month, while disposable (after-tax) income rose 0.4%.
• The advance report on international trade in goods (excluding services) for April showed the trade deficit was $72.1 billion, up $0.2 billion from the March deficit. Exports dropped $5.9 billion, while imports fell $5.6 billion. Capital goods, the largest sector of exports in the United States, fell a sharp 6.5% in April from March. Compared to last April, capital exports are off by 3.7%.
• According to the Department of Labor, there were 215,000 claims for unemployment insurance for the week ended May 25, an increase of 3,000 from the previous week’s level, which was revised up by 1,000. The advance rate for insured unemployment claims remained at 1.2% for the week ended May 18. The advance number of those receiving unemployment insurance benefits during the week ended May 18 was 1,657,000, a decrease of 26,000 from the prior week’s level, which was revised up by 7,000.

Eye on the Week Ahead

The employment figures for May are out this week. Last month saw a whopping 263,000 new jobs added. Wages, while increasing, are doing so at a snail’s pace, which is a contributing factor in keeping inflation down.

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