What I’m Watching This Week – 30 September 2019

The Markets (as of market close September 27, 2019)

Each of the benchmark indexes listed here lost value for the second consecutive week, with the S&P 500, the Dow, and the Nasdaq sinking to levels not seen since August. Investors were hit with potentially worsening trade tensions between the United States and China, along with political uncertainty following the House’s impeachment inquiry proceedings against President Trump. Small caps underperformed large-caps as the Nasdaq and Russell 2000 each fell more than 2.0% last week. Bond prices dropped, sending the yield on 10-year Treasuries over 100 basis points below its 2018 closing mark.

Oil prices fell last week, closing at $56.00 per barrel by late Friday afternoon, down from the prior week’s price of $58.09. The price of gold (COMEX) declined last week, closing at $1,503.10 by late Friday afternoon, off from the prior week’s price of $1,523.80. The national average retail regular gasoline price was $2.654 per gallon on September 23, 2019, $0.102 more than the prior week’s price but $0.190 less than a year ago.

Market/Index 2018 Close Prior Week As of 9/27 Weekly Change YTD Change
DJIA 23327.46 26935.07 26820.25 -0.43% 14.97%
Nasdaq 6635.28 8117.67 7939.63 -2.19% 19.66%
S&P 500 2506.85 2992.07 2961.79 -1.01% 18.15%
Russell 2000 1348.56 1559.76 1520.48 -2.52% 12.75%
Global Dow 2736.74 3065.59 3019.31 -1.51% 10.33%
Fed. Funds target rate 2.25%-2.50% 1.75%-2.00% 1.75%-2.00% 0 bps -50 bps
10-year Treasuries 2.68% 1.75% 1.67% -8 bps -101 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 News

  • The third and final estimate of the second-quarter gross domestic product showed the economy grew at an annual rate of 2.0%. The first-quarter GDP increased at a rate of 3.1%. Adding to economic growth in the second quarter was strong contributions from consumer spending, which grew at a rate of 4.6%. Government spending also enhanced economic growth, increasing by 4.8% last quarter. Business investment, as measured by nonresidential fixed investment, fell by a notable 1.0% in the second quarter. Gross domestic income, which measures the sum of incomes earned and costs incurred in the production of GDP, rose 1.8% in the second quarter.
  • Personal income rose 0.4% in August, and disposable (after-tax) income increased 0.5%. Consumer spending ratcheted back to a 0.1% increase last month after vaulting ahead 0.5% in July. Consumer prices, an indicator of inflationary trends, showed no movement in August after climbing 0.2% in July. Year-to-date, consumer prices are up 1.4% — well below the Fed’s 2.0% target rate.
  • Sales of new single-family homes jumped 7.1% in August after falling almost 9.5% in July. New home sales are up 18.0% over the last 12 months. The median sales price for new single-family homes in August is $328,400 ($305,400 in July), and the average sales price is $404,200 ($372,700 in July). The estimate of new houses for sale at the end of August was 326,000. This represents a supply of 5.5 months at the current sales rate.
  • New orders for manufactured durable goods in August increased $0.5 billion, or 0.2%, to $250.7 billion, according to the Census Bureau. This increase, up three consecutive months, followed a 2.0% July increase. Excluding transportation, new orders increased 0.5%. Excluding defense, new orders decreased 0.6%. While this report is a positive for manufacturing overall, new orders for nondefense capital goods actually fell 2.1% after increasing 5.0% or more in each of the prior two months.
  • According to the advance report on international trade in goods, the trade deficit was $72.9 billion in August, up $0.4 billion from July. Exports in August were $137.8 billion, $0.2 billion more than July exports. August imports were $210.6 billion, $0.5 billion more than July imports.
  • For the week ended September 21, there were 213,000 claims for unemployment insurance, an increase of 3,000 from the previous week’s level, which was revised up by 2,000. According to the Department of Labor, the advance rate for insured unemployment claims fell for the first time in several months, declining 0.1 percentage point to 1.1% for the week ended September 14. The advance number of those receiving unemployment insurance benefits during the week ended September 14 was 1,650,000, a decrease of 15,000 from the prior week’s level, which was revised up by 4,000.

Eye on the Week Ahead

The first week of October focuses on manufacturing, international trade, and employment. Last month, purchasing managers reported a drop in export orders and lagging manufacturing growth in August. Their sentiment should be slightly more encouraging for September. On the labor front, 130,000 new jobs were added in August and the unemployment rate remained at 3.7%. Wages inched up 0.4% in August, and are up 3.2% for the last 12 months. A shrinking labor pool may be the impetus for employers to increase wages.

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What I’m Watching This Week – 23 September 2019

The Markets (as of market close September 20, 2019)

Following three consecutive weekly gains, stocks closed down last week. Despite another drop in interest rates, news that a Chinese delegation involved in trade negotiations would be returning home earlier than expected worried investors and sent stocks spiraling downward. An attack on oil facilities in Saudi Arabia prompted a surge in crude oil prices, which had been falling over the past few weeks. By last week’s end, each of the benchmark indexes listed here lost value, led by the small caps of the Russell 2000 and the large caps of the Dow, each of which dropped over 1.0%. It looks like volatility will be the operative word moving into the fall, as investors’ predilections will be driven by trade rhetoric between the United States and China.

Oil prices jumped last week, closing at $58.09 per barrel by late Friday afternoon, up from the prior week’s price of $54.82. The price of gold (COMEX) climbed last week following three consecutive week-over-week losses, closing at $1,523.80 by late Friday afternoon, up from the prior week’s price of $1,495.70. The national average retail regular gasoline price was $2.552 per gallon on September 16, 2019, $0.002 more than the prior week’s price but $0.289 less than a year ago.

Market/Index 2018 Close Prior Week As of 9/20 Weekly Change YTD Change
DJIA 23327.46 27219.52 26935.07 -1.05% 15.47%
Nasdaq 6635.28 8176.71 8117.67 -0.72% 22.34%
S&P 500 2506.85 3007.39 2992.07 -0.51% 19.36%
Russell 2000 1348.56 1578.14 1559.76 -1.16% 15.66%
Global Dow 2736.74 3085.67 3065.59 -0.65% 12.02%
Fed. Funds target rate 2.25%-2.50% 2.00%-2.25% 1.75%-2.00% 25 bps -50 bps
10-year Treasuries 2.68% 1.90% 1.75% -15 bps -93 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 News

  • The Federal Open Market Committee voted to reduce the federal funds rate range by 25 basis points to 1.75%-2.00%. The Committee has reduced the interest rate range by 50 basis points this year. There is some division within the Committee, however, as the vote at last week’s meeting was split 7 in favor of the rate reduction applied, 1 in favor of a 50 basis-point reduction, and 2 voting for no reduction. Nevertheless, the FOMC statement indicated that consumer spending was rising at a strong pace and job gains have been solid, but business spending and exports have weakened, while inflation continues to run below the Fed’s target rate of 2.00%. Whether the Committee adjusts rates again this year is up to conjecture. According to the latest published FOMC forecasts, of the 17 members of the Federal Reserve, 7 expect at least one more 25 basis-point cut, 5 would opt for no additional cuts, and 5 prefer to push rates back to 2.00%. It is also unclear to what degree pressure from President Trump to lower interest rates is impacting the Committee.
  • Manufacturing may be picking up steam heading into the fall months. Industrial production rose 0.6% in August after declining 0.1% in July. Manufacturing production increased 0.5%, more than reversing its decrease in July. Factory output has increased 0.2% per month over the past four months after having decreased 0.5% per month during the first four months of the year. In August, the indexes for utilities and mining moved up 0.6% and 1.4%, respectively. Total industrial production was 0.4% higher in August than it was a year earlier.
  • Sales of existing homes advanced in August for the second consecutive month. Total existing home sales rose 1.3% in August after climbing 2.5% in July. Sales are up 2.6% from a year ago. The median existing home price in August was $278,200, down 0.9% from July’s median price of $280,800, but up 4.7% from August 2018 ($265,600). Total housing inventory at the end of August decreased to 1.86 million, down from 1.90 million existing homes available for sale in July, and marking a 2.6% decrease from 1.91 million one year ago. Single-family home sales sat at an annual rate of 4.90 million in August, up from 4.84 million in July and up 2.9% from a year ago. The median existing single-family home price was $280,700 in August 2019, up 4.7% from August 2018.
  • New home construction geared up in August. Building permits increased 7.7% over July, housing starts advanced 12.3%, and new home completions increased 2.4%, with single-family home completions up 3.7%.
  • For the week ended September 14, there were 208,000 claims for unemployment insurance, an increase of 2,000 from the previous week’s level, which was revised up by 2,000. According to the Department of Labor, the advance rate for insured unemployment claims remained at 1.2% for the week ended September 7. The advance number of those receiving unemployment insurance benefits during the week ended September 7 was 1,661,000, a decrease of 13,000 from the prior week’s level, which was revised up by 4,000.

Eye on the Week Ahead

The third and final rendering of the gross domestic product for the second quarter is out this week. The second reading last month showed the economy grew at a rate of 2.0%. Also out this week is the August report on personal income and outlays, the Fed’s preferred indicator of consumer spending and inflationary trends. In July, consumer spending (+0.6%) exceeded price growth of consumer goods and services (+0.2%).

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What I’m Watching This Week – 16 September 2019

The Markets (as of market close September 13, 2019)

Stocks continue to rebound from their August declines, posting gains for the third week in a row. Each of the benchmark indexes listed here increased in value, led by the small caps of the Russell 2000, which climbed close to 5.0%. Trade tensions appeared to wane, at least for now, after China said that it wouldn’t impose tariffs on imports of certain U.S. agricultural goods. The European Central Bank initiated several stimulus measures, including an interest rate cut. Buoyed by these events, investors moved to stocks. Long-term bond yields soared as prices plummeted. The yield on 10-year Treasuries closed the week up 35 basis points. Year-to-date, the benchmark indexes are all well above their 2018 closing values.

Oil prices fell last week, closing at $54.82 per barrel by late Friday afternoon, down from the prior week’s price of $56.60. The price of gold (COMEX) fell for the third consecutive week, closing at $1,495.70 by late Friday afternoon, down from the prior week’s price of $1,514.70. The national average retail regular gasoline price was $2.550 per gallon on September 9, 2019, $0.013 lower than the prior week’s price and $0.283 less than a year ago.

Market/Index 2018 Close Prior Week As of 9/13 Weekly Change YTD Change
DJIA 23327.46 26797.46 27219.52 1.58% 16.68%
Nasdaq 6635.28 8103.07 8176.71 0.91% 23.23%
S&P 500 2506.85 2978.71 3007.39 0.96% 19.97%
Russell 2000 1348.56 1505.17 1578.14 4.85% 17.02%
Global Dow 2736.74 3014.51 3085.67 2.36% 12.75%
Fed. Funds target rate 2.25%-2.50% 2.00%-2.25% 2.00%-2.25% 0 bps -25 bps
10-year Treasuries 2.68% 1.55% 1.90% 35 bps -78 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 News

  • Inflationary pressures remain muted as the Consumer Price Index inched up 0.1% in August following a 0.3% bump in July. Over the last 12 months ended in August, the CPI has increased 1.7%. Energy prices fell 1.9%, pulled down by gasoline prices, which dropped 3.5%. The index less food and energy rose 0.3% in August, the same increase as in the previous two months. The index less food and energy rose 2.4% over the last 12 months, its largest 12-month increase since July 2018. Two of the biggest movers last month were prices for used cars and trucks, which increased 1.1%, and prices for medical care services, which jumped 0.9%.
  • Producers of goods and services saw prices creep up 0.1% in August, following a 0.2% increase in July and a 0.1% advance in June. For the 12 months ended in August, producer prices have risen 1.8%. Last month, goods prices actually fell 0.5%, the largest decrease since falling 0.6% in January. Falling energy prices accounted for over 80% of the drop. Prices for services climbed 0.3% last month, due in large part to a broad-based increase in prices for services less trade, transportation, and warehousing, which climbed 0.5%.
  • The August federal government budget deficit was $200 billion, up from the July deficit of $120 billion. Year-to-date, the deficit sits at $1,067 billion — $170 billion ahead of the deficit over the same period last year. Comparatively, total receipts ($3.088 billion) are ahead of total receipts last year ($2.985 billion). Total outlays ($4.155 billion) are above last year’s outlays ($3.883 billion).
  • Consumers upped their purchases of goods and services in August, according to the Census Bureau’s report on retail sales. A big increase in auto sales helped drive overall retail sales up 0.4% in August from the previous month, and 4.1% above August 2018. Retail sales excluding motor vehicles and parts showed no gain in August from July. Online retailers’ sales increased by 1.6% in August and are up 16% over a year ago.
  • A drop in fuel prices (-4.3%) sent import prices down 0.5% in August, according to the latest figures from the Bureau of Labor Statistics. In a sign of global inflationary weakness, import prices declined 2.0% from August 2018. Prices for exports decreased 0.6% last month after increasing 0.2% in July. The August decline was driven by price decreases in both agricultural (foods, feeds, and beverages) and nonagricultural exports (industrial supplies and materials).
  • According to the Job Openings and Labor Turnover Summary, there were 7.2 million job openings at the end of July, little changed from June’s figures. The number of hires edged up to 6.0 million (5.7 million in June), and separations also increased to 5.8 million (5.5 million in June). The job openings level decreased in wholesale trade (-55,000) and in federal government (-11,000). The job openings level increased in information (+42,000) and in mining and logging (+11,000). Over the 12 months ended in July, hires totaled 69.6 million and separations totaled 67.0 million, yielding a net employment gain of 2.6 million.
  • For the week ended September 7, there were 204,000 claims for unemployment insurance, a decrease of 15,000 from the previous week’s level, which was revised up by 2,000. According to the Department of Labor, the advance rate for insured unemployment claims remained at 1.2% for the week ended August 31. The advance number of those receiving unemployment insurance benefits during the week ended August 31 was 1,670,000, a decrease of 4,000 from the prior week’s level, which was revised up by 12,000.

Eye on the Week Ahead

All eyes will be on the midweek meeting of the Federal Open Market Committee. Following its last meeting in July, interest rates were lowered 25 basis points. Economic conditions haven’t changed much over the summer. President Trump is demanding that the Committee lower rates again. With the stock market rebounding over the last two weeks, it’s possible the Committee holds course until it meets again at the end of October.

What I’m Watching This Week – 9 September 2019

The Markets (as of market close September 6, 2019)

Stocks climbed last week following positive rhetoric from high-ranking Chinese officials who plan to meet for another round of trade discussions in Washington next month. This is welcome news for investors who saw the United States and China impose additional tariffs on September 1, with the plan for more of the same in December if negotiations prove fruitless. Optimistic investors pushed stock prices higher as each of the benchmark indexes listed here posted solid gains. Only the small caps of the Russell 2000 failed to gain at least 1.0% for the week. The large caps of the S&P 500 gained over 1.75%, as did the Nasdaq. The Global Dow enjoyed the highest weekly gain, climbing over 2.0%. Year-to-date, these last two weeks have pushed the indexes listed here notably higher, with each posting gains in excess of 10.0%. On the other hand, long-term bond yields jumped last week as bond sell-offs pulled prices lower.

Oil prices advanced last week, closing at $56.60 per barrel by late Friday afternoon, up from the prior week’s price of $55.16. The price of gold (COMEX) fell for the second consecutive week, closing at $1,514.70 by late Friday afternoon, down from the prior week’s price of $1,529.20. The national average retail regular gasoline price was $2.563 per gallon on September 2, 2019, $0.011 lower than the prior week’s price and $0.261 less than a year ago.

Market/Index 2018 Close Prior Week As of 9/6 Weekly Change YTD Change
DJIA 23327.46 26403.28 26797.46 1.49% 14.88%
Nasdaq 6635.28 7962.88 8103.07 1.76% 22.12%
S&P 500 2506.85 2926.46 2978.71 1.79% 18.82%
Russell 2000 1348.56 1494.84 1505.17 0.69% 11.61%
Global Dow 2736.74 2953.12 3014.51 2.08% 10.15%
Fed. Funds target rate 2.25%-2.50% 2.00%-2.25% 2.00%-2.25% 0 bps -25 bps
10-year Treasuries 2.68% 1.50% 1.55% 5 bps -113 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 News

  • There were 130,000 new jobs added in August and the unemployment rate remained unchanged at 3.7%, according to the latest figures from the Bureau of Labor Statistics. The number of unemployed persons remained relatively the same at 6.0 million. The labor force participation rate edged up 0.2 percentage point to 63.2%, and the employment-population ratio, at 60.9%, also edged up 0.2 percentage point from July’s figure. Job growth has averaged 158,000 per month thus far this year, below the average monthly gain of 223,000 in 2018. In August, employment in federal government increased by 28,000, mostly due to the hiring of 25,000 temporary workers to prepare for the 2020 Census. Job gains were also seen in health care (+24,000), financial activities (+15,000), professional and business services (+37,000), and social assistance (+13,000). In August, average hourly earnings rose by $0.11 to $28.11, following $0.09 gains in both June and July. Over the past 12 months, average hourly earnings have increased by 3.2%. Last month, the average workweek increased by 0.1 hour to 34.4 hours.
  • The international goods and services trade deficit was $54.0 billion in July, down $1.5 billion from the revised June total. July exports were $207.4 billion, $1.2 billion more than June exports. July imports were $261.4 billion, $0.4 billion less than June imports. Year-to-date, the goods and services deficit increased $28.2 billion, or 8.2%, from the same period in 2018. Exports decreased $3.4 billion, or 0.2%. Imports increased $24.9 billion, or 1.4%. Of note, the deficit with China decreased $0.5 billion to $29.6 billion in July. Exports decreased $0.3 billion to $9.3 billion, and imports decreased $0.8 billion to $39.0 billion.
  • According to the Markit survey of purchasing managers, manufacturers saw a further slowdown in growth in August. The IHS Markit final U.S. Manufacturing Purchasing Managers’ Index™ posted 50.3 in August, its lowest reading since September 2009. According to the report, new orders for exports fell at the quickest pace since August 2009, which many firms linked to the trade war and tariffs.
  • The Manufacturing ISM® Report On Business® followed the Markit survey, with respondents indicating that growth in manufacturing slowed significantly. New orders, production, employment, and deliveries each fell in August, while inventories and prices rose. With inflation remaining soft, this report, along with the Markit survey, may be enough to push the Fed to lower interest rates later this month.
  • Unlike the manufacturing sector, services expanded in August, according to the Non-Manufacturing ISM® Report On Business®. Non-manufacturing business activity, new orders, and prices increased last month. Only employment fell in August.
  • For the week ended August 31, there were 217,000 claims for unemployment insurance, an increase of 1,000 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 August 24. The advance number of those receiving unemployment insurance benefits during the week ended August 24 was 1,662,000, a decrease of 39,000 from the prior week’s level, which was revised up by 3,000.

Eye on the Week Ahead

Inflationary readings are on tap this week with reports on the August Consumer Price Index, Producer Price Index, retail sales, and import and export prices. The ongoing U.S.-China trade war hasn’t had an apparent impact on prices for consumer goods and services, which have remained soft for much of the year.

Monthly Market Review – August 2019

The Markets (as of market close August 30, 2019)

Despite a closing push, August closed on a weak note for stocks, ending a tumultuous month marked by high volatility. Investors moved away from stocks, fearing that the ongoing U.S.-China trade war would negatively impact domestic and global economies. As a result, gold prices surged and long-term bond yields plummeted as prices rose. Despite the wide market swings, consumers spent more of their income as the job market remained strong.

By the close of trading on the last day of the month, each of the benchmark indexes listed here fell, with the small caps of the Russell 2000 being hit the hardest, followed by the Global Dow, the Nasdaq, the S&P 500, and the Dow, which lost over 1.70% from its July closing value. Year-to-date, each of the indexes remain ahead of their respective 2018 closing prices. However, compared to their values at the end of August 2018, the Dow and the S&P 500 are up 1.70% and 0.86%, respectively, while the Nasdaq (-1.80%), the Russell 2000 (-14.10%), and the Global Dow (-4.00%) have lost value.

By the close of trading on August 30, the price of crude oil (WTI) was $55.16 per barrel, down from the July 31 price of $57.88 per barrel. The national average retail regular gasoline price was $2.574 per gallon on August 26, down from the July 29 selling price of $2.715 and $0.253 less than a year ago. The price of gold rose by the end of August, climbing to $1,529.20 by close of business on the 30th, up from its $1,426.10 price at the end of July.

Market/Index 2018 Close Prior Month As of August 30 Month Change YTD Change
DJIA 23327.46 26864.27 26403.28 -1.72% 13.19%
NASDAQ 6635.28 8175.42 7962.88 -2.60% 20.01%
S&P 500 2506.85 2980.38 2926.46 -1.81% 16.74%
Russell 2000 1348.56 1574.60 1494.84 -5.07% 10.85%
Global Dow 2736.74 3059.35 2953.12 -3.47% 7.91%
Fed. Funds 2.25%-2.50% 2.00%-2.25% 2.00%-2.25% 0 bps -25 bps
10-year Treasuries 2.68% 2.02% 1.50% -52 bps -118 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 increased by 164,000 in July after adding 193,000 (revised) new jobs in June. The average monthly job gain so far in 2019 is roughly 164,000 per month (223,000 in 2018). Notable employment increases for June occurred in professional and business services (31,000), health care (30,000), and social assistance (20,000). The unemployment rate remained at 3.7% in July. The number of unemployed persons increased slightly to 6.1 million in July (6.0 million in June). The labor participation rate was 63.0% (62.9% in June) and the employment-population ratio was 60.7% (60.6% in June). The average workweek decreased 0.1 hour to 34.3 hours for July. Average hourly earnings increased by $0.08 to $27.98. Over the last 12 months ended in July, average hourly earnings have risen 3.2%.
  • FOMC/interest rates: The Federal Open Market Committee did not meet in August, after lowering interest rates by 25 basis points following its latest meeting in July. The Committee next meets in September. Due to mixed economic factors, it is unclear whether rates will remain as they are, or be reduced further.
  • GDP/budget: Economic growth appears to have slowed in the second quarter, according to the second estimate of the gross domestic product. The second quarter grew at an annualized rate of 2.0%. The first quarter saw an annualized growth of 3.1%. Consumer prices and spending increased in the second quarter, rising 2.2% and 4.7%, respectively. Pulling the GDP down in the second quarter were negative contributions from fixed business investment (equipment, software, structures, etc.) and exports. The federal budget deficit was $119.7 billion in July ($76.9 billion in July 2018). Through the first ten months of the fiscal year, the government deficit sits at $866.8 billion. Over the same period for fiscal year 2018, the deficit was $684.0 billion.
  • Inflation/consumer spending: Inflationary pressures remain weak as consumer prices rose 0.2% in August and are up 1.4% over the last 12 months ended in July. Consumer prices excluding food and energy increased 0.2% in July and 1.6% since July 2018. In July, consumer spending rose 0.6% (0.3% in June). Personal income and disposable (after-tax) personal income climbed 0.1% and 0.3%, respectively, in July.
  • The Consumer Price Index increased 0.3% in July following a 0.1% hop in June. Over the 12 months ended in July, the CPI rose 1.8%. Energy prices jumped 1.3% on the month with gasoline up 2.5%. Prices less food and energy rose 0.3% in July — the same increase as in June. Core prices (less food and energy) are up 2.2% over the last 12 months.
  • According to the Producer Price Index, the prices companies received for goods and services rose 0.2% in July after increasing 0.1% in June and 0.1% in May. The index increased 1.7% for the 12 months ended in July. The price index less foods, energy, and trade services fell 0.1% in July after registering no change the prior month. The price index less foods, energy, and trade services increased 1.7% over the last 12 months.
  • Housing: Activity in the housing market can be described as erratic at best. Existing home sales jumped 2.5% in July after falling 1.7% in June. Year-over-year, existing home sales are up 0.6%. Existing home prices fell in July, as the median price for existing homes was $280,800 — off from June’s all-time high of $285,700. Nevertheless, existing home prices were up 4.3% from July 2018. Total housing inventory for existing homes for sale in July decreased to 1.89 million (1.93 million in June), representing a 4.2-month supply at the current sales pace. Sales of new single-family houses plummeted in July after surging the previous month. July’s new home sales fell 12.8%, down from June’s robust total. New home sales are still 4.3% ahead of their July 2018 estimate. The median sales price of new houses sold in July was $312,800 ($310,400 in June). The average sales price was $388,000 ($368,600 in June). Inventory at the end of July was at a supply of 6.4 months (6.3 months in June).
  • Manufacturing: According to the Federal Reserve, industrial production declined 0.2% in July after remaining unchanged in June. Manufacturing output decreased 0.4% in July and has fallen more than 1.5% since December 2018. In July, mining output fell 1.8%, while utilities rose 3.1%. Total industrial production was 0.5% higher in July than it was a year earlier. Orders for durable goods jumped 2.1% in July after increasing 2.0% the prior month. New orders for capital goods used by businesses to produce consumer goods surged 5.0% after rising 1.4% in June. Core capital goods (excluding defense and aircraft) increased 0.4% in July.
  • Imports and exports: Import and export prices rebounded slightly in July from their June totals. Import prices rose 0.2% after falling 1.1% in June. Despite the July increase, import prices have decreased 1.8% over the past 12 months. Import fuel prices rose 1.8% in July after a 7.3% drop in June. Excluding fuel, import prices fell 0.1% for the third consecutive month in July. Export prices jumped ahead 0.2% in July after decreasing 0.9% in June. Export prices have fallen 0.9% for the year ended in July. The latest information on international trade in goods and services, out August 2, is for June and shows that the goods and services deficit was $55.2 billion, down slightly from the revised $55.3 billion deficit in May. June exports were $206.3 billion, $4.4 billion less than May exports. June imports were $261.5 billion, $4.6 billion less than May imports. Year-to-date, the goods and services deficit increased $23.2 billion, or 7.9%. Exports increased $0.5 billion, or less than 0.1%. Imports increased $23.8 billion, or 1.5%. The advance report on international trade in goods (excluding services) revealed the trade deficit declined to $72.3 billion in July, down from $74.2 billion in June. Exports of goods in July were $137.3 billion, $0.9 billion more than June exports, while imports of goods were $209.7 billion, $0.9 billion less than June imports.
  • International markets: British Prime Minister Boris Johnson attempted to shut down Parliament for several weeks as part of his effort to shunt opponents to his plan to push through a “no deal” Brexit on October 31. The move sent global stocks, government bond yields, and the pound reeling. In economic news, the German economy shrank 0.1% in the second quarter but is up 0.4% over the same period last year. Inflationary pressures continue to wane in Japan, as its Consumer Price Index inched up 0.1% in July, and is up only 0.5% year-over-year. In China, economic growth dipped to a 27-year low in the second quarter amid the trade war with the United States. As the rainforest fires raged in his country, Brazilian President Jair Bolsonaro refused to accept $20 million in aid from G7 countries stemming from a personal rift between Bolsonaro and French President Emmanuel Macron.
  • Consumer confidence: Despite a plunging stock market in August, consumers were fairly upbeat in their assessment of the economy. The Conference Board Consumer Confidence Index® declined marginally in August following July’s robust numbers — falling to 135.1 from 135.8. Consumers’ assessment of current business and labor market conditions increased, although consumers’ short-term outlook for income, business, and labor market conditions was not quite so positive.

Eye on the Month Ahead

Stocks took a sizable hit last month, and if the ongoing trade war continues in September, investors will likely face more turmoil. The economy has weathered the storm thus far on the heels of a strong jobs market and robust consumer spending, but that could change as we enter the third quarter.

What I’m Watching This Week – 3 September 2019

The Markets (as of market close August 30, 2019)

Stocks rebounded last week after China’s Ministry of Commerce indicated that China had no immediate intention to respond to President Trump’s latest threat of an additional round of tariff increases on imports of Chinese goods and services. The result was a surge in stock prices with each of the benchmark indexes listed here posted notable gains, led by the Dow, which eclipsed 3.0% in week-over-week gains. The Nasdaq, the S&P 500, and the Russell 2000 each increased well over 2.0%. Only the Global Dow failed to reach that mark, but came close at almost 1.9%.

Oil prices climbed last week, closing at $55.16 per barrel by late Friday afternoon, up from the prior week’s price of $53.89. The price of gold (COMEX) fell last week for the first time in several weeks, closing at $1,529.20 by late Friday afternoon, down from the prior week’s price of $1,537.20. The national average retail regular gasoline price was $2.574 per gallon on August 26, 2019, $0.024 lower than the prior week’s price and $0.253 less than a year ago.

Market/Index 2018 Close Prior Week As of 8/30 Weekly Change YTD Change
DJIA 23327.46 25628.90 26403.28 3.02% 13.19%
Nasdaq 6635.28 7751.77 7962.88 2.72% 20.01%
S&P 500 2506.85 2847.11 2926.46 2.79% 16.74%
Russell 2000 1348.56 1459.49 1494.84 2.42% 10.85%
Global Dow 2736.74 2898.73 2953.12 1.88% 7.91%
Fed. Funds target rate 2.25%-2.50% 2.00%-2.25% 2.00%-2.25% 0 bps -25 bps
10-year Treasuries 2.68% 1.52% 1.50% -2 bps -118 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 News

  • The economy grew at a rate of 2.0% in the second quarter, according to the second estimate of the gross domestic product. The first estimate projected a 2.1% growth rate. The economy grew at a 3.1% rate in the first quarter of 2019. Gross domestic income (the sum of incomes earned and costs incurred in the production of GDP) increased 2.1% in the second quarter, compared with an increase of 3.2% in the first quarter. The downward revision in the second estimate is primarily attributable to declining exports and lower corporate investment. Consumer spending increased from an initial estimate of 4.4% to a revised 4.7%. Prices for consumer goods and services increased 2.2% in the second quarter compared to a 0.8% bump in the first quarter. Overall, inflation remains stagnant, while a strong labor market is allowing consumers to spend more, somewhat masking weakness in global growth, exports, and domestic manufacturing.
  • Consumer spending rose last month, while prices remained relatively flat. According to the latest figures from the Bureau of Economic Analysis, personal income increased a scant 0.1% in July, but personal consumption expenditures jumped 0.6%. Prices for consumer goods and services inched up 0.2% in July and are up 1.4% over the last 12 months ended in July (well below the Fed’s 2.0% target inflation rate).
  • In a positive note for the manufacturing sector, new orders for long-lasting durable goods advanced 2.1% in July following a 1.8% gain in June. Transportation equipment drove the July increase, jumping 7.0% in July. Excluding transportation, new orders for durable goods actually decreased 0.4%. Shipments dropped 1.1% in July after two consecutive monthly increases, as transportation shipments fell 2.1%. Unfilled orders reversed a negative trend, advancing 0.1% in July following three consecutive monthly decreases. Inventories continue to increase, up 0.4% in July after jumping 0.3% in June. Another positive note from the report is the 5.0% gain in new orders for nondefense capital goods, or equipment used in private industry for producing consumer goods or services.
  • The international trade deficit was $72.3 billion in July, down $1.8 billion from $74.2 billion in June. Exports of goods for July were $137.3 billion, $0.9 billion more than June exports. Imports of goods for July were $209.7 billion, $0.9 billion less than June imports.
  • For the week ended August 24, there were 215,000 claims for unemployment insurance, an increase of 4,000 from the previous week’s level, which was revised up by 2,000. According to the Department of Labor, the advance rate for insured unemployment claims remained at 1.2% for the week ended August 17. The advance number of those receiving unemployment insurance benefits during the week ended August 17 was 1,698,000, an increase of 22,000 from the prior week’s level, which was revised up by 2,000.

Eye on the Week Ahead

Manufacturing activity has been slow over the summer and is not expected to pick up in August, based on purchasing managers’ sentiments. On the other hand, employment has been steady. August’s employment data is out at the end of the week. While the total number of new jobs added last month is expected to be in line with prior months, wage growth is also likely to show minimal advancement.