Month: 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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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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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.

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.