What I’m Watching This Week – 30 December 2019

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

The holiday spirit, coupled with renewed optimism on the trade front, helped propel stocks higher last week. The tech-heavy Nasdaq outperformed the other benchmark indexes listed here, crossing the 9000 plateau for the first time ever. News that the signing of the Phase One trade agreement between the United States and China is imminent helped boost investors’ spirits during the holiday-shortened week. However, details of the agreement are sketchy and, according to Chinese officials, won’t be released until after the actual signing. Oil stocks rose last week as did retail stocks, pushing the large caps of the S&P 500 and Dow higher. Only the small-cap Russell 2000 lagged behind the other indexes, closing last week in the red.

Oil prices rose again last week, closing at $61.72 per barrel by late Friday afternoon, up from the prior week’s price of $60.34. The price of gold (COMEX) climbed higher last week, closing at $1,515.60 by late Friday afternoon, up from the prior week’s price of $1,481.70. The national average retail regular gasoline price was $2.532 per gallon on December 23, 2019, $0.004 less than the prior week’s price but $0.211 more than a year ago.

Market/Index
2018 Close
Prior Week
As of 12/27
Weekly Change
YTD Change
DJIA
23327.46
28455.09
28645.26
0.67%
22.80%
Nasdaq
6635.28
8924.96
9006.62
0.91%
35.74%
S&P 500
2506.85
3221.22
3240.02
0.58%
29.25%
Russell 2000
1348.56
1671.90
1669.03
-0.17%
23.76%
Global Dow
2736.74
3248.06
3265.24
0.53%
19.31%
Fed. Funds target rate
2.25%-2.50%
1.50%-1.75%
1.50%-1.75%
0 bps
-75 bps
10-year Treasuries
2.68%
1.91%
1.87%
-4 bps
-81 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

  • November’s report on durable goods was not encouraging for manufacturing. New orders for durable (long-lasting) goods fell 2.0% in November from the previous month. The decrease, down two of the last three months, followed October’s 0.2% increase. Excluding transportation, new orders were virtually unchanged. Excluding defense, new orders increased 0.8%. Transportation equipment, also down two of the last three months, led the decrease, falling 5.9%. Shipments of durable goods in November, up following four consecutive monthly decreases, increased 0.1%. Nondefense new orders for capital goods in November decreased 1.8%.
  • New home sales ticked higher in November, up 1.3% from their October totals. Sales of new homes are 16.9% ahead of their 2018 pace. The median sales price of new houses sold in November 2019 was $330,800. The average sales price was $388,200. The estimate of new houses for sale at the end of November was 323,000. This represents a supply of 5.4 months at the current sales rate.
  • For the week ended December 21, there were 222,000 claims for unemployment insurance, a decrease of 13,000 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 December 14. The advance number of those receiving unemployment insurance benefits during the week ended December 14 was 1,719,000, a decrease of 6,000 from the prior week’s level, which was revised up by 3,000.

Eye on the Week Ahead

The first week of the new year kicks off with purchasing managers’ assessment of December’s manufacturing sector. Also, the December figures on international trade in goods is out this week. The goods trade deficit was $66.5 billion in November.

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What I’m Watching This Week – 23 December 2019

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

Stocks continued to surge last week, reaching new record highs ahead of the Christmas holiday. The S&P 500 recorded its largest weekly percentage gain in several months. Both the Dow and Nasdaq also hit new historical highs as solid economic news bolstered by optimism over continued progress in the trade negotiations between the United States and China provided encouraging signs for investors. Long-term bond prices fell, pushing yields 10 basis points higher by the end of the week.

Oil prices rose again last week, closing at $60.34 per barrel by late Friday afternoon, up from the prior week’s price of $59.82. The price of gold (COMEX) inched higher last week, closing at $1,481.70 by late Friday afternoon, up from the prior week’s price of $1,480.20. The national average retail regular gasoline price was $2.536 per gallon on December 16, 2019, $0.025 less than the prior week’s price but $0.167 more than a year ago.

Market/Index 2018 Close Prior Week As of 12/20 Weekly Change YTD Change
DJIA 23327.46 28135.38 28455.09 1.14% 21.98%
Nasdaq 6635.28 8734.88 8924.96 2.18% 34.51%
S&P 500 2506.85 3168.80 3221.22 1.65% 28.50%
Russell 2000 1348.56 1637.98 1671.90 2.07% 23.98%
Global Dow 2736.74 3214.02 3248.06 1.06% 18.68%
Fed. Funds target rate 2.25%-2.50% 1.50%-1.75% 1.50%-1.75% 0 bps -75 bps
10-year Treasuries 2.68% 1.81% 1.91% 10 bps -77 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 final release of the third-quarter gross domestic product was much like the prior iteration. The economy advanced at an annual rate of 2.1%. The GDP grew at an annual rate of 2.0% in the second quarter and 3.1% in the first quarter. Gross domestic income (the net of income and costs incurred in the production of goods and services) also rose 2.1% compared with an increase of 0.9% in the second quarter. Consumer spending slowed from 4.6% in the second quarter to 3.2% in the third quarter. Exports of goods rose 1.0% in the third quarter (-5.9% in the second) while imports increased 1.8% after no change in the second quarter. Still lagging is nonresidential (business) fixed investment, which fell 2.3% after dropping 1.0% in the second quarter.
  • Consumer income and spending ramped up in November ahead of the holiday season. Both personal income and disposable (after-tax) personal income increased 0.5% last month. Consumer spending advanced 0.4% in November after rising 0.3% in October. Inflationary pressures showed some upward movement in November as the personal consumption price index climbed 0.2%, the same increase as in October. Excluding food and energy, consumer prices inched ahead 0.1% in November.
  • Construction of new homes continued its steady advance in November. According to the latest report from the Census Bureau, building permits increased 1.4% past October’s rate, while single-family permits in November were 0.8% higher. There were more housing starts (3.2%) in November over October, and single-family construction was up 2.4%. Residential completions were down, however, falling 6.6% last month, while single-family home completions dropped 3.6%. From November 2018, building permits are up 11.1%, housing starts are 13.6% ahead, and completions have advanced 7.3%.
  • Sales of existing homes fell 1.7% in November from October’s total. That said, sales are still 2.7% ahead of last year’s pace. The number of existing homes for sale slipped from a supply of 3.9% in October to 3.7% in November. The median sales price climbed slightly to $271,300 ($271,000 in October). The sales price is 5.4% ahead of last year ($257,400). Sales of existing single-family homes dropped about 1.25% in November but are up 3.5% from a year ago. The median existing single-family home price is $274,000.
  • Industrial production and manufacturing production both rebounded 1.1% in November after declining in October. These sharp November increases were largely due to a resurgence in the output of motor vehicles and parts following the end of a strike at a major manufacturer. Excluding motor vehicles and parts, the indexes for total industrial production and for manufacturing moved up 0.5% and 0.3%, respectively. Mining production edged down 0.2%, while the output of utilities increased 2.9%. Despite the positive movement, total industrial production was 0.8% lower in November than it was a year earlier.
  • According to the Job Openings and Labor Turnover report for October, the number of job openings rose by 235,000 (4.6%) with notable increases in retail trade (125,000), finance and insurance (56,000), and durable goods manufacturing (50,000). The largest decreases in job openings were in nondurable goods manufacturing (36,000), information (33,000), and arts, entertainment, and recreation (26,000). Over the 12 months ended in October, hires totaled 69.8 million and separations totaled 67.4 million, yielding a net employment gain of 2.4 million.
  • For the week ended December 14, there were 234,000 claims for unemployment insurance, a decrease of 18,000 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 December 7. The advance number of those receiving unemployment insurance benefits during the week ended December 7 was 1,722,000, an increase of 51,000 from the prior week’s level, which was revised up by 4,000.

Eye on the Week Ahead

The holiday week is traditionally a slow one in the market and for economic news, however, two important reports are available this week. Information on new home sales for November is out. While sales were down in October, they are expected to rebound in November. Another important economic indicator is the durable goods report from the Census Bureau. October saw new orders for long-lasting goods rise following a September drop. However, new orders are not as robust in 2019 as they were the previous year.

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What I’m Watching This Week – 16 December 2019

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

Positive developments finally arrived in the ongoing trade war between the United States and China. Last Friday, President Trump announced phase one of a trade deal with China. The president indicated that he would forgo the imposition of tariffs scheduled for December 15 and reduce existing tariffs on about $120 billion of Chinese imports. According to the president’s tweets, China has agreed to make large purchases of targeted farm, energy, and manufactured goods. A representative of the Chinese government said the purchases would total about $200 billion over two years. Meanwhile, United Kingdom Prime Minister Boris Johnson’s Conservative Party enjoyed a robust victory in last week’s elections, securing a strong majority in Parliament. This development should give Johnson the votes needed to secure a Brexit deal and foster a new relationship with the European Union. Finally, the Federal Reserve maintained interest rates, noting strong consumer spending and steady economic growth.

All of this helped push stocks marginally higher for the week. Each of the benchmark indexes listed here posted gains, led by the Global Dow, most likely on the probability of a Brexit deal. The Nasdaq advanced close to 1.0%, followed by the S&P 500, the Dow, and the Russell 2000.

Oil prices inched higher last week, closing at $59.82 per barrel by late Friday afternoon, up from the prior week’s price of $59.12. The price of gold (COMEX) climbed last week, closing at $1,480.20 by late Friday afternoon, up from the prior week’s price of $1,464.50. The national average retail regular gasoline price was $2.561 per gallon on December 9, 2019, $0.014 less than the prior week’s price but $0.140 more than a year ago.

Market/Index 2018 Close Prior Week As of 12/13 Weekly Change YTD Change
DJIA 23327.46 28015.06 28135.38 0.43% 20.61%
Nasdaq 6635.28 8656.53 8734.88 0.91% 31.64%
S&P 500 2506.85 3145.91 3168.80 0.73% 26.41%
Russell 2000 1348.56 1633.84 1637.98 0.25% 21.46%
Global Dow 2736.74 3162.32 3214.02 1.63% 17.44%
Fed. Funds target rate 2.25%-2.50% 1.50%-1.75% 1.50%-1.75% 0 bps -75 bps
10-year Treasuries 2.68% 1.84% 1.81% -3 bps -87 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

  • As expected, the Federal Open Market Committee maintained interest rates at their current 1.50%-1.75% range. For the first time in several months, the Committee’s vote was unanimous. In support of its decision to maintain rates, the Committee noted that the labor market remained strong and that economic activity has been rising at a moderate rate. In addition, while household spending has been rising at a strong pace, business fixed investment and exports remain weak. On a 12-month basis, overall inflation and inflation for items other than food and energy are running below 2%. Based on quarterly projections, the Committee sees the funds target rate ending 2020 at 1.625%, down from the previous projection of 1.875%.
  • The November deficit for the federal government increased to $208.8 billion, $74.0 billion over October’s deficit. Compared to last October and November, the deficit for the first two months of fiscal year 2020 is larger by about $38.0 billion.
  • Inflationary pressures may finally be gaining some momentum, likely influenced by the trade war between the United States and China. The Consumer Price Index for November advanced 0.3% after rising 0.4% in October. Over the last 12 months, the CPI is up 2.1%. Energy prices jumped 0.8% (gasoline increased 1.1%) last month, while food prices rose 0.1%. Consumer prices less food and energy advanced 0.2% in November, the same increase as in October.
  • Prices at the producer level showed no change in November, but they advanced 0.4% in October and are up 1.1% for the 12 months ended in November. A 0.3% rise in goods prices was offset by a comparable drop in prices for services. Producer prices less foods, energy, and trade services was unchanged in November after inching up 0.1% in October. For the 12 months ended in November, prices less foods, energy, and trade services moved up 1.3%, the smallest advance since climbing 1.3% in the 12 months ended September 2016.
  • Retail sales increased 0.2% last month and are up 3.3% over November 2018. In November, motor vehicle and parts dealers sales advanced 0.5%, electronics and appliance store sales jumped 0.7%, and gasoline station sales rose 0.7%, while health and personal care store sales fell 1.1% and clothing and clothing accessory store sales dropped 0.6%. Nonstore (online) sales increased 0.8% in November and are up 11.5% from November 2018.
  • Import prices increased 0.2% in November following a 0.5% drop in October. The increase in import prices was driven by a 2.6% jump in import fuel prices — the largest monthly increase since prices rose 3.6% in May. Export prices also rose 0.2% last month after declining 0.1% in October.
  • For the week ended December 7, there were 252,000 claims for unemployment insurance, an increase of 49,000 from the previous week’s level. This is the highest level for initial claims since September 30, 2017, when it was 257,000. According to the Department of Labor, the advance rate for insured unemployment claims remained at 1.2% for the week ended November 30. The advance number of those receiving unemployment insurance benefits during the week ended November 30 was 1,667,000, a decrease of 31,000 from the prior week’s level, which was revised up by 5,000.

Eye on the Week Ahead

Aside from the impeachment news, there’s plenty of market-moving economic information available this week, including the final report for the third-quarter gross domestic product. Residential reports out this week include November’s figures for housing starts and existing home sales, which increased almost 2.0% in October. Also of note is the November report from the Federal Reserve on industrial production, which fell 0.8% in October.

What I’m Watching This Week – 9 December 2019

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

Market performance was uneven last week, culminating in some of the benchmark indexes closing in the black while a few lost value by week’s end. A strong jobs report and guarded optimism that progress will continue toward a resolution to the U.S./China trade war helped push stocks higher. The S&P 500 closed up less than 0.25%, while the small caps of the Russell 2000 gained over 0.50%. The Dow fell slightly, as did the tech-heavy Nasdaq. Year-to-date, the Nasdaq continues to lead the way, followed by the S&P 500, the Russell 2000, the Dow, and the Global Dow. Long-term government bond prices dipped pushing yields higher as investors were likely influenced by last week’s robust labor numbers.

Oil prices rose last week, closing at $59.12 per barrel by late Friday afternoon, up from the prior week’s price of $55.17. The price of gold (COMEX) inched lower last week, closing at $1,464.50 by late Friday afternoon, down from the prior week’s price of $1,465.60. The national average retail regular gasoline price was $2.575 per gallon on December 2, 2019, $0.004 less than the prior week’s price but $0.124 more than a year ago.

Market/Index 2018 Close Prior Week As of 12/6 Weekly Change YTD Change
DJIA 23327.46 28051.41 28015.06 -0.13% 20.09%
Nasdaq 6635.28 8665.47 8656.53 -0.10% 30.46%
S&P 500 2506.85 3140.98 3145.91 0.16% 25.49%
Russell 2000 1348.56 1624.50 1633.84 0.57% 21.15%
Global Dow 2736.74 3151.08 3162.32 0.36% 15.55%
Fed. Funds target rate 2.25%-2.50% 1.50%-1.75% 1.50%-1.75% 0 bps -75 bps
10-year Treasuries 2.68% 1.77% 1.84% 7 bps -84 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

  • November saw a whopping 266,000 new jobs added and the unemployment rate dip 0.01 percentage point to 3.5%. Job growth has averaged 180,000 per month thus far in 2019, compared with an average monthly gain of 223,000 in 2018. There were 5.811 million unemployed persons in November (5.855 in October), the labor force participation rate decreased from October’s 63.3% to 63.2%, and the employment-population ratio remained at 61.0%. In November, notable job gains occurred in health care and in professional and technical services. Employment also increased in manufacturing, reflecting the return of workers from a strike. Employment continued to trend up in leisure and hospitality, transportation and warehousing, and financial activities, while mining lost jobs. The average workweek was unchanged at 34.4 hours in November. Average hourly earnings rose by $0.07 to $28.29. Over the last 12 months, average hourly earnings have increased by 3.1%.
  • According to the IHS Markit final U.S. Manufacturing Purchasing Managers’ Index™, manufacturing improved in November. The purchasing managers’ index climbed from 51.3 in October to 52.6 last month, marking the strongest improvement in the manufacturing sector since April. Also increasing were new orders, output growth, and workforce numbers.
  • The other major report on the health of the manufacturing sector, the Manufacturing ISM® Report On Business®, saw its purchasing managers’ index decrease 0.2 percentage point in November, coming in at 48.1%. Anything below 50.0% indicates a slowdown. New orders fell 1.9 percentage points, employment fell 1.1 percentage points, inventories dropped 3.4 percentage points, and new export orders plummeted 2.5 percentage points. While the ISM® and Markit® indexes are based on surveys of purchasing managers, the ISM® index is based on a larger survey field and the questions are qualitative and ask about general direction rather than specific level of activity. The Markit® index is based on a smaller survey field and is based on more quantitative information.
  • The services sector also slowed in November, according to the Non-Manufacturing ISM® Report On Business®. The Non-Manufacturing Index fell to 53.9%, down from November’s 54.7%. While business activity regressed last month, new orders, employment, and prices each improved in November over October’s readings. Some industries reporting growth in business activity include real estate, rental, and leasing; health care and social assistance; arts, entertainment, and recreation; finance and insurance; retail trade; and accommodation and food services. Service industries reporting a slowdown in business activity include agriculture, forestry, fishing and hunting; construction; mining; public administration; wholesale trade; and professional, scientific and technical services.
  • The goods and services deficit was $47.2 billion in October, down $3.9 billion from $51.1 billion in September, revised. October exports were $207.1 billion, $0.4 billion less than September exports. October imports were $254.3 billion, $4.3 billion less than September imports. Year-to-date, the goods, and services deficit increased $6.9 billion, or 1.3%, from the same period in 2018. Exports decreased $0.8 billion, or less than 0.1%. Imports increased $6.1 billion, or 0.2%.
  • For the week ended November 30, there were 203,000 claims for unemployment insurance, a decrease of 10,000 from the previous week’s level. According to the Department of Labor, the advance rate for insured unemployment claims increased 0.1 percentage point to 1.2% for the week ended November 23. The advance number of those receiving unemployment insurance benefits during the week ended November 23 was 1,693,000, an increase of 51,000 from the prior week’s level, which was revised up by 2,000.

Eye on the Week Ahead

The focus this week is on the Federal Open Market Committee, which meets for the first time since October. Having lowered interest rates three times already this year, it is unlikely that the Committee reduces rates again this month. While inflation has remained tepid, business investment picked up last month, as did manufacturing and exports, which should be enough to forestall another rate cut.

Monthly Market Review – November 2019

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

Stocks grew for the third straight month as each of the benchmark indexes listed here posted solid returns in November. Despite unrest in Washington as the impeachment process drones on, investors were encouraged by the possibility of favorable movement toward a resolution of the trade war between the United States and China. While inflation remained stymied, consumer spending remained solid and business fixed investment perked up.

By the close of trading on the last day of the month, each of the benchmark indexes listed here posted gains, led by the Nasdaq, which climbed close to 5.0%. The small caps of the Russell 2000 advanced nearly 4.0%. The large caps of the Dow and S&P 500 also posted solid monthly gains of well over 3.0%. Year-to-date, the Nasdaq is more than 30.0% ahead of its 2018 closing value. In fact, of the indexes listed here, only the Global Dow has not gained at least 20.0% for the year.

By the close of trading on November 29, the price of crude oil (WTI) was $55.17 per barrel, up from the October 31 price of $54.09 per barrel. However, as OPEC meets at the end of November, it is expected that major oil-producing nations will extend production cuts, which may impact prices moving forward. The national average retail regular gasoline price was $2.579 per gallon on November 25, down from the October 28 selling price of $2.596 but $0.040 more than a year ago. The price of gold fell by the end of November, dropping to $1,465.60 by close of business on the 29th, down from its $1,515.10 price at the end of October.

Market/Index 2018 Close Prior Month As of November 29 Month Change YTD Change
DJIA 23327.46 27046.23 28051.41 3.72% 20.25%
NASDAQ 6635.28 8292.36 8665.47 4.50% 30.60%
S&P 500 2506.85 3037.56 3140.98 3.40% 25.30%
Russell 2000 1348.56 1562.45 1624.50 3.97% 20.46%
Global Dow 2736.74 3081.07 3151.08 2.27% 15.14%
Fed. Funds 2.25%-2.50% 1.50%-1.75% 1.50%-1.75% 0 bps -75 bps
10-year Treasuries 2.68% 1.69% 1.77% 8 bps -91 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.

  • Employment: The unemployment rate inched up 0.1 percentage point to 3.6% in October as the number of unemployed persons reached 5.86 million (5.77 million in September). Total employment increased by 128,000 in October after adding 180,000 (revised) new jobs in September. The average monthly job gain so far in 2019 is 167,000 (223,000 in 2018). Notable employment increases for October occurred in restaurants and bars (48,000), social assistance (20,000), financial activities (16,000), professional and business services (22,000), and health care (15,000). Sectors seeing a drop in employed persons include government (17,000) and manufacturing (36,000). The labor participation rate rose 0.1 percentage point to 63.3%, and the employment-population ratio remained at 61.0%. The average workweek remained at 34.4 hours for October. Average hourly earnings rose by $0.06 to $28.18. Over the last 12 months ended in October, average hourly earnings have risen 3.0%.
  • FOMC/interest rates: The Federal Open Market Committee did not meet in November. Following October’s interest rate decrease, the target range remains at 1.50%-1.75%. The Committee next meets December 10-11.
  • GDP/budget: According to the second estimate for the third-quarter gross domestic product, the economy accelerated at a rate of 2.1%, up from the second quarter’s 2.0% annual growth rate. The first quarter saw an annualized growth of 3.1%. Growth in consumer spending (personal consumption expenditures), which accounts for roughly two-thirds of the GDP, slowed to 2.9% from the second quarter’s 4.6%. Consumer prices for goods and services grew by 1.5% in the third quarter compared to an increase of 2.4% in the second quarter. A positive from the report comes from residential investment, which rose 5.1% — the first positive contribution to the GDP since 2017. October, the first month of the new fiscal year for the federal government, saw the budget open with a deficit of $134.5 billion ($100.5 billion in October 2018). The government spent roughly $380 billion in October and had receipts of $245.5 billion. Most of the government outlays were for Social Security ($89 billion), national defense ($71 billion), and Medicare ($56 billion). Individual income taxes accounted for the majority of receipts ($126 billion), followed by social insurance and retirement receipts ($90 billion).
  • Inflation/consumer spending: According to the Personal Income and Outlays report, inflationary pressures remain weak, as prices for consumer goods and services rose 0.2% in October, the first increase since July. Prices are up 1.3% over the last 12 months. Consumer prices excluding food and energy rose 0.1% in October (0.0% in September) and are up 1.6% year-over-year. Personal income and disposable (after-tax) personal income receded for the first time in several months in October. Personal income showed no gain after advancing 0.3% in September. Disposable personal income dropped 0.1% after climbing 0.3% the prior month. Despite a dip in income, consumers continued to spend. Personal consumption expenditures increased 0.3% in October after expanding 0.2% in September.
  • The Consumer Price Index climbed 0.4% in October following no change in September. Over the 12 months ended in October, the CPI rose 1.8%. Energy prices increased 2.7% on the month with gasoline up 3.7%. Prices less food and energy rose 0.2% in October after increasing 0.1% the previous month. Since last October, core prices (less food and energy) are up 2.3%.
  • Prices producers receive for goods and services rose 0.4% in October, after falling 0.3% in September. The index increased 1.1% for the 12 months ended in October, the smallest rise since a 1.1% increase in the 12 months ended October 2016. Prices for goods jumped 0.7% in October while prices for services advanced 0.3%. Pushing goods prices higher in October was a 2.8% spike in energy prices. The index less foods, energy, and trade services inched up 0.1% in October after no change in September.
  • Housing: The housing sector has been anything but consistent this year. After plunging 2.2% in September, sales of existing homes rebounded in October, jumping 1.9%. Year-over-year, existing home sales are up 4.6%. Existing home prices continued to drop in October, as the median price for existing homes was $270,900, down from September’s median price of $272,100. Nevertheless, existing home prices were up 6.2% from October 2018. Total housing inventory at the end of October sat at 1.77 million units (representing a 3.9-month supply), down approximately 2.7% from September and 4.3% from one year ago (1.85 million). New single-family home sales also fell in October, dropping 0.7% from their September estimate, although sales are more than 31% ahead of last year’s pace. Unlike prices for existing homes for sale, new home prices rose in October. The median sales price was $316,700 ($310,200 in September) and the average sales price was $383,300 ($366,900 in September). Available inventory, at 5.3-month supply, remained about the same in October as it was in September.
  • Manufacturing: Manufacturing and industrial production continued to lag in October. According to the Federal Reserve, industrial production fell 0.8% in October after falling 0.3% (revised) in September. Manufacturing output declined 0.6% following a 0.5% drop the prior month. Much of the decline in manufacturing in October was due to a drop of 7.1% in the output of motor vehicles and parts that resulted from a strike at a major manufacturer of motor vehicles. In October, mining output fell 0.7% (-1.3% in September), while utilities decreased 2.6% after climbing 1.4% in September. Total industrial production was 1.1% lower in October than it was a year earlier. Following a September decrease, new orders for durable goods rose 0.6% in October. Excluding transportation, new orders increased 0.6%. Excluding defense, new orders expanded by 0.1%. Helping drive the increase in durable goods orders were expansions in nondefense aircraft and parts (10.7%), defense aircraft and parts (18.1%), fabricated metal products (1.8%), machinery (1.3%), and computers and related products (2.4%). New orders for capital goods (used by businesses to produce consumer goods) grew 5.4% in October after falling 2.8% in September.
  • Imports and exports: Both import and export prices remained soft in October. Import prices fell 0.5%, driven by lower petroleum prices. Import prices excluding petroleum dropped 0.1%. Over the last 12 months ended in October, import prices are down 3.0% — the largest over-the-year decline since the index fell 3.7% during the period ended July 2016. Export prices fell 0.1% in October following a 0.2% decline in September. Overall, export prices dipped 2.2% over the past year, the largest 12-month decrease since a 2.4% decline in August 2016. Agricultural export prices rose 1.9% in October, while nonagricultural prices for items such as consumer goods, automobiles, and industrial supplies and materials receded 0.3%. The latest information on international trade in goods and services, out November 5, is for September and shows that the goods and services deficit was $52.5 billion, $0.9 billion less than August’s $55.0 billion deficit. September exports were $206.0 billion, $1.8 billion less than August exports. September imports were $258.4 billion, $4.4 billion under August imports. Year-to-date, the goods and services deficit increased $24.8 billion, or 5.4%, from the same period in 2018. Exports decreased $7.0 billion, or 0.4%. Imports increased $17.8 billion, or 0.8%. The advance report on international trade in goods (excluding services) revealed the trade deficit fell to $66.5 billion in October, down from $70.5 billion in September. However, both export and import trading slowed in October. Exports of goods were $135.3 billion, $0.9 billion less than September exports. Imports of goods were $201.8 billion, $5.0 billion less than September imports.
  • International markets: The third-quarter gross domestic product for Germany inched up 0.1% following a 0.1% drop in the second quarter. While consumer spending advanced 0.4%, the main source of growth in the third quarter was net foreign trade where exports increased 1.0%, far exceeding imports, which grew a scant 0.1%. Global price inflation continues to lag. Consumer prices in Japan showed no growth in October and are up only 0.2% over the last 12 months. Great Britain saw consumer prices fall 0.9% in October. On the other hand, China’s consumer prices rose 0.9% in October and are up 3.8% for the year.
  • Consumer confidence: Consumer confidence fell in November following a slight decrease the prior month. The Conference Board Consumer Confidence Index® registered 125.5 in November, down from 126.1 in October. The Present Situation Index — based on consumers’ assessment of current business and labor market conditions — decreased from 173.5 to 166.9. The Expectations Index — based on consumers’ short-term outlook for income, business and labor market conditions — increased from 94.5 in October to 97.9.

Eye on the Month Ahead

December is typically a slow month for trading. Last December saw stocks plummet, but economic signs in the United States are fairly encouraging. The Federal Reserve reduced interest rates three times so far in 2019, but it is less likely to drop rates again this month. Employment is expected to remain strong, while inflation, fixed business investment, and manufacturing may continue to show weakness.

What I’m Watching This Week – 2 December 2019

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

The holiday-shortened week was a good one for investors as they were encouraged by the growing likelihood of “phase one” in the resolution of the trade war between China and the United States. The large caps of the Dow and S&P 500 reached record highs earlier in the week as did the tech stocks of the Nasdaq, although the Dow lost some momentum following turkey day. By the close of the markets on Friday, the Russell 2000 had surged by almost 2.25%, followed by the Nasdaq, which gained over 1.70%. The S&P 500 rose by almost 1.0%, the Dow moved ahead by 0.63%, the Global Dow picked up more than 0.25%.

Oil prices fell again last week, closing at $55.17 per barrel by late Friday afternoon, down from the prior week’s price of $57.89. The price of gold (COMEX) inched higher last week, closing at $1,465.60 by late Friday afternoon, up from the prior week’s price of $1,462.50. The national average retail regular gasoline price was $2.579 per gallon on November 25, 2019, $0.013 less than the prior week’s price but $0.040 more than a year ago.

Market/Index
2018 Close
Prior Week
As of 11/29
Weekly Change
YTD Change
DJIA
23327.46
27875.62
28051.41
0.63%
20.25%
Nasdaq
6635.28
8519.88
8665.47
1.71%
30.60%
S&P 500
2506.85
3110.29
3140.98
0.99%
25.30%
Russell 2000
1348.56
1588.94
1624.50
2.24%
20.46%
Global Dow
2736.74
3141.77
3151.08
0.30%
15.14%
Fed. Funds target rate
2.25%-2.50%
1.50%-1.75%
1.50%-1.75%
0 bps
-75 bps
10-year Treasuries
2.68%
1.77%
1.77%
0 bps
-91 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 second estimate for the third-quarter gross domestic product saw the economy expand at an annualized rate of 2.1%. The GDP grew at a 2.0% rate in the second quarter. Gross domestic income (the net of income earned and cost incurred in the production of GDP) increased 2.4% in the third quarter, compared with an increase of 0.9% in the second quarter. Compared to the second quarter, personal consumption expenditures fell from 4.6% to 2.9%, nonresidential fixed investment (company expenditures on business-related items) fell at a rate of 2.7%, exports grew from -5.7% to 0.9%, and imports increased from 0.0% to 1.5%. The personal consumption expenditure price index (a measure of consumer prices for goods and services) remained at 1.5% for the third quarter. PCE price index excluding food and energy increased 2.1%. Interestingly, corporate profits increased $4.6 billion in the third quarter, compared with an increase of $75.8 billion in the second quarter.
  • Personal income and disposable (after-tax) personal income slowed in October. Personal income was unchanged from September, while disposable personal income fell 0.1%. Consumer spending advanced 0.3% after climbing 0.2% the previous month. Price inflation remains relatively weak as the personal consumption price index rose 0.2% in October following no increases the previous two months. For the year, consumer prices are up 1.3% — well below the Federal Reserve’s target rate of 2.0%.
  • The international goods trade deficit was $66.5 billion in October, down $4.0 billion from $70.5 billion in September. Exports of goods for October were $135.3 billion, $0.9 billion less than September exports. Imports of goods for October were $201.8 billion, $5.0 billion less than September imports. Exports that notably decreased included industrial supplies (-3.0%), automotive vehicles (-2.4%), and consumer goods (-4.0%). Import items that fell included automotive vehicles (-5.9%), consumer goods (-4.8%), and foods, feeds, and beverages (-2.9%).
  • New orders for durable goods bounced back in October, increasing 0.6% following September’s 1.4% decrease. Excluding transportation, new orders increased 0.6%. Excluding defense, new orders increased 0.1%. Shipments of manufactured durable goods in October were virtually unchanged following three consecutive monthly decreases. New orders for nondefense capital goods in October increased 3.2% after falling 3.4% the prior month.
  • According to the latest report from the Census Bureau, sales of new single-family homes dropped 0.7% in October but are 31.6% above the October 2018 estimate. The median sales price of new houses sold in October 2019 was $316,700. The average sales price was $383,300. The estimated inventory of new homes for sale represents a supply of 5.3 months.
  • For the week ended November 23, there were 213,000 claims for unemployment insurance, a decrease of 15,000 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 dropped 0.1 percentage point to 1.1% for the week ended November 16. The advance number of those receiving unemployment insurance benefits during the week ended November 16 was 1,640,000, a decrease of 57,000 from the prior week’s level, which was revised up by 2,000. This is the lowest level for insured unemployment since August 4, 1973, when it was 1,633,000.

Eye on the Week Ahead

Following the short Thanksgiving week, November reports on manufacturing, trade, and jobs are available this week. Purchasing managers have not been bullish on manufacturing, although November could prove to be a more positive showing. Employment has been solid for quite some time, and November’s results should show more new jobs added.