What I’m Watching This Week – 27 June 2022

The Markets (as of market close June 24, 2022)

The stock and bond markets were closed last Monday to observe the Juneteenth federal holiday. Then, after three weeks of bruising losses, stocks rebounded over the next four days to deliver solid gains. Investors hung on every word during Fed Chair Jerome Powell’s two days of testimony before Congress, but ironically it was signs of economic weakness that seemed to lift their spirits. The tech-heavy Nasdaq surged 7.5% and the S&P 500, which increased 6.5%, had its second-best showing of the year. The Russell 2000 rose 6.0%, followed by the Dow (5.4%) and the Global Dow (2.5%). Crude oil prices dropped (5.4%) for the second week in a row.

Investors were ready to rally last Tuesday, the first trading day after a nerve-wracking week in which U.S. stocks suffered their worst one-week decline since March 2020. The Nasdaq jumped 2.5%, followed by the S&P 500 (2.4%), the Dow (2.1%), the Russell 2000 (1.7%), and the Global Dow (1.4%). Gains were widespread across all 11 market sectors. A sell-off in U.S. government bonds pushed the yield on 10-year Treasuries above 3.3%. Crude oil prices climbed, while gold and the dollar dipped.

On Wednesday, Powell told Congress that attempting to control inflation (by hiking interest rates) is essential, and while the Committee’s intent is not to provoke a recession, “it’s certainly a possibility.” U.S. stocks swung between losses and gains before ending the day slightly in the red. The Global Dow fell 0.7%, while the Dow and the Russell 2000 slipped 0.2%. Both the S&P 500 and the Nasdaq barely dipped (-0.1%). With recession fears taking center stage, oil prices sunk 2.5% on expectations for reduced demand. The dollar weakened and gold prices advanced.

U.S. stocks ended higher last Thursday, even though the market remained jittery during the second day of Powell’s testimony. The Global Dow lost 0.9%, but the benchmark U.S. indexes listed here posted gains, led by the Nasdaq (1.6%) and followed by the Russell 2000 (1.2%), the S&P 500 (0.9%), and the Dow (0.6%). Information technology shares outperformed, as did defensive sectors including utilities, health care, real estate, and consumer staples. Economically sensitive sectors lagged, especially energy, which fell 3.75%. The yield on 10-year Treasuries declined 7 basis points to 3.08%. Crude oil and gold prices fell, and the dollar advanced.

Stocks soared on Friday after the May reading of a closely watched gauge of longer-term consumer inflation expectations was revised downward from an alarming 14-year high. Weakening economic data offered some hope that cooler inflation could potentially reduce the need for drastic rate hikes by the Fed. The Nasdaq jumped 3.3%, followed by the Russell 2000 (3.2%), the S&P 500 (3.1%), the Dow (2.7%), and the Global Dow (2.2%). All 11 market sectors ended the day higher. Treasury yields ticked up, while crude oil prices, gold, and the dollar fell.

Stock Market Indexes

Market/Index2021 ClosePrior WeekAs of 6/24Weekly ChangeYTD Change
DJIA36,338.3029,888.7831,500.685.39%-13.31%
Nasdaq15,644.9710,798.3511607.627.49%-25.81%
S&P 5004,766.183,674.843911.746.45%-17.93%
Russell 20002,245.311,665.691765.746.01%-21.36%
Global Dow4,137.633,487.213576.142.55%-13.57%
Fed. Funds target rate0.00%-0.25%1.50%-1.75%1.50%-1.75%0 bps150 bps
10-year Treasuries1.51%3.23%3.13%-10 bps162 bps
US Dollar-DXY95.64104.61104.14-0.45%%8.89%
Crude Oil-CL=F$75.44$109.95$104.03-5.38%37.90%
Gold-GC=F$1,830.30$1,842.00$1,824.00-0.98%-0.34%

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

  • After four straight months of declines, sales of new single-family homes jumped 10.7% in May above the prior month’s total, according to the Census Bureau. However, new home sales were 5.9% below the level in May 2021. The median sales price of new houses sold in May 2022 was $449,000. The average sales price was $511,400. Inventory of new homes for sale sat at a supply of 7.7 months in May at the current sales pace.
  • Sales of existing homes fell for the fourth straight month in May after declining 3.4% from April and 8.6% year-over-year. According to the National Association of Realtors®, home sales have essentially returned to levels last seen in 2019, before the pandemic supercharged the market. Further sales declines are expected due to affordability challenges worsened by the sharp rise in mortgage rates. Total housing inventory at the end of May increased 12.6% from April but fell 4.1% from one year ago. Unsold inventory sits at a 2.6-month supply at the present sales pace, up from 2.2 months in April and 2.5 months in May 2021. The median existing-home price for all housing types in May was $407,600, a rise of 14.8% from May 2021 ($355,000). Sales of existing single-family homes were also down in May after falling 3.6% from April and 7.7% year-over-year. The median existing single-family home price was $414,200 in May, up 14.6% from a year ago.
  • For the week ended June 18, there were 229,000 new claims for unemployment insurance, a decrease 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 for the week ended June 11 was 0.9%, unchanged from the previous week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended June 11 was 1,315,000, an increase of 5,000 from the previous week’s level, which was revised down by 2,000. States and territories with the highest insured unemployment rates for the week ended June 4 were New Jersey (1.9%), California (1.8%), Puerto Rico (1.6%), Alaska (1.5%), New York (1.4%), Pennsylvania (1.4%), Rhode Island (1.3%), Hawaii (1.2%), and Massachusetts (1.2%). The largest increases in initial claims for the week ended June 11 were in California (+3,951), Pennsylvania (+2,615), Illinois (+1,903), Ohio (+1,772), and Michigan (+1,587), while the largest decreases were in Missouri (-1,297), Tennessee (-831), Kentucky (-202), Mississippi (-146), and New Mexico (-103).

Eye on the Week Ahead

The final estimate for first-quarter gross domestic product is available this week. So far, available data has shown that the economy retracted at an annual rate of -1.5%, compared to an increase of 6.9% in the fourth quarter of 2021. The latest report on personal income and spending is also out this week. Included in this report is the personal consumption expenditures price index, a measure of inflation favored by the Federal Reserve. The PCE price index was up 6.3% in April from 12 months earlier.

What I’m Watching This Week – 21 June 2022

The Markets (as of market close June 17, 2022)

Last week was marked by volatility. Stocks experienced brief rallies throughout the week, but not enough to overcome corresponding troughs that ultimately dragged the major benchmark indexes lower. The Federal Reserve’s intent to bring inflation down to 2.0% through tighter monetary policy has investors concerned about the impact on the economy in general and corporate valuations in particular. That is partially reflected in the stock market, as the S&P 500 is firmly in bear territory, down more than 20.0% from its all-time high. Despite a late Friday rally, stocks ended last week down. The Russell 2000 dropped nearly 7.5% for the week and is down 25.81% for the year. The Nasdaq gave back 5.80%, followed by the Global Dow, the Dow, and the S&P 500. Crude oil prices fell over $10.00 to end the week at roughly $109.95 per barrel. The dollar inched higher, while gold prices slid.

Last Monday saw a wave of sell-offs for stocks with each of the benchmark indexes listed here falling notably. The Russell 2000 and the Nasdaq lost 4.8% and 4.7%, respectively. The S&P 500 dropped 3.9%, the Global Dow slid 3.2%, and the Dow declined 2.8%. Ten-year Treasury yields jumped 21 basis points to reach 3.36%. Investors may have lost confidence that inflation had peaked following the somewhat unexpected jump in the latest Consumer Price Index. The move from stocks could be in anticipation of more aggressive interest-rate hikes from the Federal Reserve that could push the economy into a recession. Crude oil prices inched higher. The dollar advanced, while gold prices slid lower.

Stocks closed generally lower last Tuesday, with only the Nasdaq eking out a 0.2% gain, likely the result of dip buyers seeking some low-hanging fruit. The S&P 500 declined 0.4%, falling for the fifth consecutive session, its longest slide since January. The Dow dipped 0.5%, the Russell 2000 declined 0.4%, and the Global Dow dropped 0.8%. Yields on 10-year Treasuries rose over 11 basis points to close at 3.48%. Crude oil prices fell $2.50 to $118.41 per barrel. The dollar climbed for the second consecutive day. Gold prices lost nearly $23.00, falling to $1,809.20 per ounce.

Despite a larger-than-expected interest-rate hike from the Federal Reserve, stocks rallied last Wednesday, ending a five-day tailspin. The Nasdaq led the indexes, climbing 2.5%, followed by the S&P 500 (1.5%) and the Russell 2000 (1.4%). The Dow and the Global Dow advanced 1.0%. Ten-year Treasury yields fell 8.8 basis points to close at 3.39%. Crude oil prices rose to $116.02 per barrel. The dollar dipped lower, while gold prices jumped more than $17.00 to $1,836.80 per ounce.

Stocks finished last Thursday sharply lower, giving back gains from the previous session and dragging the Dow below 30,000 for the first time since early in 2021. Investors are likely eying a prolonged period of global monetary tightening as the Bank of England and the Swiss National Bank followed the Federal Reserve with rate hikes. The Nasdaq dropped over 4.0%, while the Russell 2000 fell 4.7%. The Dow (-2.4%), the S&P 500 (-3.3%), and the Global Dow (-1.7%) also slid lower. Each of the S&P 500 market sectors ended the day in the red, with energy declining 5.6%, consumer discretionary decreasing 4.8%, and information technology losing 4.1%. Yields on 10-year Treasuries ended the day at 3.30% after falling 8.8 basis points. Crude oil prices rose $1.70 to $117.03 per barrel. The dollar fell for the second consecutive session, while gold prices advanced for the second straight day.

Last Friday saw the Nasdaq, the S&P 500, and the Russell 2000 post gains, while the Dow and the Global Dow slid lower. Ten-year Treasury yields dipped to 3.23% after declining 6.8 basis points. Crude oil prices dropped to around $109.95 per barrel. The dollar rose, while gold prices fell.

Stock Market Indexes

Market/Index2021 ClosePrior WeekAs of 6/17Weekly ChangeYTD Change
DJIA36,338.3031,392.7929,888.78-4.79%-17.75%
Nasdaq15,644.9711,340.0210,798.35-4.78%-30.98%
S&P 5004,766.183,900.863,674.84-5.79%-22.90%
Russell 20002,245.311,800.281,665.69-7.48%-25.81%
Global Dow4,137.633,700.333,487.21-5.76%-15.72%
Fed. Funds target rate0.00%-0.25%0.75%-1.00%1.50%-1.75%75 bps150 bps
10-year Treasuries1.51%3.15%3.23%8 bps172 bps
US Dollar-DXY95.64104.18104.610.41%9.38%
Crude Oil-CL=F$75.44$120.49$109.95-8.75%45.74%
Gold-GC=F$1,830.30$1,875.60$1,842.00-1.79%0.64%

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 hiked the target range for the federal funds rate 75 basis points to 1.50%-1.75%. The increase is more than the anticipated 50-basis-point advance and is the biggest rate hike since November 1994. The Committee chose a more aggressive path after noting that inflation remained elevated due to supply-and-demand imbalances related to the pandemic, higher energy prices, and broader price pressures. The invasion of Ukraine by Russia created additional upward pressure on inflation and has weighed on global economic activity. Further, COVID-related lockdowns in China are likely to exacerbate supply-chain disruptions. In addition to ongoing increases in the target range, the Committee will continue reducing its holdings of Treasury securities, agency debt, and agency mortgage-backed securities. Following last week’s meeting, Federal Reserve Chair Jerome Powell indicated that a 50-to-75 basis-point rate increase is likely in July when the Committee meets next.
  • Prices at the producer level increased 0.8% in May, following advances of 0.4% in April and 1.6% in March. Producer prices increased 10.8% for the 12 months ended in May. Last month, prices for goods advanced 1.4%, while prices for services rose 0.4%. Prices less foods, energy, and trade services moved up 0.5% in May after increasing 0.4% in April. For the 12 months ended in May, the index less foods, energy, and trade services rose 6.8%. Driving the May increase in prices for goods was a 5.0% increase in energy prices, of which prices for gasoline advanced 8.4%. Energy prices are up 45.3% since May 2021. Over half of the increase in prices for services was attributable to a 2.9% increase in prices for transportation and warehousing services.
  • In May, retail and food services sales fell 0.3% from the previous month, but are 8.1% above sales in May 2021. Retail trade sales also declined, dropping 0.4% for the month, but are up 6.9% over the 12 months ended in May. Gasoline station sales were up 4.0% in May and 43.2% from May 2021, while sales for food services and drinking places were up 0.7% last month and 17.5% from last year. Food and beverage store sales rose 1.2% in May and 7.9% over May 2021. The data for May seems to indicate that consumers are scaling back on discretionary spending, possibly evidenced by declining sales for motor vehicle and parts dealers (-3.5%), furniture and home furnishing stores (-0.9%), and electronics and appliance stores (-1.3%). Online retail sales also dipped 1.0% in May.
  • U.S. import prices rose 0.6% in May and 11.7% for the 12 months ended in May. Import fuel prices rose 7.5% last month and 73.5% since May 2021, the largest 12-month increase since advancing 87.0% in November 2021. Nonfuel imports actually declined 0.3% in May, the first monthly decrease since decreasing 0.2% in November 2020. Exports increased 2.8%. Higher prices for both nonagricultural and agricultural exports contributed to the U.S. export price rise in May. Exports have risen 18.9% since May 2021, the largest annual increase since the index was first published in September 1984.
  • New home construction slowed in May. The number of issued building permits fell 7.0% from the prior month and is only 0.2% above the total for May 2021. The number of housing starts in May was 14.4% lower than the April estimate and 3.5% below the May 2021 rate. Housing completions increased 9.1% in May and are up 9.3% from a year earlier. For single-family construction in May, issued building permits fell 5.5%, housing starts were down 9.2%, while completions rose 2.8%.
  • Total industrial production inched higher in May, advancing 0.2% from the previous month. Industrial production has increased every month of the year so far, with an average monthly gain of nearly 0.8%. Total industrial production in May was 5.8% above its year-earlier level. In May, manufacturing output declined 0.1%, following three months when growth averaged nearly 1%. The indexes for utilities and mining rose 1.0% and 1.3%, respectively.
  • The national average retail price for regular gasoline was $5.006 per gallon on June 13, $0.130 per gallon above the prior week’s price and $1.937 higher than a year ago. Also as of June 13, the East Coast price increased $0.13 to $4.85 per gallon; the Gulf Coast price rose $0.08 to $4.63 per gallon; the Midwest price climbed $0.16 to $4.97 per gallon; the West Coast price increased $0.12 to $5.87 per gallon, and the Rocky Mountain price increased $0.21 to $4.92 per gallon. Residential heating oil prices averaged $4.37 per gallon on June 10, about $0.09 per gallon more than the prior week’s price. According to the U.S. Energy Information Administration, U.S. exports of crude oil and petroleum products reached a record of 9.8 million barrels per day during the week of May 27. In addition to high exports, movements from the Gulf Coast to the East Coast via pipeline, tanker, and barge are near historic high annual levels for both motor gasoline and distillate. Despite this supply, low product inventories in the Northeast are likely to continue, driven by a confluence of factors, including transportation constraints, increasing demand, and low regional refinery production.
  • For the week ended June 11, there were 229,000 new claims for unemployment insurance, a decrease of 3,000 from the previous week’s level, which was revised up by 3,000. According to the Department of Labor, the advance rate for insured unemployment claims for the week ended June 4 was 0.9%, unchanged from the previous week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended June 4 was 1,312,000, an increase of 3,000 from the previous week’s level, which was revised up by 3,000. States and territories with the highest insured unemployment rates for the week ended May 28 were California (1.8%), New Jersey (1.8%), Alaska (1.5%), New York (1.4%), Pennsylvania (1.3%), Puerto Rico (1.3%), Massachusetts (1.2%), Rhode Island (1.2%), Georgia (1.1%), Hawaii (1.1%), Illinois (1.1%), and Oregon (1.1%). The largest increases in initial claims for the week ended June 4 were in Florida (+2,098), Georgia (+2,060), Pennsylvania (+1,134), Missouri (+1,053), and Illinois (+827), while the largest decreases were in Michigan (-2,131), Mississippi (-1,723), New York (-631), Oklahoma (-598), and New Jersey (-440).

Eye on the Week Ahead

The real estate sector is front and center this week with the release of the latest data on sales of both new and existing homes. The housing market slowed notably in April and if the latest data on housing starts is any indication, May will not show much improvement.

What I’m Watching This Week – 13 June 2022

The Markets (as of market close June 10, 2022)

U.S. stocks tumbled with their biggest losses in three weeks, and Treasury yields rose by 20 basis points as inflation continued to push higher. Each of the benchmark indexes listed here declined, led by the Nasdaq and the S&P 500, which dropped by more than 5.0%. Crude oil prices rose marginally, the dollar inched higher, while gold prices rose by more than $22.00 per ounce. Last Friday, the latest data showed that the Consumer Price Index rose 8.6% in May from one year earlier, the fastest pace since 1981. Several factors are driving price pressures including the Russia/Ukraine war, which has impacted energy and crude oil prices; supply-chain disruptions; China’s economic lockdown in response to rising COVID cases; and a tight labor market, with demand for workers far outpacing supply, driving wages higher. Demand for travel and other services has surged with the onset of summer and the receding impact of COVID-19, pushing up prices for airline fares, hotels, and dining. Unfortunately, higher prices are cutting into profits for many businesses. Also, in its attempt to temper inflationary pressures, the Federal Reserve is likely to step up measures to tighten spending by raising interest rates further increasing the cost of borrowing and doing business. For consumers in general and investors in particular, higher prices are likely to impact consumer spending and slow economic activity.

Stocks posted modest gains last Monday. A sell-off in Treasuries sent 10-year yields above 3.0% for the first time since mid-May. The Nasdaq gained 0.4%, while the Global Dow, the Russell 2000, and the S&P 500 rose 0.3%. The Dow eked out a 0.1% advance. Crude oil prices slipped marginally, closing at around $118.50 per barrel. The dollar advanced, while gold prices fell more than $5.00 to $1,845.10 per ounce. China is set to begin easing COVID-related restrictions that could help ease supply-chain pressures. Elsewhere, the European Central Bank is about to end bond purchases and increase borrowing costs, likely in July.

Equities pushed higher last Tuesday led by energy and tech shares. Stocks recovered from a dip early in the day following news that a major retailer cut in its profit outlook. A drop in bond yields helped fuel the surge in stocks. By the close of trading last Tuesday, the Nasdaq and the S&P 500 rose 1.0%, the Dow gained 0.8%, the Russell 2000 jumped 1.6%, and the Global Dow increased 0.3%. Ten-year Treasury yields fell 6.6 basis points to end the day at 2.97%. Crude oil prices continued to push toward $120.00 per barrel after ending the day at $119.63. The dollar slipped lower while gold prices advanced.

Stocks slid lower last Wednesday following a two-day rally. Each of the benchmark indexes lost value, with the Russell 2000 falling nearly 1.6%. The Nasdaq dropped 1.1%, the Dow lost 0.8%, while the S&P 500 and the Global Dow dipped 0.7%. Bond prices declined, with yields on 10-year Treasuries rising 5.7 basis points to reach 3.02%. The dollar and gold prices increased. Crude oil prices continued to advance, climbing another $3.14 to hit $122.55 per barrel. Rising crude oil prices and related gas price increases are prompting concerns that economic growth will be stifled and corporate earnings will take a hit.

Last Thursday saw stocks extend their slide as investors contemplated more economic growth concerns following the European Central Bank’s intention to hike interest rates by a quarter-point next month. Each of the benchmark indexes listed here fell by nearly 1.9%. Ten-year Treasury yields remained above 3.0%, the dollar rose, while gold prices dipped lower. Crude oil prices slipped, down $0.75 to close around $121.36 per barrel.

Investors withdrew from stocks last Friday after the latest jump in the Consumer Price Index likely signaled more economic tightening. The Nasdaq plunged 3.5% on the day, followed by the S&P 500 and the Global Dow (-2.9%), the Dow (-2.7%), and the Russell 2000 (-2.6%). The yield on 10-year Treasuries jumped more than 11 basis points to close at 3.15%. Crude oil prices retreated to $120.49 per barrel. The Dollar rose against a basket of currrencies. Gold prices climbed nearly $23.00 to reach $1,875.60 per ounce.

Stock Market Indexes

Market/Index2021 ClosePrior WeekAs of 6/10Weekly ChangeYTD Change
DJIA36,338.3032,899.7031,392.79-4.58%-13.61%
Nasdaq15,644.9712,012.7311,340.02-5.60%-27.52%
S&P 5004,766.184,108.543,900.86-5.05%-18.16%
Russell 20002,245.311,883.051,800.28-4.40%-19.82%
Global Dow4,137.633,881.923,700.33-4.68%-10.57%
Fed. Funds target rate0.00%-0.25%0.75%-1.00%0.75%-1.00%0 bps75 bps
10-year Treasuries1.51%2.95%3.15%20 bps164 bps
US Dollar-DXY95.64102.17104.181.97%8.93%
Crude Oil-CL=F$75.44$120.26$120.490.19%59.72%
Gold-GC=F$1,830.30$1,853.90$1,875.601.17%2.48%

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 Consumer Price Index rose 1.0% in May after advancing 0.3% in April. The CPI has risen 8.6% since May 2021, the highest level in more than 40 years. While the May increase was broad-based, rising prices for shelter, gasoline, and food were the largest contributors. The CPI less food and energy rose 0.6% last month. The latest data is likely to promote further tightening of monetary policy by the Federal Reserve, which meets next week. Gasoline prices jumped 4.1% in May and are up nearly 50.0% over the last 12 months. According to the Energy Information Administration, the average price of regular gasoline was $4.88 per gallon on June 6. Food prices advanced 1.0% in May and 8.6% over the last 12 months. Shelter prices increased 0.6% in May and 5.5% since May 2021.
  • The federal Treasury budget deficit was $66.2 billion in May after running a $308.3 billion surplus in April. In May, government receipts declined nearly $474.6 billion to $389.0 billion, while expenditures dipped $100.2 billion to $455.2 billion. Year to date, the budget deficit sits at $426.2 billion, more than 380% lower than the deficit over the same period last year.
  • The goods and services trade deficit fell to $87.1 billion in April, a decrease of 19.1% from the prior month’s figure. According to the latest information from the Bureau of Economic Analysis, in April exports increased 3.5% from March, while imports fell 3.4%. Year to date, the goods and services deficit increased $107.9 billion, or 41.1%, from the same period in 2021. Exports increased $151.3 billion, or 18.8%. Imports increased $259.2 billion, or 24.3%. Of particular note in April, the deficit with China decreased $8.5 billion to $34.9 billion, while the deficit with Mexico increased $1.7 billion to $11.5 billion.
  • The national average retail price for regular gasoline was $4.876 per gallon on June 6, $0.252 per gallon above the prior week’s price and $1.841 higher than a year ago. Also as of June 6, the East Coast price increased $0.17 to $4.72 per gallon; the Gulf Coast price rose $0.33 to $4.55 per gallon; the Midwest price climbed $0.36 to $4.82 per gallon; the West Coast price increased $0.19 to $5.75 per gallon; and the Rocky Mountain price increased $0.26 to $4.71 per gallon. Residential heating oil prices averaged $4.28 per gallon on June 3, about $0.28 per gallon more than the prior week’s price. According to the U.S. Energy Information Administration forecast, non-OPEC countries will increase petroleum production by 1.9 million barrels per day in 2022 and 1.4 million barrels per day in 2023, compared with an increase of 0.8 million barrels per day in 2021. About 60% of the growth in petroleum production will be driven by the United States, whose production will increase by 1.3 million barrels per day in 2022 and by 1.4 million barrels per day in 2023.
  • For the week ended June 4, there were 229,000 new claims for unemployment insurance, an increase of 27,000 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 for the week ended May 28 was 0.9%, unchanged from the previous week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended May 28 was 1,306,000, unchanged from the previous week’s revised level which was revised down by 3,000. States and territories with the highest insured unemployment rates for the week ended May 21 were California (1.9%), New Jersey (1.8%), Alaska (1.5%), New York (1.4%), Puerto Rico (1.4%), Pennsylvania (1.3%), Illinois (1.2%), Massachusetts (1.2%), Rhode Island (1.2%), and the Virgin Islands (1.2%). The largest increases in initial claims for the week ended May 28 were in Mississippi (+1,935), California (+1,911), New York (+1,054), Oklahoma (+753), and Michigan (+582), while the largest decreases were in Kentucky (-3,523), Pennsylvania (-2,127), Georgia (-1,762), Florida (-1,520), and Indiana (-426).

Eye on the Week Ahead

The Federal Open Market Committee meets this week. It is expected that the federal funds rate will be increased 50 basis points to 1.25%-1.50%. While indicators in April appeared to show inflation was slowing, the latest data in May has price increases accelerating at a faster pace.

What I’m Watching This Week – 6 June 2022

The Markets (as of market close June 3, 2022)

Investors swallowed modest losses last week as the stock market served up another disappointing performance. Each of the benchmark indexes listed here lost value, with the S&P 500 declining 1.2%, the Nasdaq pulling back 1.0%, and the Dow falling 0.9%. The Global Dow fell 0.8% and the Russell 2000 dipped 0.3%. Strong employment data seems to support the Fed’s plan to raise the federal funds rate quickly to help fight inflation, leaving investors to fret about the impact on economic growth.

Last Tuesday, rising crude oil prices and bond yields pulled stocks lower to start the holiday-shortened week. The Dow slid 0.7%, the S&P 500 lost 0.6%, and the Nasdaq slipped 0.4%. The small caps of the Russell 2000 advanced 0.6%. Ten-year Treasury yields added 12 basis points to close at 2.82%. Crude oil prices fell marginally. The dollar inched higher, while gold prices continued to tumble.

Wall Street began June on a sour note with each of the benchmark indexes listed here declining. Last Wednesday, the Global Dow, the Nasdaq, and the S&P 500 lost nearly 0.8%, while the Dow and the Russell 2000 dropped 0.5%. Yields on 10-year Treasuries rose 9 basis points to 2.93%. Crude oil prices changed little from the prior day. The dollar and gold prices advanced.

Equities rebounded last Thursday, with dip buyers targeting reduced megacap stocks. The Nasdaq jumped 2.7%, followed by the Russell 2000 (2.3%), the S&P 500 (1.8%), the Dow (1.3%), and the Global Dow (0.9%). Crude oil prices advanced $2.12, rising to $117.38 per barrel. However, OPEC+ agreed to increase crude output in July and August to compensate for the drop in production due to sanctions placed on Russia. Ten-year Treasury yields dipped about 2 basis points to 2.91%. The dollar declined, while gold prices climbed higher for the second straight day.

Yet another decline in tech shares dragged down the equity market last Friday, with the Nasdaq falling 2.5% and the S&P 500 dropping 1.6%. The Dow (-1.0%), the Russell 2000 (-0.8%), and the Global Dow (-0.6%) also ended the day in the red. Ten-year Treasury yields ticked up to 2.95%. Crude oil prices and the dollar advanced, while gold prices retreated.

Stock Market Indexes

Market/Index2021 ClosePrior WeekAs of 6/3Weekly ChangeYTD Change
DJIA36,338.3033,212.9632,899.70-0.94%-9.46%
Nasdaq15,644.9712,131.1312,012.73-0.98%-23.22%
S&P 5004,766.184,158.244,108.54-1.20%-13.80%
Russell 20002,245.311,887.861,883.05-0.25%-16.13%
Global Dow4,137.633,913.193,881.92-0.80%-6.18%
Fed. Funds target rate0.00%-0.25%0.75%-1.00%0.75%-1.00%0 bps75 bps
10-year Treasuries1.51%2.74%2.95%21 bps144 bps
US Dollar-DXY95.64101.68102.170.48%6.83%
Crude Oil-CL=F$75.44$115.12$120.264.46%59.41%
Gold-GC=F$1,830.30$1,857.20$1,853.90-0.18%1.29%

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 390,000 new jobs added in May, and the unemployment rate remained at 3.6% for the third straight month, according to the latest report from the Bureau of Labor Statistics. The number of unemployed persons was essentially unchanged at 6.0 million. Both the total number of unemployed and the unemployment rate are little different from their values in February 2020 (5.7 million and 3.5%, respectively), prior to the COVID-19 pandemic. Both the labor force participation rate, at 62.3%, and the employment-population ratio, at 60.1%, were little changed over the month. Average hourly earnings rose by $0.10, or 0.3%, to $31.95 in May. Over the past 12 months, average hourly earnings have increased by 5.2%. In May, the average work week was 34.6 hours for the third month in a row.
  • Manufacturing accelerated in May, but at a slower pace than in April. According to the S&P Global US Manufacturing Purchasing Managers’ Index™ report, while operating conditions continued to improve, the rate of growth in the manufacturing sector eased to the softest since January as expansions in output, new orders, and stocks of purchases slowed. However, demand remained robust, with firms increasing their hiring activity and backlogs of work expanding. Nevertheless, business confidence slipped to the lowest level since October 2020, as supply constraints and inflationary pressures hampered growth. Price growth increased at its fastest rate in six months, with manufacturers passing on higher expenses to customers.
  • The services sector also expanded in May, but at the slowest rate in four months, amid the slowest increase in new business since last September, as well as ongoing labor and supply constraints. Meanwhile, pressure on capacity continued to build as backlogs of work rose steeply again. In response, firms expanded their workforce numbers sharply.
  • According to the latest Job Openings and Labor Turnover report, the number of job openings fell 455,000 in April to 11.4 million. The largest decreases in job openings were in health care and social assistance (-266,000), retail trade (-162,000), and accommodation and food services (-113,000). The largest increases were in transportation, warehousing, and utilities (+97,000); nondurable goods manufacturing (+67,000); and durable goods manufacturing (+53,000). The number of hires in April, at 6.6 million, was little changed from March. The number of layoffs and discharges edged down to a series low of 1.2 million. Over the 12 months ended in April, hires totaled 78.0 million and separations totaled 71.6 million, yielding a net employment gain of 6.4 million.
  • The national average retail price for regular gasoline was $4.624 per gallon on May 30, $0.031 per gallon above the prior week’s price and $1.597 higher than a year ago. Also as of May 30, the East Coast price increased $0.02 to $4.55 per gallon; the Gulf Coast price fell $0.04 to $4.22 per gallon; the Midwest price climbed $0.06 to $4.46 per gallon; the West Coast price increased $0.07 to $5.56 per gallon; and the Rocky Mountain price increased $0.12 to $4.45 per gallon. Residential heating oil prices averaged $4.00 per gallon on May 27, about $0.26 per gallon more than the prior week’s price. According to the U.S. Energy Information Administration June 2 report on petroleum and other liquids, international oil and natural gas companies reported increased cash flow and higher reserves in 2021. These companies directed more of their financial resources toward debt reduction, dividend increases, and merger and acquisition opportunities than toward capital expenditures for production growth.
  • For the week ended May 28, there were 200,000 new claims for unemployment insurance, a decrease of 11,000 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 for the week ended May 21 was 0.9%, a decrease of 0.1 percentage point from the previous week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended May 21 was 1,309,000, a decrease of 34,000 from the previous week’s level, which was revised down by 3,000. This is the lowest level for insured unemployment since December 27, 1969, when it was 1,304,000. States and territories with the highest insured unemployment rates for the week ended May 14 were California (2.0%), New Jersey (1.9%), Alaska (1.7%), New York (1.4%), Puerto Rico (1.4%), Illinois (1.2%), Massachusetts (1.2%), Pennsylvania (1.2%), Rhode Island (1.2%), and the Virgin Islands (1.2%). The largest increases in initial claims for the week ended May 21 were in Missouri (+1,178), Georgia (+606), Mississippi (+481), Texas (+426), and North Carolina (+322), while the largest decreases were in California (-6,119), Illinois (-4,082), Kentucky (-3,578), New York (-1,450), and Michigan (-524).

Eye on the Week Ahead

The Consumer Price Index for May is available this week. Consumer prices rose 0.3% in April and were up 8.3% from April 2021. However, price inflation may be slowing, as the April increase was much lower than March’s 1.2% jump.

Monthly Market Review – May 2022

The Markets (as of market close May 31, 2022)

May was a volatile month for Wall Street. Stocks began May where April ended, with losses. In fact, it wasn’t until the last week of May that stocks posted gains. Throughout the month, investors had to face the prospects of an economic slowdown impacted by accelerating inflation, rising interest rates, the ongoing war in Ukraine, and lukewarm corporate earnings reports. Despite suggestions from Federal Reserve Chair Jerome Powell that the central bank is not likely to raise interest rates by 75 basis points, stubbornly high inflation has set the Fed on a path of quantitative tightening and interest-rate advances that presents a risk to economic growth.

Crude oil prices gradually rose throughout the month, only to surge on the last day of May after the European Union imposed an immediate ban on two-thirds of all Russian oil imports in a further response to its invasion of Ukraine. Crude oil prices advanced over 10.0% to nearly $115.00 per barrel. Gas prices also continued to increase in May, reaching record highs along the way. The national average retail price for regular gasoline was $4.59 per gallon on May 23, up from $4.12 on April 25 and $1.57 over a year ago. Analysts suggest that gas prices are likely to continue to increase with rising crude oil prices, the impact of the ongoing Russia/Ukraine war, and demand exceeding refinery output.

First-quarter gross domestic product contracted at an annualized rate of 1.5% (see below) after increasing nearly 7.0% to end 2021. Nevertheless, there were some positive signs in May. Consumer spending continued to increase and some high-end retail earnings reports gave investors a reason to believe the economy could weather the storm.

A late-month rally helped push some of the benchmark indexes higher to close May in the black. The Dow, the S&P 500, the Russell 2000, and the Global Dow each finished ahead of their respective April closing values. While tech shares rebounded somewhat at the end of the month, the Nasdaq still closed May in the red.

Ten-year Treasury yields ended the month about where they began. Gold prices decreased nearly 3.0% in May. The U.S. dollar road the ebbs and flows of the stock market and bond prices, ultimately ending the month lower than it started.

Stock Market Indexes

Market/Index2021 ClosePrior MonthAs of May 31Monthly ChangeYTD Change
DJIA36,338.3032,977.2132,990.120.04%-9.21%
Nasdaq15,644.9712,334.6412,081.39-2.05%-22.78%
S&P 5004,766.184,131.934,132.150.01%-13.30%
Russell 20002,245.311,862.161,872.550.56%-16.60%
Global Dow4,137.633,815.073,901.992.28%-5.70%
Fed. Funds target rate0.00%-0.25%0.25%-0.50%0.75%-1.00%50 bps75 bps
10-year Treasuries1.51%2.88%2.84%-4 bps133 bps
US Dollar-DXY95.64103.17101.80-1.33%6.44%
Crude Oil-CL=F$75.44$104.07$114.9010.41%52.31%
Gold-GC=F$1,830.30$1,897.90$1,839.40-3.08%0.50%

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark the performance of specific investments.

Latest Economic Reports

  • Employment: Employment rose by 428,000 in April, about the same increase as in March. Notable job gains occurred in leisure and hospitality, in manufacturing, and in transportation and warehousing. However, employment is down by 1.2 million, or 0.8%, from its pre-pandemic level in February 2020. In April, the unemployment rate remained at 3.6%. The number of unemployed persons remained relatively unchanged at 5.9 million. These measures are little different from their pre-pandemic values in February 2020 (3.5% and 5.7 million, respectively). Among the unemployed, the number of workers who permanently lost their jobs remained at 1.4 million in April. Also in April, the number of persons who were unable to work because their employer closed or lost business due to the pandemic fell to 1.7 million — down from 2.5 million in the previous month. The labor-force participation rate decreased 0.2 percentage point to 62.2% in April. The employment-population ratio fell by 0.1 percentage point to 60.0%. In April, average hourly earnings rose by $0.10, or 0.3%, to $31.85. Over the last 12 months, average hourly earnings rose by 5.5%. The average work week was unchanged at 34.6 hours in April.
  • There were 210,000 initial claims for unemployment insurance for the week ended May 21, up from a month earlier when there were approximately 180,000 new claims filed. As of May 14, there were 1,346,000 total claims for unemployment benefits. A year ago, there were 3,618,000 total claims for unemployment insurance benefits.
  • FOMC/interest rates: The Federal Open Market Committee met at the beginning of May, and in a move specifically directed at tempering rising inflationary pressures, the Committee increased the federal funds target range by 50 basis points. The FOMC also decided to begin reducing its balance sheet starting June 1 until the size can “maintain securities holdings in amounts needed to implement monetary policy efficiently and effectively in its ample reserves regime.”
  • GDP/budget: Gross domestic product contracted at an annualized rate of -1.5% in the first quarter of 2022 compared with a 6.9% advance in the fourth quarter of 2021. The decrease in GDP primarily reflected decreases in private inventory investment, exports, federal government spending, and state and local government spending; while imports, which are a subtraction in the calculation of GDP, increased. Personal consumption expenditures (3.1%), nonresidential fixed investment (9.2%), and residential fixed investment (0.4%) increased. Spending on goods was unchanged, while spending on services climbed 4.8%. The personal consumption price index, a measure of inflation, increased 7.0% in the first quarter after advancing 6.4% in the fourth quarter. Imports increased 18.3% in the first quarter, while exports fell 5.4%.
  • There was a surplus of $308.2 billion in the April Treasury budget deficit, in sharp contrast to the $225.6 billion deficit in April 2021. Through the first seven months of fiscal year 2022, the deficit sits at $360.0 billion, 81.0% lower than the deficit over the same period in fiscal year 2021. So far in this fiscal year, government expenditures are down 18.0%, while receipts are up 39.0%. Individual income tax receipts have risen 69.0% and corporate income tax receipts have increased 22.0% compared to April 2021.
  • Inflation/consumer spending: According to the latest Personal Income and Outlays report for April, personal income increased 0.4% and disposable personal income rose 0.3% after rising 0.5% and 0.4%, respectively, in March. Consumer spending increased 0.9% following a 1.4% jump in March. Consumer prices rose 0.2% in April after advancing 0.9% the previous month. Consumer prices have risen 6.3% since April 2021. Year over year, energy prices vaulted 30.4%, while food prices increased 10.0%.
  • The Consumer Price Index increased 0.3% in April after climbing 1.2% the previous month. Increases in the indexes for shelter, food, airline fares, and new vehicles were the largest contributors to the April CPI increase. Food prices rose 0.9% in April after advancing 1.0% in March, for a 12-month increase of 9.4%, the largest year-over-year gain since April 1981. The gasoline index fell 6.1% in April but is up 43.6% since April 2021. The CPI has risen 8.3% over the last 12 months, a slight decrease from the 8.5% March figure.
  • Prices that producers receive for goods and services jumped 0.5% in April following a 1.6% increase in March. Producer prices have increased 11.0% since April 2021. Prices less foods, energy, and trade services increased 0.6% in April after climbing 0.9% the previous month. For the year, prices less foods, energy, and trade services moved up 6.9%. In April, prices for goods jumped 1.3%, while prices for services were unchanged after increasing 1.2% in March. In April, producer prices for foods rose 1.5% and energy prices increased 1.7%.
  • Housing: Sales of existing homes declined for the third consecutive month, falling 2.4% in April after dropping 2.7% in March. Year over year, existing home sales were 5.9% under the April 2021 estimate. According to the latest survey from the National Association of Realtors®, home shoppers are feeling the effects of rising mortgage rates and higher home prices. The median existing-home price was $391,200 in April, up from $374,800 in March and 14.8% more than April 2021 ($347,100). Unsold inventory of existing homes represents a 2.2-month supply at the current sales pace. Sales of existing single-family homes also fell in April, down 2.5% after dropping 2.7% in March. Since April 2021, sales of existing single-family homes have fallen 4.8%. The median existing single-family home price was $397,600 in April, up from $381,300 in March.
  • Sales of new single-family homes fell 16.6% in April after decreasing 11.7% (revised) in March. The median sales price of new single-family houses sold in April was $450,600 ($435,000 in March). The April average sales price was $570,300 ($522,500 in March). The inventory of new single-family homes for sale in April represented a supply of 8.3 months at the current sales pace, up from March’s 5.9-month supply. Sales of new single-family homes in April were 26.9% below the April 2021 estimate.
  • Manufacturing: Industrial production increased 1.1% in April following a 0.9% jump in March. The April increase marks the fourth consecutive month of gains of at least 0.8%. All three major industry groups advanced in April. Manufacturing rose 0.8%, mining increased 1.6%, and utilities climbed 2.4%. Total industrial production in April was 6.4% higher than it was a year earlier. Since April 2021, manufacturing has risen 5.8%, mining has jumped 8.6%, and utilities increased 7.5%.
  • April saw new orders for durable goods increase 0.4% following a 0.6% March increase. A 0.6% increase in transportation equipment led the April increase in new orders. Excluding transportation, new orders rose 0.3% in April. Excluding defense, new orders increased 0.3%. In addition to the increase in transportation equipment, areas that contributed to the overall April increase in new durable goods orders included primary metals (0.6%), machinery (1.0%), and nondefense aircraft and parts (4.3%). New orders for nondefense capital goods increased 0.4% in April, while new orders for defense capital goods rose 2.5%. Since April 2021, new orders for durable goods have increased 10.5%.
  • Imports and exports: Both import and export price inflation slowed in April. Import prices were unchanged in April after increasing 2.9% in March, according to the U.S. Bureau of Labor Statistics. Import prices have advanced 12.0% since April 2021. Import fuel prices declined 2.4% in April, the first monthly decrease since December 2021. Prices for nonfuel imports increased 0.4% in April and have not recorded a monthly decrease since November 2020. Prices for exports advanced 0.6% in April following a 4.1% increase the previous month. Export prices rose 18.0% over the past year.
  • The international trade in goods deficit was $105.9 billion in April, down $20.0 billion, or 15.9%, from March. Exports of goods for April were $173.9 billion, $5.2 billion more than March exports. Imports of goods for April were $279.9 billion, $14.8 billion less than March imports. The decrease in imports was largely driven by a drop in industrial supplies, capital goods, consumer goods, and other goods, while the increase in exports was tied to a 13.3% increase in foods, feeds, and beverages.
  • The latest information on international trade in goods and services, released May 4, is for March and shows that the goods and services trade deficit increased $20.0 billion, or 22.3%, from $89.8 billion the previous month. March exports were $241.7 billion, 5.6% above the February estimate. March imports were $351.5 billion, 10.3% more than February imports. Year over year, the goods and services deficit increased $84.8 billion, or 41.5%, from the same period in 2021. Exports increased 17.7%. Imports increased 23.8%.
  • International markets: Several European Union leaders pledged to cut oil purchases from Russia, which sent crude oil prices higher. Eurozone inflation reached an annualized rate of 8.1% in May, impacted by the Russia/Ukraine war and corresponding sanctions imposed by European governments. The potential of an economic slowdown in China and supply-chain disruptions due to the pandemic and the aforementioned war weighed on investors. China’s economy declined for the third consecutive month in May, although at a slower pace than in April, as COVID restrictions began to ease. Overall, for the markets in May, the STOXX Europe 600 Index dipped 0.4%. The United Kingdom’s FTSE rose 0.8%. Japan’s Nikkei 225 Index climbed 1.7%, while China’s Shanghai Composite Index increased 4.6%.
  • Consumer confidence: The Conference Board Consumer Confidence Index® decreased slightly in May. The index stands at 106.4 in May, down from 108.6 in April. The Present Situation Index, based on consumers’ assessment of current business and labor market conditions, decreased to 149.6 in May, down from 152.9 in April. The Expectations Index, based on consumers’ short-term outlook for income, business, and labor market conditions, inched lower to 77.5 in May from 79.0 in April.

Eye on the Month Ahead

The Federal Open Market Committee meets in June and will almost certainly increase the federal funds target interest rate another 50 basis points, following a similar measure the last time the Committee met in May. Several economic indicators in April began to show that the economy may be slowing. The May data, available in June, will likely continue this trend.