Author: dredheadz

The Markets (as of market close March 11, 2022)

Each of the benchmark indexes listed here closed lower for the second straight week. The war in Ukraine continued, with Ukraine’s top diplomat indicating he saw no progress in talks with Russia. Inflation continued to run hot ahead of this week’s Federal Reserve meeting. During the week, markets oscillated between panic selling and dip-buying. And the volatility wasn’t restricted to stocks — crude oil prices and bond yields also swung higher and lower. By the end of the week, the Nasdaq, the S&P 500, and the Dow fell the furthest. Crude oil prices dipped about $5.00 per barrel. Gold prices rose nearly 1.0%. The dollar inched higher, while 10-year Treasury yields added 28 basis points.

Wall Street opened last week lower. Each of the benchmark indexes listed here fell by at least 2.0%, with the Nasdaq (-3.6%) and the S&P 500 (-3.0%) dropping the most. The Russell 2000 lost 2.5%, the Dow slipped 2.4%, and the Global Dow slid 2.1%. Ten-year Treasury yields rose nearly 3 basis points to 1.75%. The dollar was mixed. Gold prices continued to climb, closing the day up 1.7% to $2,004.30 per ounce. Crude oil prices rose to $121.41 per barrel. The national average price for regular gasoline topped $4.00 a gallon for the first time in over a decade and only $0.11 lower than the record high on July 17, 2008. Rising gasoline prices at the pump are a reflection of the pressure that the Russia-Ukraine crisis has put on the global oil markets.

Other than the Russell 2000 (0.60%), the benchmark indexes listed here closed lower last Tuesday as investors weighed the impact of the U.S. ban on imports of Russian oil and energy. The S&P 500 dipped 0.7%, while the Dow fell 0.6%. The Nasdaq and the Global Dow lost 0.3%. Ten-year Treasury yields rose 12 basis points to 1.87%. The dollar slid lower, while crude oil prices advanced to $124.87 per barrel. Gold prices jumped 3.1% to $2,058.20 per ounce. Not surprisingly, energy was the only sector to gain ground, as consumer staples and health care dropped more than 2.0%. While about 8.0% of U.S. total petroleum imports come from Russia, European countries rely more heavily on Russian crude oil and natural gas for energy. The embargo on Russian energy and crude oil raises several issues, including finding alternative sources to replace the Russian supply, the impact of the embargo on global trade flows, supply chain disruptions, and inflation.

Last Wednesday, in a turn of events, stock prices surged to their biggest rally since June 2020, while European shares advanced the most since March 2020. Crude oil prices dropped nearly 11.0% to $110.32 per barrel, while 10-year Treasury yields added more than 7 basis points to close at 1.94%. The dollar and gold prices declined. The latest rally may be temporary, driven by dip buyers and bargain hunters.

Wall Street dipped lower last Thursday as investors reacted to inflation reaching a 40-year high and a lack of progress in talks between Russia and Ukraine as the war raged on. Each of the benchmark indexes listed here finished in the red, with the Nasdaq falling 1.0%. The S&P 500 lost 0.4%, followed by the Dow (-0.3%), the Russell 2000 (-0.2%), and the Global Dow (-0.2%). Ten-year Treasury prices slid, driving yields up 6 basis points to 2.01%. The dollar and gold prices rose, while crude oil prices decreased 2.3% to $106.21 per barrel. Despite the drop in crude oil prices, the energy sector advanced more than 3.0%.

Stocks continued to slide last Friday as Russia expanded its attack on Ukraine. President Joe Biden called for removal of normal trade relations with Russia, likely the precursor for new tariffs on Russian imports. A drop in tech shares pulled the Nasdaq down 2.2%. The small caps of the Russell 2000 fell 1.6%. The large caps of the S&P 500 (-1.3%) and the Dow (-0.7%) closed in the red. The Global Dow declined 0.4%. Crude oil prices rose over 3.0% to $109.40 per barrel. Ten-year Treasury yields dipped minimally, while the dollar advanced for a second consecutive day.

Stock Market Indexes

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 continued to advance in February. The Consumer Price Index rose 0.8% last month after increasing 0.6% in January. A 6.6% increase in gasoline prices accounted for nearly a third of the overall CPI February advance. Of note, food rose 1.0% in February, while food at home prices jumped 1.4% — both were the largest monthly increases since April 2020. The CPI has increased 7.9% since February 2021, the largest 12-month advance since the period ended January 1982. Since February 2021, the CPI less food and energy rose 6.4%, the largest 12-month change since the period ended August 1982. The energy index has risen 25.6% over the last year, and the food index increased 7.9%, the largest 12-month increase since the period ended July 1981.
• The report on international trade in goods and services, out March 8, was for January and revealed that the trade deficit rose 9.4%, or $7.7 billion, to $89.7 billion. Exports fell 1.7% to $224.4 billion, which was more than offset by a 1.2% increase in imports ($314.1 billion). Year over year, the goods and services deficit increased $24.6 billion, or 37.7%, from January 2021. Exports increased $29.9 billion, or 15.4%. Imports increased $54.4 billion, or 21.0%.
• According to the latest report from the United States Treasury, the government deficit for February was $216.6 billion, well above the January surplus of $118.7 billion. In February, government expenditures rose 46.0% to $506.5 billion. Government receipts fell 38.0% to $289.9 billion. Through the first five months of the fiscal year, the total deficit was $475.6 billion, significantly lower than the $1,046.7 trillion deficit over the same period in the previous fiscal year.
• There were 11.3 million job openings in January, little changed from the previous month’s total, according to the latest information from the Bureau of Labor Statistics. Job openings declined in several industries, with the largest decreases in accommodation and food services (-288,000); transportation, warehousing, and utilities (-132,000); and federal government (-60,000). Job openings increased in other services (+136,000) and in durable goods manufacturing (+85,000). Hires and total separations were little changed at 6.5 million and 6.1 million, respectively. Within separations, the number of voluntary quits in January decreased by 151,000 to 4.3 million. The number of layoffs and discharges increased by 129,000 to 1.4 million. Over the 12 months ended January 2022, hires totaled 76.4 million and separations totaled 70.0 million, yielding a net employment gain of 6.4 million.
• The national average retail price for regular gasoline was $4.102 per gallon on March 4, $0.494 per gallon more than the prior week’s price and $1.331 higher than a year ago. As of March 7, the East Coast price increased $0.81 to $4.97 per gallon; the Gulf Coast price rose $0.83 to $4.70 per gallon; the Midwest price increased $0.68 to $4.65 per gallon; the West Coast price increased $0.68 to $5.39 per gallon; and the Rocky Mountain price increased $0.57 to $4.54 per gallon. As of March 7, residential heating oil prices averaged $4.92 per gallon, more than $0.87 per gallon above the prior week’s price and almost $2.04 per gallon higher than last year’s price at this time. Residential propane prices averaged nearly $3.00 per gallon, up $0.11 per gallon above last week’s price and $0.58 per gallon above last year’s price. U.S. crude oil refinery inputs averaged 15.4 million barrels per day during the week ended March 4, which was 21,000 barrels per day less than the previous week’s average. Refineries operated at 89.3% of their operable capacity last week. Gasoline production increased last week, averaging 9.6 million barrels per day. On February 24, Russia’s invasion of Ukraine contributed to a significant increase in the Brent crude oil price, which rose to $134.00 per barrel as of March 8.
• For the week ended March 5, there were 227,000 new claims for unemployment insurance, an increase 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 February 26 was 1.1%, unchanged from the previous week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended February 26 was 1,494,000, an increase of 25,000 from the previous week’s level, which was revised down by 7,000. States and territories with the highest insured unemployment rates for the week ended February 19 were Alaska (2.4%), California (2.4%), Illinois (2.4%), New Jersey (2.4%), Rhode Island (2.4%), Minnesota (2.3%), Massachusetts (2.2%), New York (2.2%), Michigan (1.8%), Montana (1.8%), and Pennsylvania (1.8%). The largest increases in initial claims for the week ended February 26 were in Massachusetts (+3,201), Rhode Island (+1,040), the District of Columbia (+995), Nevada (+689), and Kansas (+587), while the largest decreases were in Michigan (-9,161), California (-5,412), Florida (-2,182), Ohio (-2,098), and Illinois (-1,777).

Eye on the Week Ahead

Some extremely important, potentially market-moving economic information is available this week, beginning with the highly anticipated meeting of the Federal Open Market Committee. A few weeks ago, much of the focus was on escalating inflation likely attributable to labor shortages and backlogs caused by rapidly expanding economic growth. The war in Ukraine has impacted not only inflation, but the global economy as well. How the FOMC responds is up to speculation, although Federal Reserve Chair Jerome Powell has indicated that he would probably favor a 25-basis-point increase to the federal funds rate.

The Markets (as of market close March 4, 2022)

Wall Street was hit hard last week as traders moved from stocks to bonds and gold. Each of the benchmark indexes listed here lost value, with the Global Dow dropping more than 4.0% and the Nasdaq declining nearly 3.0%. The Russian escalation of the war in Ukraine eclipsed strong economic data at home, including a solid jobs report. The crisis in Ukraine has boosted commodities, particularly crude oil prices, which rose more than 25.0% last week. Federal Reserve Chairman Jerome Powell said he would support a 25-basis point interest rate increase in March as inflation has continued to soar.

Stocks closed mixed last Monday as investors considered more sanctions against Russia, which responded by putting its nuclear forces on high alert. The large caps of the Dow and the S&P 500 fell 0.5% and 0.2%, respectively, while the Nasdaq (0.4%) and the Russell 2000 (0.4%) added value. The Global Dow dipped 0.6%. Ten-year Treasury yields fell 15 basis points to 1.83%. The dollar inched higher, while domestic crude oil prices jumped nearly 5.0%, reaching $95.91 per barrel. Gold prices also rose, climbing to $1,910.50 per ounce. The Russian central bank raised interest rates to 20.0% as the ruble plunged following additional sanctions imposed by Western countries. The United States, the European Union, the United Kingdom, and Canada pledged to exclude certain large Russian banks from the SWIFT interbank messaging network. Talks between representatives of Russia and Ukraine ended with no deal on a potential cease-fire as the conflict intensified throughout the day.

Domestic crude oil prices vaulted past $105.00 per barrel last Tuesday, sending domestic and global stocks tumbling. Ten-year Treasury yields slid to 1.70%, marking their worst four-day drop since last December. Investors could view surging oil prices, rising inflation, and the intensifying Russia-Ukraine crisis as threats to economic growth. That, coupled with the prospect of higher interest rates, may be moving investors away from stocks. By the close of trading last Tuesday, each of the benchmark indexes listed here declined, with the Global Dow (-2.0%) and the Russell 2000 (-1.9%) falling the furthest, followed by the Dow (-1.8%), the Nasdaq (-1.6%), and the S&P 500 (-1.5%). The dollar and gold prices traded higher. Among the market sectors, financials and materials were hit the hardest, while energy rose 1.0%.

Crude oil prices, Treasury yields, and stocks climbed higher last Wednesday. The Russell 2000 jumped 2.5%, the S&P 500 rose 1.9%, the Dow gained 1.8%, and the Nasdaq added 1.6%. The Global Dow increased 1.0%. Ten-year Treasury yields advanced nearly 16 basis points to 1.87%. Domestic crude oil prices climbed nearly 8.0% to $111.51 per barrel, while the dollar and gold prices retreated. Commodity markets around the globe rose to multi-year highs last Wednesday. In addition to rising oil prices, aluminum jumped to an all-time high and wheat climbed to its highest price since 2008.

Last Thursday, stocks erased most of the gains from the previous day. A decline in tech shares dragged down the equity market, with the Nasdaq falling 1.6% and the Russell 2000 dropping 1.3%. Ten-year Treasury yields slid to 1.84%. The dollar and gold advanced, while crude oil prices retreated to $108.36 per barrel. With prices increasing at the fastest rate since 1982, Federal Reserve Chairman Jerome Powell told the Senate Banking Committee that the central bank should have cut stimulus sooner in an attempt to slow burgeoning inflation.

Despite a strong labor report (see below), stocks continued to slide last Friday. The Russell 2000 and the Global Dow dropped nearly 2.0%, the Nasdaq fell 1.7%, the S&P 500 lost 0.8%, and the Dow slipped 0.5%. Crude oil prices jumped nearly $8.00 to $115.37 per barrel. The dollar and gold prices rose, while 10-year Treasury yields fell 12 basis points to 1.72%.

Stock Market Indexes

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

• Employment rose by 678,000 in February, according to the latest information from the Bureau of Labor Statistics. While new jobs continue to be added on a monthly basis, total employment remains 2.1 million, or 1.4%, below its pre-pandemic level in February 2020. Job growth was widespread, led by gains in leisure and hospitality, professional and business services, health care, and construction. In February, the unemployment rate edged down 0.2 percentage point to 3.8%, and the total number of unemployed dipped by 243,000 to 6.3 million. The labor force participation rate ticked up 0.1 percentage point to 62.3%, and the employment-population ratio rose 0.2 percentage point to 59.9%. The number of those who permanently lost jobs fell marginally to 1.6 million. The number of persons not in the labor force who currently want a job declined by 349,000 to 5.4 million. In February, 13.0% of employed persons teleworked because of the coronavirus pandemic, down from 15.4% in the prior month. In February, 4.2 million persons reported that they had been unable to work because their employer closed or lost business due to the pandemic, down from 6.0 million in the previous month. Average hourly earnings in February were $31.58, up $0.01 from January’s figure. Since February 2021, average hourly earnings have increased 5.1%. The average work week rose by 0.1 hour to 34.7 hours in February.
• The international trade in goods deficit widened in January as exports of goods dipped 1.8%, while imports increased 1.7%. The deficit for January was $107.6 billion, up $7.2 billion, or 7.1%, from the December deficit. Exports fell $2.8 billion from December, while imports increased $4.4 billion. Exports of consumer goods slipped $2.7 billion in January, accounting for most of the decrease in overall exports.
• According to the latest PMI™ data from IHS Markit, in February the manufacturing sector registered a stronger improvement in operating conditions amid signs of easing supply-chain disruptions and a sharp expansion in new orders. Stronger new sales growth spurred manufacturers to increase staffing numbers and boost stocks of products. Although input costs increased at the slowest pace in nine months, selling prices rose at the sharpest rate since last November.
• Business activity across the services sector rose sharply in February, according to the latest IHS Markit US Services PMI Business Activity survey. Sales grew at the fastest rate in the last seven months, aided by an increase in foreign client demand. To keep pace, businesses increased their workforce numbers at the fastest pace since May 2021. Inflationary pressures continued to increase, as a marked rise in input costs prompted firms to hike their selling prices at the fastest rate on record.
• The national average retail price for regular gasoline was $3.608 per gallon on February 28, $0.078 per gallon more than the prior week’s price and $0.897 higher than a year ago. The East Coast price increased $0.06 to $3.56 per gallon; the Gulf Coast price rose $0.07 to $3.31 per gallon; the Midwest price increased $0.11 to $3.47 per gallon; the West Coast price increased $0.08 to $4.31 per gallon; and the Rocky Mountain price increased $0.03 to $3.37 per gallon. As of February 28, residential heating oil prices averaged $4.04 per gallon, more than $0.09 per gallon above the prior week’s price and almost $1.19 per gallon higher than last year’s price at this time. Residential propane prices averaged nearly $2.90 per gallon, up $0.05 per gallon above last week’s price and $0.39 per gallon above last year’s price.
• For the week ended February 26, there were 215,000 new claims for unemployment insurance, a decrease of 18,000 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 February 19 was 1.1%, unchanged from the previous week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended February 19 was 1,476,000, an increase of 2,000 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 February 12 were California (2.6%), Alaska (2.6%), New Jersey (2.5%), Rhode Island (2.4%), Massachusetts (2.3%), Minnesota (2.3%), New York (2.2%), Illinois (2.1%), Connecticut (2.0%), Montana (1.9%), and Pennsylvania (1.9%). The largest increases in initial claims for the week ended February 19 were in Michigan (+3,500), Kansas (+724), Utah (+454), Connecticut (+349), and the District of Columbia (+239), while the largest decreases were in Missouri (-6,949), New York (-3,037), Ohio (-2,212), California (-2,182), and Tennessee (-1,959).

Eye on the Week Ahead

The economic impact of the Eastern European conflict will continue to be felt here and globally. Not only are traders paying close attention to the economic outlook resulting from the war, but they must also keep an eye on the upcoming Federal Reserve meeting, particularly in light of the latest developments in Ukraine.

The Markets (as of market close February 28, 2022)

Wall Street opened the month on a high note, with each of the benchmark indexes advancing. A stronger-than-expected jobs report and solid fourth-quarter corporate earnings data helped support equities. Nevertheless, concerns about the Russia-Ukraine situation began to worry investors. Natural gas and crude oil prices climbed higher. Throughout much of February, the impending crisis in Eastern Europe seemed to displace thoughts about a likely interest-rate hike from the Federal Reserve in March.

Then on Thursday, February 24, Russia launched attacks against multiple strategic targets in Ukraine. The United States, European Union, United Kingdom, Germany, Canada, Australia, and Japan responded to the Russian incursion by imposing sanctions mostly targeting Russian banks, oligarchs, and high-tech sectors, along with travel restrictions. The conflict shook global financial markets as stocks plunged. Oil and gas prices surged globally amid concerns that heating bills and food prices would skyrocket. Brent crude oil prices reached $100 per barrel. The invasion heightened the pressure on a global economy already reeling from snarled supply chains and the highest inflation in years.

As fighting continued throughout the last days of February, Western countries announced additional sanctions against Russia. Even Switzerland broke from its customary neutral stance to join the European Union in its actions. The United States, United Kingdom, Canada, and European Union blocked several major Russian banks from participating in the SWIFT payment system.

As the ruble fell, Russia’s central bank raised interest rates to 20.0%. Russian President Vladimir Putin put the country’s nuclear arms facilities on high alert. Several global companies cut ties with Russia. Canada banned Russian crude oil imports as U.S energy shares climbed higher. A meeting of delegates from Ukraine and Russia on the last day of February produced no immediate resolutions, particularly toward a cease-fire, as the conflict waged on.

Global stocks took the brunt of the turmoil. Domestically, the benchmark indexes seemed to respond more to a rise in inflationary pressures than the conflict in Eastern Europe. Nevertheless, for the second consecutive month, each of the benchmark indexes listed here fell, led by the Dow, followed by the Nasdaq, the S&P 500, and the Global Dow. The small caps of the Russell 2000 were able to post a gain.

Ten-year Treasury yields bounced up and down throughout the month, finally settling at 1.83%. Domestically, crude oil prices advanced, but not at the pace of Brent crude, which rose to $100.99 per barrel. Prices at the pump rose in February as the national average retail price for regular gasoline was $3.530 per gallon on February 21, up from the January 24 price of $3.323 per gallon. Gold prices increased notably, hitting a one-year high after rising to nearly $1,900.00 per ounce.

Stock Market Indexes

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 467,000 in January, marginally below the December 2021 revised total of 510,000. Employment has increased by 19.1 million since April 2020 but is down by 2.9 million, or 1.9%, from its pre-pandemic level in February 2020. The unemployment rate inched up by 0.1 percentage point to 4.0%. The number of unemployed persons increased 184,000 in January to 6.5 million. Since January 2021, the unemployment rate fell 2.4 percentage points and the number of unemployed persons dropped 3.7 million. While both measures are down considerably from their highs at the end of the February-April 2020 recession, they remain above their levels prior to the coronavirus pandemic (3.5% and 5.7 million, respectively, in February 2020). Among the unemployed, the number of workers who permanently lost their jobs declined by 100,000 to 1.6 million in January. Conversely, the number of workers who voluntarily left their jobs increased 228,000 to 952,000. Also in January, the number of persons who were unable to work because their employer closed or lost business due to the pandemic jumped to 6.0 million from 3.1 million in December 2021. The labor force participation rate increased 0.3 percentage point to 62.2% in January. The employment-population ratio increased by 0.2 percentage point to 59.7%. In January, average hourly earnings increased by $0.23 to $31.63. Over the last 12 months, average hourly earnings rose by 5.7%. The average work week fell by 0.2 hour to 34.5 hours in January.
• There were 232,000 initial claims for unemployment insurance for the week ended February 19. Over the course of 2021 and through the first two months of 2022, initial weekly claims and total claims for unemployment insurance benefits steadily decreased. As of February 12, there were 1,476,000 total claims for unemployment benefits. This is the lowest level for insured unemployment since March 14, 1970, when it was 1,456,000. A year ago, there were 4,469,000 total claims for unemployment insurance benefits.
• FOMC/interest rates: The Federal Open Market Committee did not meet in February. However, it is expected the federal funds target rate range will be adjusted higher following the March meeting.
• GDP/budget: Gross domestic product rose 7.0% in the fourth quarter of 2021 compared with a 2.3% advance in the third quarter. Consumer spending, as measured by personal consumption expenditures, climbed 3.1% in the fourth quarter (2.0% in the third quarter). The PCE price index, a measure of inflation, increased 6.3% in the fourth quarter after advancing 5.3% in the third quarter. Gross private domestic investment, which includes nonresidential and residential fixed investment, vaulted 33.5% in the fourth quarter after gaining 12.4% in the third quarter. Nonresidential (business) fixed investment increased 3.1% (1.7% in the third quarter), while residential fixed investment increased 1.0% (-7.7% in the third quarter). Exports jumped 23.6% in the fourth quarter after falling 5.3% in the prior quarter. Imports climbed 17.6% following a 4.7% rise in the third quarter.
• The Treasury budget posted a notable surplus of $118.7 billion in January, the first monthly surplus since September 2019. By comparison, the budget deficit was $162.8 billion in January 2021. The January 2022 surplus helped shrink the overall cumulative deficit for the first four months of fiscal year 2022 to $259.0 billion, 65.0% lower than the deficit over the same period in fiscal year 2021. So far for fiscal year 2022, individual income tax receipts have risen 43.0% and corporate income tax receipts have increased 32.0%. In January, government expenditures fell 8.0% to $1.78 billion, while receipts rose 28.0% to $1.52 billion. In January, budget outlays fell 37.0% to $346.4 billion, while receipts increased 21.0% to $465.1 billion.
• Inflation/consumer spending: According to the latest Personal Income and Outlays report for January, personal income rose less than 0.1%, while disposable personal income inched up 0.1% after increasing 0.4% and 0.2%, respectively, in December 2021. Consumer spending increased 2.1% following a 0.8% decrease in December. Consumer prices climbed 0.6% in January after advancing 0.5% in December. Consumer prices have risen 6.1% since January 2021. Prices for energy goods and services increased 1.1% in January and 25.9% over the past 12 months. Food prices rose 0.9% in January and 6.7% since January 2021.
• The Consumer Price Index climbed 0.6% in January, the same increase as in the previous month. Since January 2021, the CPI has risen 7.5% — the largest 12-month gain since February 1982. Price growth was broad based, with most major categories showing an increase, led by fuel oil (9.5%) and electricity (4.2%). Prices for food rose 0.9% in January. Energy prices increased 0.9%, although gasoline prices dipped 0.8%. Prices for new cars were flat, but used-car prices rose 1.5%. Over the last 12 months, energy prices have risen 27.0%, driven higher by gasoline prices (40.0%) and fuel oil (46.5%). Food prices have increased 7.0%, while prices for used cars and trucks have climbed 40.5%.

• Prices that producers receive for goods and services jumped 1.0% in January following a 0.4% increase in December 2021. Producer prices have increased 9.7% since January 2021. Prices less foods, energy, and trade services increased 0.9% in January, the largest increase since rising 1.0% in January 2021. For the year, prices less foods, energy, and trade services moved up 6.9%. Prices for services increased 0.7%. A major factor in the January increase in the prices for services was hospital outpatient care prices, which rose 1.6%. Prices for goods rose 1.3%, as prices for motor vehicles and equipment rose 0.7%.

• Housing: Sales of existing homes rose 6.7% in January, rebounding from a 3.8% decrease the previous month. Despite the January increase, existing home sales were still 2.3% under the January 2021 estimate. The median existing-home price was $350,300 in January, down from $358,000 in December 2021 and 15.4% lower than January 2021 ($303,600). Unsold inventory of existing homes represents a 1.6-month supply at the current sales pace, down from 1.7 months in December. Sales of existing single-family homes increased 6.5% in January after falling 4.3% the previous month. Since January 2021, sales of existing single-family homes have fallen 2.4%. The median existing single-family home price was $357,100 in January, down from $364,300 in December.
• Sales of new single-family homes fell 4.5% in January after advancing 11.9% in December 2021. The median sales price of new single-family houses sold in January was $423,300 ($395,500 in December). The January average sales price was $496,900 ($482,300 in December). The inventory of new single-family homes for sale in January represented a supply of 6.1 months at the current sales pace, up from December’s 5.6-month supply. Sales of new single-family homes in January, 2022 were 19.3% below the January 2021 estimate.
• Manufacturing: Industrial production increased 1.4% in January following a 0.1% decline in December 2021. In January, manufacturing rose 0.2% and mining increased 1.0%, while utilities jumped 9.9% after a surge in demand for heating. Total industrial production in January was 4.1% higher than it was a year earlier and 2.1% above its pre-pandemic (February 2020) reading. Since January 2021, manufacturing has risen 2.5%, mining has jumped 8.2%, and utilities have increased 9.3%.
• January saw new orders for durable goods increase 1.6% after increasing 1.2% (revised) in December. Excluding transportation, new orders increased 0.7% in January. Excluding defense, new orders increased 1.6%. Transportation equipment contributed to the increase in new orders, climbing 3.4% in January. Over the last 12 months, new orders for durable goods increased 16.5%.
• Imports and exports: Both import and export prices jumped higher in January. Import prices rose 2.0% after decreasing 0.4% in the prior month. The January rise in import prices was the largest monthly increase since April 2011. For the 12 months ended in January 2022, prices for imports have advanced 10.8%. Excluding import fuel, import prices increased 1.4% in January — the largest one-month advance since January 2002. Higher prices for nonfuel industrial supplies and materials; foods, feeds, and beverages; capital goods; consumer goods; and automotive vehicles contributed to the January increase in nonfuel import prices. Import fuel prices rose 9.3% in January, driven higher by higher petroleum and natural gas prices. Import fuel prices have advanced 60.3% over the past 12 months. Export prices rose 2.9% in January after falling 1.6% in December 2021. The January advance in export prices was the largest since January 1989. Higher prices for both agricultural and nonagricultural exports in January contributed to the overall increase in U.S. export prices. Export prices have risen 15.1% since January 2021.
• The international trade in goods deficit was $107.6 billion in Janury, up $7.2 billion, or 7.1%, from December. Exports of goods were $154.8 billion in January, $2.8 billion less than in December. Imports of goods were $262.5 billion, $4.4 billion more than December imports.
• The latest information on international trade in goods and services, released February 8, is for December 2021 and shows that the goods and services trade deficit rose by $1.4 billion to $80.7 billion from the November 2021 deficit. December exports were $228.1 billion, $3.4 billion more than November exports. December imports were $308.9 billion, $4.8 billion more than November imports. For 2021, the goods and services deficit increased $182.4 billion, or 27.0%, from the same period in 2020. Exports increased $394.1 billion, or 18.5%. Imports increased $576.5 billion, or 20.5%.
• International markets: The Russia-Ukraine crisis shook the globe since the Russian military operation against Ukraine began on Thursday, February 24. Several countries, including Great Britain and Japan, along with the European Union, imposed sanctions against Russia and its leadership. Benchmark indexes in Europe and Asia fell and oil prices surged in the immediate aftermath of Russia’s advance into the Ukraine. The FTSE 100 in London fell 2.5%, the German DAX dropped 4.0%, the Nikkei 225 in Japan dipped 1.8%, and the CAC in Paris lost 3.6%. Overall, for the markets in February, the STOXX Europe 600 Index dropped 2.6%; the United Kingdom’s FTSE gained 0.3%; Japan’s Nikkei 225 Index dipped 1.0%; and China’s Shanghai Composite Index climbed 2.7%.
• Consumer confidence: The Conference Board Consumer Confidence Index® fell slightly in February following a decline in January. The index stands at 110.5, down from 111.1 in January. The Present Situation Index, based on consumers’ assessment of current business and labor market conditions, improved to 145.1 in February, up from 144.5 in January. The Expectations Index, based on consumers’ short-term outlook for income, business, and labor market conditions, declined to 87.5 in February, down 88.8 in January.

Eye on the Month Ahead

The Federal Open Market Committee meets in March for the first time since January. It is expected that the Committee with raise the federal funds target rate by at least 25 basis points — the first such increase since December 2018. A bump in interest rates, coupled with the Russia-Ukraine conflict, is likely to impact economic and market growth, but to what extent and for how long is difficult to project.

The Markets (as of market close February 25, 2022)

Stocks closed mostly higher last week, despite a tumultuous week with the Russian invasion of Ukraine. Of the benchmark indexes listed here, only the Dow and the Global Dow closed the week in the red. The Russell 2000, the Nasdaq, and the S&P 500 each posted solid gains. While the world reacted to the conflict in Eastern Europe, traders sought domestic stocks, driving values higher. Apparently, some investors may be viewing the Russia-Ukraine conflict as a reason to believe the Federal Reserve may not be quite so quick to jack up interest rates. However, with prices continuing to rise even before the turmoil in Europe, inflationary pressures are likely to accelerate due to disruptions caused by the war, which would seem to increase the likelihood of a more aggressive stance by the Fed. Much is still to be determined in the weeks ahead.

Growing tensions between Russia and Ukraine pulled stocks lower last Tuesday to start the holiday-shortened week. Both the Russell 2000 and the Dow closed down 1.4%, while the Nasdaq lost 1.2%. The S&P 500 and the Global Dow each fell 1.0%. Ten-year Treasury yields rose, while the dollar was flat. Crude oil prices increased to $92.27 per barrel. Earlier on Tuesday, NATO Secretary-General Jens Stoltenberg said that Russia’s recognition of two separatist regions in Ukraine could be viewed as a prelude to a large-scale assault. In response, several Western leaders unveiled a series of sanctions targeting Russian banks and financial firms.

As Russia moved closer to a full-scale invasion of Ukraine last Wednesday, tensions mounted globally. Sanctions were either threatened or imposed by the United States and other Western countries, prompting retaliatory rhetoric from Russia. Then, late Wednesday, as anticipated, Russia launched a military attack on Ukraine. Unsurprisingly, stocks extended losses. The Nasdaq shed 2.6% as technology stocks sold off amid fears of Russian cyberattacks. The S&P 500 fell 1.8%, falling deeper into correction territory. The Russell 2000 lost 1.8%, the Dow dropped 1.4%, and the Global Dow slid 0.9%. Yields on 10-year Treasuries rose nearly 3 basis points to 1.97%. The dollar was little changed. Crude oil prices surged, nearing $100.00 per barrel. Gold prices reached $1,910.80 per troy ounce, the highest value in more than a year.

Equities rebounded last Thursday following President Biden’s announcement of new sanctions against Russia after its full-scale invasion of Ukraine. Tech stocks, which had been hard-hit, led the surge, pulling the Nasdaq up 3.3%. The S&P 500 advanced 1.5%, while the Dow gained 0.3%. The small caps of the Russell 2000 advanced 2.7%. The Global Dow fell 2.3%. Along with technology, communication services and consumer discretionary moved higher. Ten-year Treasury yields declined, closing the day at 1.96%. Crude oil prices and the dollar rose. Not unexpectedly, the Cboe Volatility Index reached its highest level in 15 months.

Despite global economic turmoil caused by the ongoing Russian onslaught of Ukraine, domestic markets seemed to be impervious to that tumult. Each of the benchmark indexes posted solid gains last Friday, led by the Dow (2.5%), the Russell 2000 (2.3%), the S&P 500 (2.2%), and the Nasdaq (1.6%). Even the Global Dow advanced nearly 3.0% by the close of trading. And while Brent crude oil prices surged, New York Mercantile (CL=F) crude oil prices dropped nearly 1.0% to close the day a little over $92.00 per barrel. The dollar and gold prices also fell, while 10-year Treasury yields advanced.

Stock Market Indexes

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 accelerated at an annualized rate of 7.0% in the fourth quarter of 2021, according to the second estimate of gross domestic product. Major contributors to the fourth-quarter growth were private domestic investment (+33.5%), exports (+23.6%), and personal consumption expenditures (+3.1%). The personal consumption expenditures price index, a measure of the prices paid for consumer goods and services, increased 6.3%.
• Personal income and disposable (after-tax) personal income increased minimally in January, according to the latest data from the Bureau of Economic Analysis. While compensation increased 0.5%, it was partially offset by a decrease in government social benefits. On the other hand, consumer spending, as measured by personal consumption expenditures, rose 2.1% in January. Inflationary pressures continued to mount as consumer prices for goods and services advanced 0.6%. Over the past 12 months, prices have risen 6.1%; energy prices increased 25.9% while food prices rose 6.7%.
• January saw new orders for durable goods increase 1.6%, which followed a 1.2% increase in December 2021. Orders for transportation equipment led the increase, advancing 3.4% in January. Shipments of durable goods rose 1.2%, while unfilled orders climbed 0.9%. Nondefense capital goods used in the production of consumer goods increased 4.2%, while defense capital goods advanced 15.7%.
• Sales of new single-family homes fell 4.5% in January following a robust December 2021. While sales may have dipped, new home prices did not. The median sales price of new houses sold in January was $423,300, a 7.0% increase over December’s median sales price. The average sales price in January rose 3.1% to $496,900. The estimate of new houses for sale at the end of January represented a supply of 6.1 months, up from December’s estimate of 5.6 months.
• The national average retail price for regular gasoline was $3.530 per gallon on February 21, $0.043 per gallon more than the prior week’s price and $0.897 higher than a year ago. The Gulf Coast and East Coast prices each increased more than $0.05 to $3.24 per gallon and $3.50 per gallon, respectively; the Midwest price increased more than $0.03 to $3.35 per gallon; the West Coast price increased more than $0.04 to $4.23 per gallon; and the Rocky Mountain price increased nearly $0.02 to $3.34 per gallon. As of February 21, residential heating oil prices averaged more than $3.94 per gallon, more than $0.01 per gallon below the prior week’s price but almost $1.14 per gallon higher than last year’s price at this time. Residential propane prices averaged nearly $2.85 per gallon, more than $0.01 per gallon above last week’s price and more than $0.35 per gallon above last year’s price.
• For the week ended February 19, there were 232,000 new claims for unemployment insurance, a decrease of 17,000 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 February 12 was 1.1%, unchanged from the previous week’s revised rate. The advance number of those receiving unemployment insurance benefits during the week ended February 12 was 1,476,000, a decrease of 112,000 from the previous week’s level, which was revised down by 5,000. This is the lowest level for insured unemployment since March 14, 1970, when it was 1,456,000. States and territories with the highest insured unemployment rates for the week ended February 5 were California (2.7%), Alaska (2.6%), Illinois (2.5%), Minnesota (2.5%), New Jersey (2.5%), Rhode Island (2.4%), the Virgin Islands (2.4%), Massachusetts (2.3%), New York (2.3%), and Montana (2.0%). The largest increases in initial claims for the week ended February 12 were in Missouri (+7,253), Ohio (+5,392), Kentucky (+4,555), Tennessee (+1,737), and Illinois (+1,488), while the largest decreases were in Pennsylvania (-1,688), California (-1,618), Wisconsin (-1,034), New Jersey (-941), and Connecticut (-747).

Eye on the Week Ahead

Employment data for February is out this week. Job growth has been solid so far this year, with 467,000 new jobs added in January. Wages rose 0.7% in January and have risen 5.7% since January 2021.

The Markets (as of market close February 18, 2022)

Last week, Wall Street reacted to the ongoing Russia-Ukraine conflict by moving from stocks to bonds, the dollar, and gold. Investors were faced with rising fears that a Russian invasion of the Ukraine will engulf Europe and the United States, worsen global supply bottlenecks, and further accelerate inflation. Stocks continued to track lower despite solid fourth-quarter earnings growth. Each of the market sectors ended the week lower, with the exception of consumer staples, which managed to eke out a 0.1% gain. Information technology dipped over 1.0%, helping to pull the Nasdaq down 1.8% for the week. The Global Dow and the Dow led the declines among the benchmark indexes listed here. Long-term Treasury yields slipped two basis points. Crude oil prices fell nearly $2.00 to $91.56 per barrel. Gold prices continued to show strength, advancing for the second consecutive week.

Stocks road a wave of highs and lows last Monday, ultimately closing with modest losses. Ukraine worries and rising bond yields drove several of the benchmark indexes listed here lower. The Global Dow fell 1.5%, followed by the Dow and the Russell 2000, each of which lost 0.5%. The S&P 500 dipped 0.4%, while the Nasdaq was unable to maintain a mid-day surge, eventually ending the day flat. Ten-year Treasury yields reached 1.99% by the end of trading. Crude oil prices continued to march toward $100.00 per barrel, ending the day at around $94.88 per barrel. The dollar advanced against a basket of currencies. Consumer discretionary and communication services were the only market sectors to advance, while energy fell 2.24%.

U.S. equities closed notably higher last Tuesday, reversing a three-day skid on signs of a possible easing of tensions between Russia and the Ukraine. The Russell 2000 advanced 2.8%, followed by the Nasdaq, which gained 2.5%. The S&P 500 (1.6%), the Dow (1.2%), and the Global Dow (1.0%) also climbed higher. Ten-year Treasury yields rose eight basis points to 2.04%. The dollar, crude oil prices, and gold prices fell.

Last Wednesday saw stocks end the day mixed, with the S&P 500 (0.1%), the Russell 2000 (0.1%), and the Global Dow (0.4%) edging higher, while the Dow (-0.2%) and the Nasdaq (-0.1%) dipped lower. Ten-year Treasury yields closed flat. Crude oil prices fell to $93.66 per barrel. The dollar also declined, while gold prices advanced.

Stocks tumbled lower last Thursday after President Joe Biden warned that a Russian invasion of the Ukraine could happen within the next several days. Among the market sectors, only consumer staples and utilities closed the day ahead. Several sectors fell more than 2.0%, including communication services, consumer discretionary, financials, and information technology. The benchmark indexes closed sharply lower, with the Nasdaq falling 2.9%, closely followed by the Russell 2000, which declined 2.5%. The S&P 500 (-2.1%), the Dow (-1.8%), and the Global Dow (-1.0%) also dipped lower. Investors apparently moved to bonds, driving prices higher and yields lower. Ten-year Treasury yields fell seven basis points to 1.97%. The dollar inched higher, while crude oil prices decreased to $91.61 per barrel. Last Friday saw bond prices rise and stock values fall on fears of an imminent military conflict between Russia and the Ukraine. The Nasdaq again led the declines among the benchmark indexes listed here, dropping 1.2%, followed by the Russell 2000 (-1.0%), the Global Dow (-0.8%), the S&P 500 (-0.7%), and the Dow (-0.7%). Ten-year Treasury yields slid to 1.93%. Crude oil prices also dipped lower, while the dollar inched higher.

Stock Market Indexes

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

• Producer prices jumped 1.0% in January, the largest increase since rising 1.0% a year earlier. For the 12 months ended in January 2022, producer prices have moved up 9.7%. Excluding food and energy, producer prices increased 0.8% in January and 8.3% since January 2021. Prices for both services and goods rose last month. Prices for services advanced 0.7% in January, the same as in December. A major factor in the January increase in the prices for services was hospital outpatient care prices, which rose 1.6%. Prices for goods climbed 1.3% in January after declining 0.1% in December. Within the goods category in January, prices for energy rose 2.5%, while prices for motor vehicles and equipment rose 0.7%. Prices for diesel fuel, gasoline, beef and veal, dairy products, and jet fuel also increased. With prices at the producer level surging in January, the extent to which this appreciation is passed on to consumers remains to be seen.
• Sales by retail and food services stores advanced 3.8% in January and 13.0% since January 2021. Retail trade sales were up 4.4% in January from December and have risen 11.4% over the past 12 months. Sales at several businesses increased in January, including motor vehicle and parts dealers (5.7%), building material and garden equipment and supplies dealers (4.1%), food and beverage stores (1.1%), furniture stores (7.2%), general merchandise stores (3.6%), and nonstore (online) retailers (14.5%). Sales for food services and drinking places dipped 0.9% in January but rose 27.0% since January 2021. Gasoline station sales fell 1.3% in January but jumped 33.4% over the last 12 months.
• January saw both import and export prices increase following declines in December. Import prices advanced 2.0% last month, the largest increase since April 2011. Import prices are up 10.8% over the past year. Leading the January rise in import prices was a 9.3% increase in import fuel prices, which have climbed 60.3% over the past 12 months. Prices for nonfuel imports increased 1.4% in January and have not recorded a monthly decline since November 2020. The January advance was the largest one-month rise since January 2002. Higher prices for nonfuel industrial supplies and materials; foods, feeds, and beverages; capital goods; consumer goods; and automotive vehicles all contributed to the January increase in nonfuel import prices. Export prices increased 2.9% in January, which was the largest one-month rise since January 1989. Export prices have advanced 15.1% since January 2021. Agricultural exports rose 3.0% last month, while nonagricultural export prices increased 2.9%.
• The number of issued residential building permits rose 0.7% in January, largely driven by a 6.8% jump in single-family authorizations. Total building permits issued were 0.8% above the January 2021 rate. Housing starts fell 4.1% last month but are 0.8% higher than the rate a year earlier. Single-family housing starts also dipped, down 5.6% in January. Total housing completions in January fell 5.2% from the previous month’s figures and are 6.2% below the January 2021 pace. In January, single-family housing completions were 7.3% under the December estimate.
• Existing home sales advanced 6.7% in January following a December decline. Year over year, existing home sales are down 2.3%. Total housing inventory of existing homes slid 2.3% last month, sitting at a scant 1.6-month supply at the current sales pace. The median existing home price for homes in January was $350,300, down from $358,000 in December but up 15.4% from January 2021 ($303,600). Single-family home sales jumped 6.5% in January yet are down 2.4% from January 2021. The median existing single-family home price was $357,100 in January, down from December’s median price of $364,300 but up 15.9% from January 2021.
• In January, total industrial production increased 1.4%. Manufacturing output and mining production rose 0.2% and 1.0%, respectively. Manufacturing output is up 2.5% over the past 12 months. A surge in demand for heating in January sent utilities up 9.9%, the largest jump in the history of the index. The index for mining rose 1.0% in January. Total industrial production in January was 4.1% higher than its year-earlier level and 2.1% above its pre-pandemic (February 2020) reading.
• The national average retail price for regular gasoline was $3.487 per gallon on February 14, $0.043 per gallon more than the prior week’s price and $0.986 higher than a year ago. The Gulf Coast and East Coast prices each increased more than $0.06 to $3.19 per gallon and $3.45 per gallon, respectively; the Midwest price increased more than $0.03 to $3.32 per gallon; and the West Coast price increased more than $0.01 to $4.19 per gallon. The Rocky Mountain price decreased less than $0.01, remaining virtually unchanged at $3.33 per gallon. As of February 14, 2022, residential heating oil prices averaged nearly $3.96 per gallon, $0.07 per gallon above the prior week’s price and nearly $1.22 per gallon higher than last year’s price at this time. Residential propane prices averaged nearly $2.84 per gallon, more than $0.01 per gallon above last week’s price and more than $0.54 per gallon above last year’s price.
• For the week ended February 12, there were 248,000 new claims for unemployment insurance, an increase of 23,000 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 February 5 was 1.2%, unchanged from the previous week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended February 5 was 1,593,000, a decrease of 26,000 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 January 29 were Alaska (2.7%), California (2.7%), New Jersey (2.6%), Minnesota (2.5%), Rhode Island (2.4%), Massachusetts (2.3%), New York (2.3%), and Illinois (2.2%). The largest increases in initial claims for the week ended February 5 were in Michigan (+2,884), New Jersey (+406), Kansas (+309), Delaware (+235), and Maryland (+148), while the largest decreases were in California (-4,247), Kentucky (-3,962), Tennessee (-2,916), Illinois (-2,303), and Indiana (-1,760).

Eye on the Week Ahead

The second estimate for the fourth-quarter gross domestic product is available this week. The first estimate showed that the economy expanded at an annualized rate of 6.9%. Another important source of economic information is out this week with the release of the personal income and outlays report for January. The personal consumption price index, a measure of inflation relied upon by the Federal Reserve, rose 5.8% over the 12 months ended in December 2021.