What I’m Watching This Week – 17 June 2019

The Markets (as of market close June 14, 2019)

While not as robust as the prior week, stocks still managed to post gains for the second week in a row. Last week started off with a bang for the benchmark indexes listed here, only to slip lower by Friday as tensions in the Middle East mounted. After getting pummeled in May, stocks have slowly regained some momentum during the early part of June. Year-to-date gains for each of the indexes listed here are in double digits, except for the Global Dow, which is off by less than half a percentage point. Oil prices slipped again last week, while long-term bond yields remained relatively unchanged.

Oil prices decreased to $52.51 per barrel by late Friday, down from the prior week’s price of $54.04. The price of gold (COMEX) fell last week, dropping to $1,344.80 by Friday evening, down slightly from the prior week’s price of $1,345.00. The national average retail regular gasoline price was $2.732 per gallon on June 10, 2019, $0.075 lower than the prior week’s price and $0.179 less than a year ago.

Market/Index 2018 Close Prior Week As of 6/14 Weekly Change YTD Change
DJIA 23327.46 25983.94 26089.61 0.41% 11.84%
Nasdaq 6635.28 7742.10 7796.66 0.70% 17.50%
S&P 500 2506.85 2873.34 2886.98 0.47% 15.16%
Russell 2000 1348.56 1514.39 1522.50 0.54% 12.90%
Global Dow 2736.74 2990.88 2998.79 0.26% 9.58%
Fed. Funds target rate 2.25%-2.50% 2.25%-2.50% 2.25%-2.50% 0 bps 0 bps
10-year Treasuries 2.68% 2.09% 2.09% 0 bps -59 bps

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

Last Week’s Economic Headlines

  • Overall, prices producers received for goods and services edged up 0.1% in May after increasing 0.2% in April. Prices for services increased 0.3%, largely due to a 10.1% jump in guestroom rentals. Prices for services actually carried the spurt in producer prices, as the prices for goods actually dropped 0.2% in May following three consecutive monthly increases. A majority of the decrease can be traced to a 1.0% drop in energy prices. Within the energy sector, gas prices fell 1.7% in May.
  • According to the Consumer Price Index, prices consumers paid for goods and services inched up 0.1% in May — the same rate increase as producer prices. The CPI rose 0.3% in April. Over the last 12 months ended in May, the CPI has risen 1.8%. Prices less food and energy also increased 0.1% in May for the fourth consecutive month. Prices less food and energy have climbed 2.0% since May 2018. Within consumer prices, food prices increased 0.3% and prices for medical care services jumped 0.5%. On the other hand, energy prices fell 0.6% and used car and truck prices dropped 1.4%. Evidencing marginal inflationary pressures, the scant increases in both the Consumer Price Index and the Producer Price Index could influence the Federal Open Market Committee to keep interest rates at their current level following its meeting later this week.
  • Sales at the retail level rose 0.5% in May following a 0.3% increase in April. For the year, retail sales have climbed 3.2% since May 2018. Online sales spiked 1.4% in May and are up 11.4% over the last 12 months. Areas experiencing a good sales month include sporting goods, hobby, musical instrument & book stores (1.1%) and electronics & appliance stores (1.1%).
  • The federal budget deficit sat at $207.8 billion in May. There was a surplus of $160.3 billion in April (tax month). Fiscal year-to-date, the government is operating at a deficit of $738.6 billion compared to a deficit of $532.2 billion over the same period last fiscal year. Last month, the largest outlays were for Medicare ($98 billion), Social Security ($88 billion), and national defense ($65 billion). On the other side of the ledger, individual income taxes brought in $104 billion, while corporate taxes accounted for $0.4 billion of total government receipts.
  • Industrial production rose 0.4% in May after falling 0.4% in April. The indexes for manufacturing and mining gained 0.2% and 0.1%, respectively, in May, while the index for utilities climbed 2.1%. Total industrial production was 2.0% higher in May compared to a year earlier.
  • Prices for U.S. imports declined 0.3% in May following an increase of 0.1% the previous month. This is the first monthly decline in import prices since last December. Import fuel prices fell 1.0%, helping to drive the overall import price decline last month. Over the 12 months ended in May, import prices have decreased 1.5%. Export prices fell for the first time since January, dropping 0.2% in May, after advancing 0.1% in April. Export prices decreased 0.7% over the past 12 months ended in May, the largest year-over-year decline since prices dropped 1.1% for the 12-month period ended in October 2016. Agricultural export prices fell 5.3% over the past year, the largest 12-month drop since the index declined 9.1% in April 2016. All of this information references a period just before the United States increased tariffs on $200 billion of Chinese imports. Next month’s figures should reflect the impact, if any, of those tariffs.
  • According to the Job Openings and Labor Turnover report, the number of job openings was little changed at 7.4 million on the last day of April. Job openings increased in federal government (+22,000) and educational services (+20,000). Job openings decreased in professional and business services (-172,000). The number of job openings was little changed in all four regions. Over the month, the number of hires edged up to 5.9 million (+240,000 from March). Total separations, which include quits, layoffs, and discharges, increased by 70,000 to 5.6 million in April. Over the 12 months ended in April, hires totaled 69.6 million and separations totaled 66.8 million, yielding a net employment gain of 2.8 million.
  • For the week ended June 8, there were 222,000 claims for unemployment insurance, an increase of 3,000 from the previous week’s level, which was revised up by 1,000. According to the Department of Labor, the advance rate for insured unemployment claims remained at 1.2% for the week ended June 1. The advance number of those receiving unemployment insurance benefits during the week ended June 1 was 1,695,000, an increase of 2,000 from the prior week’s level, which was revised up by 11,000.

Eye on the Week Ahead

The Federal Open Market Committee meets this week. Although the stock market has bounced back some, inflation remains stagnant and ongoing economic pressures from the trade war with China are likely to discourage an interest rate hike.

To view the What I’m Watching This Week Portfolio, please click here. (Free Membership is required) https://www.barchart.com/my/featured-portfolios

Advertisements

What I’m Watching This Week – 10 June 2019

The Markets (as of market close June 7, 2019)

Markets rebounded nicely last week on hopes that the Federal Reserve Board will cut interest rates in the near future. Early in the week, chairman Jerome Powell said the Fed was closely watching trade developments and signaled rate cuts may be an option if the economic outlook worsens. And on Friday, a weak jobs report supported the possibility of future rate cuts, further encouraging investors. All the indexes tracked here climbed more than 3%, with the large caps of the Dow and S&P 500 surpassing 4% for the week. With the exception of global stocks, all year-to-date returns topped 10%.

Oil prices rose to $54.04 per barrel by late Friday, up from the prior week’s price of $53.33. The price of gold (COMEX) also rose last week, reaching $1,345.00 by Friday evening, up from the prior week’s price of $1,310.30. The national average retail regular gasoline price was $2.807 per gallon on June 3, 2019, $0.015 lower than the prior week’s price and $0.133 less than a year ago.

Market/Index 2018 Close Prior Week As of 6/7 Weekly Change YTD Change
DJIA 23327.46 24815.04 25983.94 4.71% 11.39%
Nasdaq 6635.28 7453.15 7742.10 3.88% 16.68%
S&P 500 2506.85 2752.06 2873.34 4.41% 14.62%
Russell 2000 1348.56 1465.49 1514.39 3.34% 12.30%
Global Dow 2736.74 2888.03 2990.88 3.56% 9.29%
Fed. Funds target rate 2.25%-2.50% 2.25%-2.50% 2.25%-2.50% 0 bps 0 bps
10-year Treasuries 2.68% 2.13% 2.09% -4 bps -59 bps

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

Last Week’s Economic Headlines

  • The employment report revealed an increase of just 75,000 jobs in May, compared to a monthly average of 164,000 in 2019. Gains were reported in professional and business services and health care. Little change was noted in construction, mining, manufacturing, wholesale trade, retail trade, transportation and warehousing, information, financial activities, leisure and hospitality, and government. Hourly wages increased by $0.06 to $27.83, bringing the average increase in hourly earnings over the past year to 3.1%. The March and April figures were revised downward by a total of 75,000 jobs.
  • At 50.5, the IHS Markit U.S. Manufacturing Purchasing Managers’ Index™ (PMI™) reached its lowest level in May since September 2009, as output slowed and new orders dropped for the first time since August 2009. Weak demand and concerns surrounding ongoing trade negotiations caused manufacturers to express their joint-lowest level of confidence since the outlook was first measured in July 2012. The May reading was 2.1 points lower than April. “The data for the second quarter so far have indicated a distinct slowdown in the manufacturing sector compared to the first three months of 2019,” the report said.
  • Although the Institute for Supply Management (ISM) Purchasing Managers Index dropped 0.7 percentage point from its April reading to 52.1% in May, the reading indicates that economic activity in the sector continued to expand (a reading above 42.9% over a period of time indicates expansion). New orders, employment, and prices rose, while production, supplier deliveries, and inventories decreased.
  • The ISM’s Non-Manufacturing Index came in at 56.9% in May, 1.4% higher than April. Business activity, new orders, and employment all posted gains, while prices decreased. According to the report, survey respondents “…are optimistic about overall business conditions, but concerns remain about tariffs and employment resources.”
  • According to the U.S. Census Bureau “Monthly U.S. International Trade in Goods and Services” report, the deficit fell $1.1 billion from March to April, to $50.8 billion. Exports were $206.8 billion, while imports were $257.6 billion. The April deficit reflected a decrease in the goods deficit of $1 billion and an increase in the services deficit of $0.1 billion. Year-to-date, the goods, and services deficit rose $4.1 billion, or 2%, from the same period in April 2018.
  • For the week ended June 1, there were 218,000 claims for unemployment insurance, unchanged from the previous week’s revised level. According to the Department of Labor, the advance rate for insured unemployment claims remained at 1.2% for the week ended May 25. The advance number of those receiving unemployment insurance benefits during the week ended May 25 was 1,682,000, an increase of 20,000 from the prior week’s level, which was revised up by 5,000.

Eye on the Week Ahead

Next week, investors and the Federal Reserve Board will get another perspective on how the economy is faring, as inflation numbers are on tap. Other key reports include the federal budget, retail sales, industrial production, and consumer sentiment.

Monthly Market Review – May 2019

The Markets (as of market close May 31, 2019)

Stocks fell sharply in May, closing out their worst month since last December. Each of the benchmark indexes posted month-over-month losses exceeding 6.5%. While market performance has largely swung on trade rhetoric, it appears investors have reached their boiling point and are moving away from stocks and floating toward bonds, pushing yields on 10-year Treasuries down (-37 bps in May) as bond prices soared. Oil prices fell sharply on trade tensions and a slowing Chinese economy. For the month, small caps and tech stocks lost almost 8.0%, followed by the large caps of the Dow and the S&P 500. Year-to-date, only the Nasdaq remains more than 10% ahead of its 2018 closing value.

By the close of trading on May 31, the price of crude oil (WTI) was $53.33 per barrel, down from the April 30 price of $63.42 per barrel. The national average retail regular gasoline price was $2.822 per gallon on May 27, up from the April 29 selling price of $2.623, but $0.140 less than a year ago. The price of gold rose by the end of May, climbing to $1,310.30 by close of business on the 31st, up from its $1,285.10 price at the end of April.

Market/Index 2018 Close Prior Month As of May 31 Month Change YTD Change
DJIA 23327.46 26592.91 24815.04 -6.69% 6.38%
NASDAQ 6635.28 8095.39 7453.15 -7.93% 12.33%
S&P 500 2506.85 2945.83 2752.06 -6.58% 9.78%
Russell 2000 1348.56 1591.21 1465.49 -7.90% 8.67%
Global Dow 2736.74 3099.65 2888.03 -6.83% 5.53%
Fed. Funds 2.25%-2.50% 2.25%-2.50% 2.25%-2.50% 0 bps 0 bps
10-year Treasuries 2.68% 2.50% 2.13% -37 bps -55 bps

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

Latest Economic Reports

  • Employment: Total employment vaulted by 263,000 in April after adding 189,000 (revised) new jobs in March. The average monthly job gain in 2019 was 213,000 per month (223,000 in 2018). Notable employment increases for April occurred in professional and business services (76,000), construction (33,000), and health care (27,000). The unemployment rate fell 0.2 percentage point to 3.6% in April, the lowest rate since December 1969. The number of unemployed persons decreased by 387,000 to 5.8 million. The labor participation rate dropped 0.2 percentage point for the second consecutive month to 62.8% in April, while the employment-population ratio was unchanged at 60.6%. The average workweek decreased by 0.1 hour to 34.4 hours for April. Average hourly earnings increased by $0.06 to $27.77. Over the last 12 months ended in April, average hourly earnings have risen 3.2%.
  • FOMC/interest rates: As expected, the Federal Open Market Committee did not change interest rates following its latest meeting during the first week of May. On the plus side, the Committee noted that economic activity was running at a solid rate, as was the labor market. However, household spending declined as did inflation, which was running below the FOMC’s 2.0% target rate.
  • GDP/budget: The second estimate of the first-quarter gross domestic product showed the economy grew at an annualized rate of 3.1% (3.2% for the initial estimate). The GDP expanded at a rate of 2.2% for the fourth quarter of 2018. Driving the growth rate increase was an upturn in state and local government spending, accelerations in private inventory investment and in exports, and a smaller decrease in residential investment. These movements were partly offset by decelerations in consumer spending and nonresidential fixed investment (business spending on equipment, structures, software, etc.), and a downturn in federal government spending. Imports declined. The federal budget enjoyed a surplus of $160.3 billion in April ($214.3 billion in April 2018), largely due to individual income tax payments. Through the first seven months of the fiscal year, the government deficit sits at $530.9 billion. Over the same period for fiscal year 2018, the deficit was $385.4 billion.
  • Inflation/consumer spending: Inflationary pressures remain weak as consumer prices are up 1.5% over the last 12 months ended in April. Consumer prices excluding food and energy are up 1.6% over the same 12-month period. For the month, consumer prices rose 0.3% over March, when prices increased 0.2%. In April, consumer spending rose 0.3% (1.1% in March). Personal income climbed 0.5% in April after increasing 0.1% in March. Disposable (after-tax) income rose 0.4% in April after advancing 0.1% in March.
  • The Consumer Price Index increased 0.3% in April after rising 0.4% in March. Over the 12 months ended in April, the CPI rose 2.0%. The gasoline index continued to increase, rising 5.7% and accounting for over two-thirds of the monthly increase. Core prices, which exclude food and energy, climbed 0.1% for the third consecutive month in April. Core prices were up 2.1% over the previous 12 months ended in April.
  • According to the Producer Price Index, the prices companies received for goods and services rose 0.2% in April after climbing 0.6% in March. The index increased 2.2% for the 12 months ended in April. The index less foods, energy, and trade services moved up 0.4% in April, the largest increase since rising 0.5% in January 2018.
  • Housing: While new home sales have continued to expand, the market has been slower for existing home sales, which fell 4.0% in April after dropping 4.9% in March. Year-over-year, existing home sales remain down 4.4%. The April median price for existing homes was $267,300, up from $259,400 the prior month. Existing home prices were up 3.6% from April 2018. Total housing inventory for existing homes for sale in April increased to 1.83 million (4.2-month supply), up from 1.67 million existing homes available for sale in March. Sales of new single-family houses in April were 6.9% lower than March, but 7% higher than their April 2018 estimate. Falling prices and a few more houses on the market have helped drive sales activity. The median sales price of new houses sold in April was $342,200. The average sales price was $393,700. Inventory was at a supply of 5.9 months in April.
  • Manufacturing: The manufacturing sector continued to sputter in April, as industrial production edged down 0.5% after falling 0.1% in March. Output is now reported to have declined 1.9% at an annual rate in the first quarter. Manufacturing production also decreased 0.5% in April after being unchanged in March. Total industrial production was 0.9% higher in April than it was a year earlier. After showing signs of life during the first quarter, durable goods orders fell 2.1% in April after rising 1.7% (revised) in March. Transportation equipment drove the decrease, dropping 5.9% for the month.
  • Imports and exports: Import prices advanced 0.2% in April after increasing 0.6% in March. Higher fuel prices (+2.5%) drove the April increase. Excluding fuel, prices paid for imports edged down 0.1% in April. Prices received for exports also rose 0.2% in April following a 0.6% jump the prior month. Agricultural exports decreased 1.5% in April, while nonagricultural export prices rose 0.4%. Prices for imports from China declined 0.2% in April, and have fallen 1.1% over the past 12 months—the largest over-the-year drop since the index fell 1.1% in May 2017. The latest information on international trade in goods and services, out May 9, is for March and shows that the goods and services deficit increased to $50.0 billion, up from the $49.3 billion deficit in February. March exports were $212.0 billion, $2.1 billion more than February exports. March imports were $262.0 billion, $2.8 billion more than February imports. Year-to-date, the goods and services deficit decreased $5.8 billion, or 3.7%, from the same period in 2018. The advance report on international trade in goods (excluding services) revealed the trade deficit to be $72.1 billion in April, up $0.2 billion from March. Goods exports in April were $5.9 billion less than the prior month, while imports of goods were $6.5 billion less than March.
  • International markets: European Union elections held last week saw the highest turnout in 27 years and resulted in big wins for the Brexit Party and Liberal Democrats, and a devastating turn for Conservatives. Following Prime Minister Theresa May’s resignation announcement earlier in the week, the prospects of a negotiated Brexit deal are slim at best. As it stands, Great Britain will leave the European Union on October 31—deal or no deal—unless there’s another extension to negotiate a deal or Great Britain decides to forgo Brexit altogether. The trade dispute involving the United States and China continues to affect other nations, as Japan expects its industrial production to weaken, impacted by the trade tensions between the two world economic giants.
  • Consumer confidence: The Conference Board Consumer Confidence Index® jumped from 129.2 in April to 134.1 in May, as consumers saw improvements in current business and labor market conditions.

Eye on the Month Ahead

The trade negotiations between the United States and China continue to play a major role in the domestic economy overall, and the stock market specifically. Industrial production fell in April, while sales of existing homes continued to flounder. Both sectors look to rebound heading into the summer months.

What I’m Watching This Week – 3 June 2019

The Markets (as of market close May 31, 2019)

Treasury yields fell to their lowest level in 2019, gold prices soared, oil prices fell, trade tensions wore on investors’ nerves, and stocks fell again last week. Mounting trade tensions between the United States and China, an ongoing saga that has lasted for over a year, may have finally pushed investors to abandon stocks for bonds and precious metals such as gold and silver. Each of the benchmark indexes listed here fell over 2.0% for the week, led by the Russell 2000 and the Dow, each falling over 3.0% for the week. More worrisome is the year-to-date totals. Where once the benchmarks were double digits above their 2018 closing values, now several of the indexes are receding closer to their 2019 starting values, with only the Nasdaq still more than 10% ahead of last year’s closing mark.

Oil prices fell sharply last week, closing at $53.33 per barrel by late Friday, down from the prior week’s closing price of $59.04 per barrel. The price of gold (COMEX) advanced last week, closing at $1,310.30 by Friday evening, up from the prior week’s price of $1,284.20. The national average retail regular gasoline price was $2.822 per gallon on May 27, 2019, $0.030 lower than the prior week’s price and $0.140 less than a year ago.

Market/Index 2018 Close Prior Week As of 5/31 Weekly Change YTD Change
DJIA 23327.46 25585.69 24815.04 -3.01% 6.38%
Nasdaq 6635.28 7637.01 7453.15 -2.41% 12.33%
S&P 500 2506.85 2826.06 2752.06 -2.62% 9.78%
Russell 2000 1348.56 1514.11 1465.49 -3.21% 8.67%
Global Dow 2736.74 2951.46 2888.03 -2.15% 5.53%
Fed. Funds target rate 2.25%-2.50% 2.25%-2.50% 2.25%-2.50% 0 bps 0 bps
10-year Treasuries 2.68% 2.37% 2.13% -24 bps -55 bps

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

Last Week’s Economic Headlines

  • The second estimate for the first-quarter gross domestic product showed the economy grew at an annualized rate of 3.2% (3.1% according to the first estimate). The GDP grew at an annualized rate of 2.2% in the fourth quarter. Consumer spending and exports were revised slightly higher in the second estimate, while business spending and inventory investment were revised slightly lower compared to the first estimate. Gross domestic income increased 1.4% in the first quarter, compared with an increase of 0.5% (revised) in the fourth quarter. Consumer spending, as measured by personal consumption expenditures, increased 1.3% in the first quarter, compared with an increase of 2.5% in the fourth quarter. Excluding food and energy prices, the PCE price index increased 1.0%, compared with a fourth-quarter increase of 1.8%.
  • Consumer spending advanced 0.3% in April over March, as did the prices for consumer goods and services. As an indication of inflation, consumer prices are up 1.5% over the last 12 months ended in April. Personal income rose 0.5% for the month, while disposable (after-tax) income rose 0.4%.
  • The advance report on international trade in goods (excluding services) for April showed the trade deficit was $72.1 billion, up $0.2 billion from the March deficit. Exports dropped $5.9 billion, while imports fell $5.6 billion. Capital goods, the largest sector of exports in the United States, fell a sharp 6.5% in April from March. Compared to last April, capital exports are off by 3.7%.
  • According to the Department of Labor, there were 215,000 claims for unemployment insurance for the week ended May 25, an increase of 3,000 from the previous week’s level, which was revised up by 1,000. The advance rate for insured unemployment claims remained at 1.2% for the week ended May 18. The advance number of those receiving unemployment insurance benefits during the week ended May 18 was 1,657,000, a decrease of 26,000 from the prior week’s level, which was revised up by 7,000.

Eye on the Week Ahead

The employment figures for May are out this week. Last month saw a whopping 263,000 new jobs added. Wages, while increasing, are doing so at a snail’s pace, which is a contributing factor in keeping inflation down.

To view the What I’m Watching This Week Portfolio, please click here. (Free Membership is required) https://www.barchart.com/my/featured-portfolios

 

What I’m Watching This Week – 28 May 2019

The Markets (as of market close May 24, 2019)

With last week’s loss, the Dow suffered its longest weekly losing streak since 2011. Trade tensions between the United States and China seem to be taking a toll on investors’ patience. Each of the benchmark indexes listed here also posted weekly losses. Money moved to bonds, pushing prices higher and yields lower. Tech stocks were particularly hard-hit last week, as were energy stocks. Year-to-date, each of the benchmarks are still comfortably ahead of their 2018 closing values, but the gap is narrowing for some indexes, particularly the Global Dow and the Dow, which are now less than 10% ahead of their respective year-end closing marks.

Oil prices fell last week, closing at $59.04 per barrel by late Friday, down from the prior week’s closing price of $62.71 per barrel. The price of gold (COMEX) jumped last week, closing at $1,284.20 by Friday evening, up from the prior week’s price of $1,277.40. The national average retail regular gasoline price was $2.852 per gallon on May 20, 2019, $0.014 lower than the prior week’s price and $0.071 less than a year ago.

Market/Index 2018 Close Prior Week As of 5/24 Weekly Change YTD Change
DJIA 23327.46 25764.00 25585.69 -0.69% 9.68%
Nasdaq 6635.28 7816.28 7637.01 -2.29% 15.10%
S&P 500 2506.85 2859.53 2826.06 -1.17% 12.73%
Russell 2000 1348.56 1535.76 1514.11 -1.41% 12.28%
Global Dow 2736.74 2977.45 2951.46 -0.87% 7.85%
Fed. Funds target rate 2.25%-2.50% 2.25%-2.50% 2.25%-2.50% 0 bps 0 bps
10-year Treasuries 2.68% 2.46% 2.37% -9 bps -31 bps

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

Last Week’s Economic Headlines

  • Sales of existing homes continued to lag in April. According to the National Association of Realtors®, existing home sales fell 0.4% from their March total and are down 4.4% from a year ago. The median existing-home price for all housing types in April was $267,300, up from the prior month’s price ($259,400) and ahead of the median price from a year ago ($257,900). Total housing inventory increased from 1.67 million in March to 1.83 million in April. First-time buyers were responsible for 32% of sales in April, down from the 33% reported last month and one year ago. Sales for single-family existing homes fell about 1.1% in April and are down 4.0% from April 2018. The median existing single-family home price was $269,300 in April, up 3.7% from April 2018.
  • Sales of new single-family homes had been fairly strong through the first quarter of the year. However, April’s totals are definitely lagging. New home sales dipped 6.9% below March’s totals, although they’re 7.0% above sales from a year ago. The median sales price of new houses sold in April was $342,200 ($305,800 in March). The average sales price was $393,700 ($372,300 in March). There were about 332,000 new homes for sale in April, representing a supply of 5.9 months (5.6-month supply in March).
  • New orders for long-lasting goods fell 2.1% in April, after climbing 1.7% in March. Transportation equipment (primarily commercial aircraft and cars), down two of the last three months, drove the decrease, falling 5.9%. Shipments of manufactured durable goods in April, down three of the last four months, decreased 1.6%. Not surprisingly, inventories increased 0.4% in April.
  • According to the Department of Labor, there were 211,000 claims for unemployment insurance for the week ended May 18, a decrease of 1,000 from the previous week’s level. The advance rate for insured unemployment claims remained at 1.2% for the week ended May 11. The advance number of those receiving unemployment insurance benefits during the week ended May 11 was 1,676,000, an increase of 12,000 from the prior week’s level, which was revised up by 4,000.

Eye on the Week Ahead

The second estimate of the first-quarter gross domestic product is available this week. The advance estimate, released last month, showed the economy grew at an annualized rate of 3.2%. It is expected that the latest estimate will closely mirror the initial report.

To view the What I’m Watching This Week Portfolio, please click here. (Free Membership is required) https://www.barchart.com/my/featured-portfolios

 

What I’m Watching This Week – 20 May 2019

The Markets (as of market close May 17, 2019)

Investors were heading for the hills early last week as stocks suffered their worst day on Monday following China’s announcement that it would impose an additional $60 billion in retaliatory tariffs on U.S. imports. Stocks for several companies with direct ties to China were hit particularly hard. The markets rebounded, but not enough to overcome the poor start early in the week. Helping to ease investors’ concerns over trade tensions, the Trump administration indicated that it would delay a decision on whether to impose tariffs on auto and parts imports. Then, last Friday afternoon, the administration announced that it had reached an agreement with Canada and Mexico that would end U.S. tariffs on steel and aluminum imports. Nevertheless, each of the benchmark indexes listed here lost value by last week’s end, led by the Russell 2000 and the Nasdaq. Year-to-date, the Nasdaq continues to lead the pack, ahead of its 2018 closing value by almost 18%.

Oil prices inched higher last week, closing at $62.71 per barrel by late Friday, up from the prior week’s closing price of $61.73 per barrel. The price of gold (COMEX) dropped again last week, closing at $1,277.40 by Friday evening, down from the prior week’s price of $1,286.50. The national average retail regular gasoline price was $2.866 per gallon on May 13, 2019, $0.031 lower than the prior week’s price and $0.007 less than a year ago.

Market/Index 2018 Close Prior Week As of 5/17 Weekly Change YTD Change
DJIA 23327.46 25942.37 25764.00 -0.69% 10.44%
Nasdaq 6635.28 7916.94 7816.28 -1.27% 17.80%
S&P 500 2506.85 2881.40 2859.53 -0.76% 14.07%
Russell 2000 1348.56 1572.99 1535.76 -2.37% 13.88%
Global Dow 2736.74 2998.45 2977.45 -0.70% 8.80%
Fed. Funds target rate 2.25%-2.50% 2.25%-2.50% 2.25%-2.50% 0 bps 0 bps
10-year Treasuries 2.68% 2.46% 2.39% -7 bps -29 bps

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

Last Week’s Economic Headlines

  • U.S. import prices advanced 0.2% in April, after increasing 0.6% in March. The April advance was driven by higher fuel prices, which more than offset decreasing prices for nonfuel imports. Despite the recent monthly advances, import prices declined 0.2% for the 12-month period ended in April, driven by lower nonfuel prices. Prices for U.S. exports rose 0.2% in April after a 0.6% rise in March, as nonagricultural exports outpaced declining agricultural exports. U.S. export prices rose 0.3% over the 12-month period ended in April. Of particular note, prices for imports from China declined 0.2% in April, and have decreased 1.1% since April 2018 — the largest over-the-year drop since May 2017. On the other hand, prices for exports to China rose 0.6% in April, but have otherwise declined 2.7% over the past 12 months. Increased U.S. tariffs on Chinese imports this month will likely change this scenario in May.
  • Retail sales fell 0.2% in April, but are still 3.1% above April 2018. Food and beverage store sales rose 0.2% in April, and gas station sales jumped 1.8%. However, building material and garden equipment and supplies dealers saw sales drop 1.9% last month, electronics and appliance store sales fell 1.3%, and sales for motor vehicle and parts dealers decreased 1.1%. Nonstore (online) retail sales lost 0.2% in April, but are up 9.0% from April 2018.
  • According to the Federal Reserve, the manufacturing sector slowed considerably in April. Overall, industrial production fell 0.5% last month, as did manufacturing. Not surprisingly, capacity utilization, which estimates sustainable potential output, dropped 0.6 percentage point from its March rate.
  • New home sales should continue to gain traction in May if April’s report on housing starts is any indication. According to the Census Bureau, issued building permits increased by 0.6% in April, while housing starts jumped 5.7% over March’s total. Home completions lagged (down 1.4%), but that could be attributable to April’s inclement weather across much of the country.
  • According to the Department of Labor, there were 212,000 claims for unemployment insurance for the week ended May 11, a decrease of 16,000 from the previous week’s level. The advance rate for insured unemployment claims remained at 1.2% for the week ended May 4. The advance number of those receiving unemployment insurance benefits during the week ended May 4 was 1,660,000, a decrease of 28,000 from the prior week’s level, which was revised up by 4,000.

Eye on the Week Ahead

The housing sector is in the news this week with the April figures for sales of both new and existing homes on tap. New home sales have picked up the past few months, but sales of existing properties have dragged, primarily due to scant inventory and rising prices.

To view the What I’m Watching This Week Portfolio, please click here. (Free Membership is required) https://www.barchart.com/my/featured-portfolios

 

What I’m Watching This Week – 13 May 2019

The Markets (as of market close May 10, 2019)

Only a late rally last Friday saved the benchmark indexes from their worst week of the year. As it was, each of the indexes listed here fell at least 2.12%, with the Global Dow and the Nasdaq falling more than 3.0%. During the week, the small-cap Russell 2000 temporarily sank into correction territory as it drifted more than 10% below its August 2018 high. Once again it appears trade fears stoked investor concerns following President Trump’s 25% tariff rate hike on some Chinese imports. Not surprisingly, bond yields fell as prices rose following increased investor demand. Also notable last week was the initial public offering of Uber, which raised more than $8.1 billion, making it the largest IPO since Alibaba Group’s 2014 public launching.

Oil prices inched lower last week, closing at $61.73 per barrel by late Friday, down from the prior week’s closing price of $61.87 per barrel. The price of gold (COMEX) dropped last week, closing at $1,286.50 by Friday evening, down from the prior week’s price of $1,288.40. The national average retail regular gasoline price was $2.897 per gallon on May 6, 2019, $0.010 higher than the prior week’s price and $0.052 more than a year ago.

Market/Index 2018 Close Prior Week As of 5/10 Weekly Change YTD Change
DJIA 23327.46 26504.95 25942.37 -2.12% 11.21%
Nasdaq 6635.28 8164.00 7916.94 -3.03% 19.32%
S&P 500 2506.85 2945.64 2881.40 -2.18% 14.94%
Russell 2000 1348.56 1614.02 1572.99 -2.54% 16.64%
Global Dow 2736.74 3097.28 2998.45 -3.19% 9.56%
Fed. Funds target rate 2.25%-2.50% 2.25%-2.50% 2.25%-2.50% 0 bps 0 bps
10-year Treasuries 2.68% 2.52% 2.46% -6 bps -22 bps

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

Last Week’s Economic Headlines

  • The trade deficit was $50.0 billion in March, up $0.7 billion from February’s revised total. March exports were $2.1 billion more than February exports. Imports in March were $2.8 billion more than February imports. Year-to-date, the goods and services deficit decreased $5.8 billion, or 3.7%, from the same period in 2018. Exports increased $14.0 billion, or 2.3%. Imports increased $8.2 billion, or 1.1%.
  • Consumer prices continued to surge in April. The CPI increased 0.3% for the month following a 0.4% jump in March. Over the last 12 months, the CPI has increased 2.0% — right at the target inflation rate set by the Federal Reserve. As in March, the primary driver of the price increase was attributable to gasoline prices, which rose 5.7% in April, accounting for over two-thirds of the monthly price increase. Consumer prices less food and energy rose a more modest 0.1% for the third consecutive month.
  • The Producer Price Index rose 0.2% in April, according to the Bureau of Labor Statistics. Producer prices rose 0.6% in March and 0.1% in February. For the 12 months ended in April, producer prices have risen 2.2%. Producer prices less foods, energy, and trade services moved up 0.4% in April — the largest increase since rising 0.5% in January 2018. Most of the April price increase is attributed to prices for gasoline, which increased 5.9%. Prices for services inched up 0.1% in April after climbing 0.3% in March.
  • The federal government deficit increased to $160,305 billion in April after reaching $146,945 billion in March. Through the first seven months of the fiscal year the deficit sits at $530,870 billion, up from the $385,445 billion deficit over the same period last year.
  • According to the latest Job Openings and Labor Turnover (JOLTS) report, the number of job openings increased by 346,000 in March. Job openings increased in a number of industries, with the largest increases in transportation, warehousing, and utilities (87,000), construction (73,000), and real estate and rental and leasing (57,000). Job openings decreased in federal government (15,000). Over the 12 months ended in March, hires totaled 69.3 million and separations totaled 66.6 million, yielding a net employment gain of 2.7 million.
  • According to the Department of Labor, there were 228,000 claims for unemployment insurance for the week ended May 4, a decrease of 2,000 from the previous week’s level. The advance rate for insured unemployment claims remained at 1.2% for the week ended April 27. The advance number of those receiving unemployment insurance benefits during the week ended April 27 was 1,684,000, an increase of 13,000 from the prior week’s level.

Eye on the Week Ahead

Retail sales, which got a boost in March, may see sales pull back a bit in April. The April report on industrial production is out this week. The manufacturing sector has been lagging despite a relatively strong economy over the past few months. Finally, the April report on import and export prices is likely to follow the trend of revealing export prices rising at a faster rate than import prices. The number of hires and separations in March remained relatively the same as in the prior month.

To view the What I’m Watching This Week Portfolio, please click here. (Free Membership is required) https://www.barchart.com/my/featured-portfolios