Category: Investing

The Markets (as of market close July 14, 2023)

Wall Street enjoyed a positive week of returns, with each of the benchmark indexes posting solid gains, despite a marginal downturn at the end of last week. The financial sector began releasing quarterly updates last Friday as investors focused on the state of the banking industry. A few major banks reported increasing profits in the second quarter, while more data will be released this week. The Russell 2000, the Global Dow, and the Nasdaq gained over 3.0% last week, while the S&P 500 and the Dow advanced over 2.3%. Ten-year Treasury yields fell 24.0 basis points as investors saw hope that inflation may be subsiding and the Federal Reserve may be nearing an end to its policy of interest rate hikes. Crude oil prices climbed higher last week, despite last Friday’s drop, which was the largest decline since the end of last month. The dollar slid lower and is now down 3.4% year to date. Gold prices, on the other hand, rose higher last week and are up more than 7.0% for the year.

Last Monday saw investors grab some apparent bargains, pushing stocks higher to begin the week. The Russell 2000 led the benchmark indexes listed here, climbing 1.6%. The Dow advanced 0.6%, while the Global Dow (0.4%), the S&P 500 (0.2%), and the Nasdaq (0.2%) ticked higher. Ten-year Treasury yields settled at 4.06% after falling 4.4 basis points on rising bond prices. Crude oil prices ended a streak of increases, dipping 0.9% to $73.21 per barrel. The dollar and gold prices began last week on a downturn.

Stocks closed higher for the second straight session last Tuesday as investors awaited the Wednesday release of the Consumer Price Index report. The Global Dow rose 1.1% to head the indexes listed here. The Russell 2000 enjoyed a second day of notable gains after advancing 1.0%. The Dow rose 0.9%, followed by the S&P 500 (0.7%), and the Nasdaq (0.6%). Crude oil prices reversed the prior day’s downturn, climbing 2.6% to settle at $74.86 per barrel. The yield on 10-year Treasuries slipped 2.6 basis points to close at 3.98%. The dollar declined, while gold prices advanced.

Signs that inflation may be receding drove stocks and bond prices higher last Wednesday. A better-than-expected Consumer Price Index (see below) offered encouragement to investors that the Federal Reserve’s interest rate hikes may be nearing an end. For the second day in a row, the Global Dow (1.4%) led the benchmark indexes listed here, followed by the Nasdaq (1.2%), the Russell 2000 (1.1%), the S&P 500 (0.7%), and the Dow (0.3%). With bond prices climbing higher, yields on 10-year Treasuries fell nearly 12.0 basis points to close at 3.86%. Crude oil prices rose 1.4% to $75.86 per barrel. The dollar continued to decline, while gold prices continued to advance.

Stocks rallied for a fourth straight day last Thursday, with the S&P 500 and the Nasdaq reaching new intraday 52-week highs. Tech stocks were some of the highest climbers helping to drive the indexes. The Nasdaq rose 1.6%, followed by the Global Dow (1.1%), the Russell 2000 and the S&P 500 (0.9%), and the Dow (0.1%). Bond prices continued to climb, pulling yields lower. Ten-year Treasury yields fell 10.0 basis points to settle at 3.76%. Crude oil prices advanced for the third straight day, reaching $77.31 per barrel. The dollar continued to slide, falling 0.8%. Gold prices inched up 0.2%.

Last Friday saw stocks close generally lower, with only the Dow posting a 0.3% gain among the benchmark indexes listed here. The Russell 2000 fell 1.0%, the Global Dow dipped 0.5%, the Nasdaq slipped 0.2%, and the S&P 500 declined 0.1%. Ten-year Treasury yields rose 5.8 basis points. The dollar advanced for the only day last week, while gold prices fell. Crude oil prices dropped 2.2% to $75.23 per barrel.

Stock Market Indexes

Market/Index	2022 Close	Prior Week	As of 7/14	Weekly Change	YTD Change
DJIA	33,147.25	33,734.88	34,509.03	2.29%	4.11%
Nasdaq	10,466.48	13,660.72	14,113.70	3.32%	34.85%
S&P 500	3,839.50	4,398.95	4,505.42	2.42%	17.34%
Russell 2000	1,761.25	1,864.66	1,931.09	3.56%	9.64%
Global Dow	3,702.71	4,044.03	4,172.05	3.17%	12.68%
Fed. Funds target rate	4.25%-4.50%	5.00%-5.25%	5.00%-5.25%	0 bps	75 bps
10-year Treasuries	3.87%	4.05%	3.81%	-24 bps	-6 bps
US Dollar-DXY	103.48	102.28	99.98	-2.25%	-3.38%
Crude Oil-CL=F	$80.41	$73.66	$75.23	2.13%	-6.44%
Gold-GC=F	$1,829.70	$1,930.50	$1,959.80	1.52%	7.11%

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

Last Week’s Economic News

• The Consumer Price Index rose 0.2% in June after advancing 0.1% in May. Shelter prices (0.4%) accounted for over 70% of the CPI increase in June. Also advancing in June were prices for motor vehicles, insurance, apparel, recreation, and personal care. Prices for airline fares, communication, used cars and trucks, and household furnishings and operations were among those that decreased last month. Prices less food and energy rose 0.2% in June, the smallest one-month increase since August 2021. Over the last 12 months, the CPI rose 3.0%, which is the smallest yearly increase since the period ended March 2021. The CPI less food and energy rose 4.8% over the last 12 months. Energy prices decreased 16.7% for the 12 months ended in June, while the food prices increased 5.7%.
• Producer prices inched up 0.1% in June after declining 0.4% in the previous month. Since June 2022, Producer prices have risen 0.1%. Pushing producer prices higher was a 0.2% increase in prices for services. Prices for goods were unchanged in June. producer prices less foods, energy, and trade services moved up 0.1% in June after no change in May. For the 12 months ended in June, producer prices less foods, energy, and trade services advanced 2.6%.
• Import and export prices continued to decline in June. According to the latest report from the Bureau of Labor Statistics, import prices fell 0.2% in June after decreasing 0.4% in May. Export prices declined 0.9% in June following a 1.9% drop the previous month. In 2003, import prices have fallen in five of the last six months after rising 3.2% in 2022. Import prices declined 6.1% thus far this year, the largest 12-month drop since the year ended May 2020. Export prices fell 12.0% from June 2022 to June 2023, the largest 12-month decline since the data was first published in September 1984.
• The Treasury budget deficit was $227.8 billion in June, a decrease of about $12.6 billion from the May deficit but $139.0 billion above the June 2022 deficit. Through the first nine months of the fiscal year, the government deficit sits at $1.392.6 trillion compared to $515.1 billion over the same period in the prior fiscal year. Compared to last fiscal year, government receipts are down $422.8 billion, while government expenditures rose by $454.7 billion.
• The national average retail price for regular gasoline was $3.546 per gallon on July 10, $0.019 per gallon hither than the prior week’s price but $1.100 less than a year ago. Also, as of July 10, the East Coast price increased $0.057 to $3.429 per gallon; the Midwest price fell $0.027 to $3.362 per gallon; the Gulf Coast price rose $0.044 to $3.152 per gallon; the Rocky Mountain price declined $0.042 to $3.748 per gallon; and the West Coast price inched up $0.001 to $4.534 per gallon. The U.S. Energy Information Administration forecasts higher oil prices in the second half of 2023 and into 2024. EIA expects production cuts from OPEC members and higher demand, which will likely drive Brent crude oil prices to the mid $80.00 per barrel range by the end of 2024.
• For the week ended July 8, there were 237,000 new claims for unemployment insurance, a decrease of 12,000 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 July 1 was 1.2%, unchanged from the previous week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended July 1 was 1,729,000, an increase of 11,000 from the previous week’s level, which was revised down by 2,000. States and territories with the highest insured unemployment rates for the week ended June 24 were California (2.2%), New Jersey (2.2%), Puerto Rico (2.2%), Massachusetts (1.9%), Connecticut (1.8%), Rhode Island (1.8%), New York (1.7%), Oregon (1.7%), Pennsylvania (1.7%), and Minnesota (1.6%). The largest increases in initial claims for unemployment insurance for the week ended July 1 were in Michigan (+6,792), New York (+4,152), Ohio (+3,028), Kentucky (+2,449), and Indiana (+1,549), while the largest decreases were in Texas (-3,126), New Jersey (-1,137), Colorado (-509), Wisconsin (-504), and Connecticut (-446).

Eye on the Week Ahead

The June retail sales report is released this week. May saw retail sales increase by 0.3% from the previous month. The June report on industrial production is also out this week. Industrial production has been somewhat flat over the past few months, decreasing 0.2% in May. June reports on housing starts and existing home sales are available this week. In general, new home sales have increased throughout the year, while sales of existing homes have declined, primarily due to rising mortgage rates and a dearth of inventory.

The Markets (as of market close July 7, 2023)

Stocks fell for the second straight week, with each of the benchmark indexes losing ground. The Dow led the declines, followed by the Global Dow, the Russell 2000, the S&P 500, and the Nasdaq. Although the employment report for June (see below) showed a moderate decline in the number of new jobs added, wages continued to track higher, which could support further interest rate hikes by the Federal Reserve. The Fed meets next on July 26, and the latest employment data makes another pause in rate increases highly unlikely. Whether the rate hike is 25.0 basis points or 50.0 basis points is open to conjecture. Crude oil prices advanced for the second straight week as export cuts by Saudi Arabia and Russia began to impact prices. Ten-year Treasury yields increased by 24.0 basis points, impacted by the weakest number of new job hires in three years and rising wages.

As expected, trading was light last Monday before the fourth of July holiday. Nevertheless, stocks managed to post moderate gains, with each of the benchmark indexes listed here adding value, led by the Global Dow (0.5%), followed by the Russell 2000 (0.4%), the Nasdaq (0.2%), and the S&P 500 (0.1%). The Dow closed the session where it began. Ten-year Treasury yields inched up to 3.85% after adding 3.9 basis points. Crude oil prices fell 1.2% to $69.79 per barrel, despite fresh production cuts by Saudi Arabia and Russia. The dollar and gold prices edged higher.

Stocks declined last Wednesday as investors digested the minutes from the Federal Reserve’s June meeting and a sharp decline in services activity in China. The Russell 2000 slid 1.3%, followed by the Global Dow (-0.6%), and the Dow (-0.4%). The S&P 500 and the Nasdaq dipped 0.2%. Crude oil prices jumped 3.0%, settling at $71.88 per barrel. The dollar edged higher, while gold prices declined. Ten-year Treasury yields rose 8.7 basis points to 3.94%.

Equities got off to a slow start last Thursday. The Fed got more ammunition to continue to hike interest rates, following a better-than-expected ADP employment report. The Russell 2000 and the Global Dow fell 1.6%, the Dow dropped 1.1%, while the Nasdaq and the S&P 500 slid 0.8%. Ten-year Treasury yields gained 9.6 basis points, closing at 4.04%. Crude oil prices were flat, while the dollar and gold prices slid lower.

Last Friday saw stocks close mostly lower, with only the Russell 2000 (1.22%) and the Global Dow (0.40%) ending the session higher. The Dow lost 0.6%, the S&P 500 fell 0.3%, and the Nasdaq dipped 0.1%. Crude oil prices jumped 2.6% to close at $73.66 per barrel. The dollar slid lower, while gold prices advanced 0.8%. Ten-year Treasury yields were flat on the day.

Stock Market Indexes

Market/Index	2022 Close	Prior Week	As of 7/7	Weekly Change	YTD Change
DJIA	33,147.25	34,407.60	33,734.88	-1.96%	1.77%
Nasdaq	10,466.48	13,787.92	13,660.72	-0.92%	30.52%
S&P 500	3,839.50	4,450.38	4,398.95	-1.16%	14.57%
Russell 2000	1,761.25	1,888.73	1,864.66	-1.27%	5.87%
Global Dow	3,702.71	4,103.46	4,044.03	-1.45%	9.22%
Fed. Funds target rate	4.25%-4.50%	5.00%-5.25%	5.00%-5.25%	0 bps	75 bps
10-year Treasuries	3.87%	3.81%	4.05%	24 bps	18 bps
US Dollar-DXY	103.48	102.93	102.28	-0.63%	-1.16%
Crude Oil-CL=F	$80.41	$70.47	$73.66	4.53%	-8.39%
Gold-GC=F	$1,829.70	$1,926.20	$1,930.50	0.22%	5.51%

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 slowed somewhat in June. There were 209,000 new jobs added last month, down from the 2023 average of 278,000 per month, and well off the monthly average of 399,000 since May 2022. In May, employment continued to trend up in government, health care, social assistance, and construction. Both the unemployment rate, at 3.6%, and the number of unemployed persons, at 6.0 million, changed little in June. The unemployment rate has ranged from 3.4% to 3.7% since March 2022. The labor force participation rate, at 62.6%, and the employment-population ratio, at 60.3%, were unchanged in May from the previous month. In June, average hourly earnings rose by $0.12, or 0.4%, to $33.58. Over the past 12 months, average hourly earnings have increased by 4.4%. The average workweek edged up by 0.1 hour to 34.4 hours in June.
• According to the latest Job Openings and Labor Turnover Summary (JOLTS), the number of job openings fell 496,000 to 9.8 million in May. In May, the largest decreases in job openings were in health care and social assistance (-285,000), finance and insurance (-139,000), and other services (-78,000). Job openings increased in educational services (+45,000), state and local government education (+37,000), and federal government (+24,000). The number of hires increased by 107,000 in May, with hires in durable goods manufacturing increasing by 41,000. Total separations include quits, layoffs and discharges, and other separations. Quits are generally voluntary separations initiated by the employee. Therefore, the quits rate can serve as a measure of workers’ willingness or ability to leave jobs. The number of total separations increased 211,000 in May. The number of quits increased 250,000 to 4.0 million.
• Manufacturing contracted for the second straight month in June, according to the latest survey from S&P Global. The S&P Global US Manufacturing Purchasing Managers’ Index™ posted 46.3 in June, down from 48.4 in May. Manufacturing has declined in seven of the last eight months. A sharper decline in new orders caused manufacturing output to decrease. Survey respondents generally attributed the decline in demand to inflationary pressure and higher interest rates.
• Unlike the manufacturing sector, services expanded in June. According to the latest purchasing managers’ index from S&P Global, new orders increased for the fourth straight month. The June PMI™, at 54.4, rose at the second-fastest pace in over a year. Survey respondents were more upbeat in their expectations for the remainder of the year and sought to expand employment accordingly. Even with the expansion, higher interest rates and increased wage demands pushed cost burdens higher for service providers. Nevertheless, in an attempt to remain competitive, selling prices increased at the slowest rate since February.
• The goods and services trade deficit decreased by $5.5 billion to $69.0 billion in April. Exports fell 0.8%, while imports declined 2.3%. Year to date, the goods and services deficit decreased $101.7 billion, or 22.8%, from the same period in 2022. Exports increased $48.0 billion, or 3.9%. Imports decreased $53.7 billion, or 3.2%.
• The national average retail price for regular gasoline was $3.527 per gallon on July 3, $0.044 per gallon lower than the prior week’s price and $1.244 less than a year ago. Also, as of July 3, the East Coast price decreased $0.033 to $3.372 per gallon; the Midwest price fell $0.063 to $3.389 per gallon; the Gulf Coast price decreased $0.082 to $3.108 per gallon; the Rocky Mountain price rose $0.056 to $3.790 per gallon; and the West Coast price dipped $0.023 to $4.533 per gallon.
• For the week ended July 1, there were 248,000 new claims for unemployment insurance, an increase of 12,000 from the previous week’s level, which was revised down by 3,000. According to the Department of Labor, the advance rate for insured unemployment claims for the week ended June 24 was 1.2%, unchanged from the previous week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended June 24 was 1,720,000, a decrease of 13,000 from the previous week’s level, which was revised down by 9,000. States and territories with the highest insured unemployment rates for the week ended June 17 were California (2.2%), New Jersey (2.1%), Puerto Rico (2.1%), Massachusetts (1.8%), New York (1.6%), Oregon (1.6%), Pennsylvania (1.6%), Illinois (1.5%), Minnesota (1.5%), and Rhode Island (1.5%). The largest increases in initial claims for unemployment insurance for the week ended June 24 were in New Jersey (+5,306), Ohio (+2,359), Connecticut (+2,096), Rhode Island (+927), and Oregon (+711), while the largest decreases were in California (-10,956), Texas (-8,962), Pennsylvania (-3,199), Minnesota (-2,490), and Puerto Rico (-1,280).

Eye on the Week Ahead

Quite a bit of attention will be focused on the Consumer Price Index and the Producer Price Index, which are released this week. The CPI inched up 0.1% in May and 4.0% for the year. The PPI declined 0.3% in May and was up only 1.1% for the 12 months ended in May.

The Markets (second quarter through June 30, 2023)

Wall Street proved resilient during the second quarter of the year, despite rising inflation, two interest rate hikes, and concerns about the debt ceiling. The economy remained relatively strong, despite predictions that it may be headed toward a recession. The second quarter saw information technology, communication services, and consumer discretionary account for most of the market gains. Energy, utilities, health care, financials, and consumer staples slid lower. The market’s positive performance during the second quarter was buoyed by strength in the labor market, economic data that may be showing inflation is beginning to wane, and a better-than-expected first-quarter gross domestic product.

Government bond yields rose in the second quarter, with investors eyeing the relative strength of the economy as reason to remain bullish on stocks. Each of the benchmark indexes listed here climbed higher in the second quarter, with the Nasdaq enjoying its third-best first half on record, a far cry from last year at this time, when the tech-heavy index was going through its second-worst six-month stretch. The S&P 500 also enjoyed notable growth in the second quarter. The dollar inched higher while gold prices retreated in the second quarter. Notwithstanding a roughly 4.0% increase in June, crude oil prices declined for the fourth consecutive quarter, marking the longest losing streak since 1988. While indications seem to point to a more bullish outlook, crude oil supply continued to outpace demand, muting prices. OPEC+ cuts were offset by production increases from other sources, including the United States. In addition, China’s demand has been weaker than anticipated, with manufacturing slow to expand. Prices at the pump rose in the second quarter. The June 26 retail price for regular gasoline was $3.571 per gallon, $0.15 above the March price of $3.421 per gallon. However, gas prices are down $1.301 over the last 12 months.

April began the quarter with stocks posting modest gains from the previous month. The large caps of the Dow (2.5%) and the S&P 500 (1.5%) were bolstered by a rally over the last two days of the month. Small caps declined further with the Russell 2000 falling 1.9%, while remaining marginally ahead of its 2022 year-end value. Among the market sectors in April, industrials underperformed, while communication services fared the best. Data in April showed some signs of economic weakening. Job growth in April (236,000), was well below the monthly average for the year, while the number of workers receiving unemployment insurance reached its highest level since November 2021. Housing data was soft, with the number of residential building permits and housing starts sagging from the previous month. Existing home sales dropped, while the median existing-homes sales price was 0.9% less than a year ago. Financials took a hit after another bank fell into Federal Deposit Insurance Corporation receivership. Despite some economic downturns, other data supported ongoing economic strength and bolstered investor sentiment. First-quarter corporate earnings were somewhat better than expected. The Consumer Price Index inched up only 0.1%, bringing the year-over-year increase to 5.0%, the lowest annual pace since May 2021.

Stocks were mixed in May, with information technology and communication services pushing the Nasdaq up nearly 6.0%, while the Dow lost 3.5%. The S&P 500 inched up 0.3%, but the small caps of the Russell 2000 fell 1.1%. Like the previous month, relatively strong corporate earnings reports and encouraging inflation data helped keep investors in the market. Bond prices slid lower, pushing yields higher, with 10-year Treasuries climbing 18.0 basis points in May. Stocks began the month on a downturn after the Federal Reserve hiked interest rate 25.0 basis points, while giving no clear indication as to whether or when more rate hikes were coming. For much of the month, investors focused on the debt ceiling negotiations between President Biden and House Speaker McCarthy. Mega-cap technology and artificial intelligence stocks dominated the market for much of May. Inflation remained elevated, with the personal consumption expenditures price (PCE) index, a preferred inflation indicator of the Federal Reserve, rising 4.3% for the year, while consumer prices excluding food and energy rose 4.7%.

June was a strong month for stocks, with each of the benchmark indexes listed here posting gains of between 4.6% and 8.0%. Inflationary pressures showed signs of cooling, with the 12-month PCE price index coming in at 3.8%. The Consumer Price Index rose 4.0% for the year, the smallest 12-month increase since the comparable period ended March 2021. The Federal Reserve elected not to increase interest rates in June, opting, instead, to step back and assess additional information and its implications for monetary policy. Gross domestic product advanced at a stronger-than-expected 2.0% for the first quarter, showing resilience in the economy. Despite the collapse of several major U.S. banks, the Federal Reserve indicated that the largest domestic banks are sufficiently positioned to continue lending to households and businesses even during a severe recession. The labor market picked up the pace, adding nearly 340,000 new jobs, in line with the average monthly gain over the past 12 months. Industrial production declined minimally, following two consecutive monthly increases. While manufacturing slowed, business activity in the services sector expanded at the fastest rate since April 2022. Long-term bond yields increased in June from May, as bond prices dipped lower.

Stock Market Indexes

Market/Index	2022 Close	As of June 30	Monthly Change	Quarterly Change	YTD Change
DJIA	33,147.25	34,407.60	4.56%	3.41%	3.80%
Nasdaq	10,466.48	13,787.92	6.59%	12.81%	31.73%
S&P 500	3,839.50	4,450.38	6.47%	8.30%	15.91%
Russell 2000	1,761.25	1,888.73	7.95%	4.79%	7.24%
Global Dow	3,702.71	4,103.46	6.88%	4.68%	10.82%
Fed. Funds target rate	4.25%-4.50%	5.00%-5.25%	0 bps	25 bps	75 bps
10-year Treasuries	3.87%	3.81%	18 bps	32 bps	-6 bps
US Dollar-DXY	103.48	102.93	-1.25%	0.33%	-0.53%
Crude Oil-CL=F	$80.41	$70.47	4.08%	-6.75%	-12.36%
Gold-GC=F	$1,829.70	$1,926.20	-2.78%	-3.10%	5.27%

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: Employment rose by 339,000 in May from April, in line with an average monthly gain of 341,000 over the prior 12 months. In May, employment continued to trend upward in professional and business services, health care, government, construction, transportation and warehousing, and social assistance. The unemployment rate rose 0.3 percentage point to 3.7%. In May, the number of unemployed persons rose by 440,000 to 6.1 million. The employment-population ratio, at 60.3%, and the labor force participation rate, at 62.6%, were little changed from the previous month. Both measures have shown little net change since early 2022. In May, average hourly earnings increased by $0.11, or 0.3%, to $33.44. Over the past 12 months ended in May, average hourly earnings rose by 4.3%. The average workweek edged down 0.1 hour to 34.3 hours.
• There were 239,000 initial claims for unemployment insurance for the week ended June 24, 2023. The total number of workers receiving unemployment insurance was 1,742,000. By comparison, over the same period last year, there were 213,000 initial claims for unemployment insurance, and the total number of claims paid was 1,340,000.
• FOMC/interest rates: The Federal Open Market Committee maintained the federal funds target range rate at the current 5.00%-5.25% in June. The Committee essentially decided to assess the effects of prior rate increases. However, the FOMC indicated that more rate hikes are likely, noting that inflation remained elevated, while economic activity expanded at a modest pace and job gains have been robust. Overall, the FOMC will base its decisions on available data, and “will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.” The summary of economic projections has the federal funds rate at 5.6% in June from 5.1% in March, which suggests the fed interest rate will be increased by 50.0 basis points by the end of 2023.
• GDP/budget: Economic growth slowed minimally in the first quarter, as gross domestic product increased 2.0%, according to the third and final estimate from the Bureau of Economic Analysis. GDP rose 2.6% in the fourth quarter. The deceleration in first-quarter GDP compared to the previous quarter primarily reflected downturns in private inventory investment and residential fixed investment. Consumer spending, as measured by personal consumption expenditures, rose 4.2% in the first quarter compared to a 1.0% increase in the fourth quarter. Consumer spending on long-lasting durable goods jumped 16.3% in the first quarter after decreasing 1.3% in the prior quarter. Spending on services rose 3.2% (1.6% in the fourth quarter). Nonresidential fixed investment increased 0.6% after climbing 4.0% in the fourth quarter. Residential fixed investment fell 4.0% in the first quarter, significantly better than the 25.1% decrease in the fourth quarter. Exports increased 7.8% in the first quarter, following a decrease of 3.7% in the fourth quarter. Imports, which are a negative in the calculation of GDP, increased 2.0% in the first quarter after declining 5.5% in the previous quarter. Consumer prices increased 4.1% in the first quarter compared to a 3.7% advance in the fourth quarter. Excluding food and energy, consumer prices advanced 4.9% in the first quarter (4.4% in the fourth quarter).
• The federal budget had a $240.3 billion deficit in May, well above the May 2022 deficit of $66.2 billion. The deficit for the first eight months of fiscal year 2023, at $1,164.9 trillion, is much higher than the $426.2 billion deficit over the same period of the previous fiscal year. In May, government receipts totaled $307.5 billion for the month and $3.0 trillion for the current fiscal year. Government outlays were $547.8 billion in May and $4.2 trillion through the first eight months of fiscal year 2023. By comparison, receipts in May 2022 were $389.0 billion and $3.4 trillion through the first eight months of the previous fiscal year. Expenditures were $455.2 billion in May 2022 and $3.8 trillion through the comparable period in FY22.
• Inflation/consumer spending: According to the latest Personal Income and Outlays report, the personal consumption expenditures price index edged up 0.1% in May and 3.8% since May 2022. Prices excluding food and energy advanced 0.3% in May, following increases of 0.4% in April and 0.3% in March. Prices for goods decreased 0.1%, while prices for services increased 0.3%. Food prices increased 0.1% and energy prices decreased 3.9%. Since May 2022, consumer prices for food increased 5.8%, while energy prices declined 13.4%. Personal income rose 0.4% in May, 0.1 percentage point greater than the April increase. Disposable personal income increased 0.4% in May after advancing 0.3% in April. Consumer spending increased 0.1% in May, after rising 0.6% in the previous month.
• The Consumer Price Index rose 0.1% in May after increasing 0.4% in April. Over the 12 months ended in May, the CPI advanced 4.0%, down from 4.9% for the year ended in April. Excluding food and energy prices, the CPI rose 0.4% in May and 5.3% over the last 12 months. Contributing to the May CPI advance were increases in prices for shelter (0.6%) and used cars and trucks (4.4%). In May, food prices increased 0.2% and 6.7% since May 2022. Energy prices fell 3.6% in May and are down 11.7% over the 12 months ended in May.
• Prices that producers received for goods and services decreased 0.3% in May, following a 0.2% increase in the previous month. Producer prices increased 1.1% for the 12 months ended in May. The Producer Price Index saw prices for goods fall 1.6%, while prices for services increased 0.2%. Producer prices less foods, energy, and trade services were unchanged in May after increasing 0.1% in the previous month. Prices less foods, energy, and trade services advanced 2.8% for the year ended in May after increasing 3.3% from the 12 months ended in April.
• Housing: Sales of existing homes increased 0.2% in May. Since May 2022, existing-home sales dropped 12.7%. According to the report from the National Association of Realtors®, job gains, a dearth of inventory, and fluctuating mortgage rates have contributed to the decline in sales of existing homes. The median existing-home price was $396,100 in May, up from $385,900 in April but lower than the May 2022 price of $408,600. In May, unsold inventory of existing homes represented a 3.0-month supply at the current sales pace, up from the April pace of 2.9 months. Sales of existing single-family homes dropped 0.3% in May and 20.0% from May 2022. The median existing single-family home price was $401,100 in May, up from the April price of $390,200 but well below the May 2022 price of $415,400.
• New single-family home sales advanced in May, climbing 12.2%, marking the third consecutive monthly increase. Sales were up 20.0% from a year earlier. The median sales price of new single-family houses sold in May was $416,300 ($402,400 in April). The May average sales price was $487,300 ($495,600 in April). The inventory of new single-family homes for sale in May decreased to 6.7 months, down from 7.6 months in April.
• Manufacturing: Industrial production declined 0.2% in May after increasing 0.5% the previous month. Manufacturing increased 0.1% in May, bolstered by 0.3% increase in durables, which was offset by a 0.1% decrease in noondurables. In May, mining fell 0.4%, while utilities dropped 1.8%.The decrease in mining was driven primarily by decreases in coal mining and support activities (in particular, oil and gas well drilling).The output of utilities declined for the second consecutive month, as electric utilities fell in May, while natural gas utilities remained unchanged. Total industrial production in May was 0.2% above its year-earlier level. Major market groups posted mixed results in May. Notable gains were recorded in defense and space equipment and construction supplies. Most other major market groups recorded modest declines.
• New orders for durable goods increased 1.7% in May after increasing 1.2% in April. New orders for transportation equipment led the overall increase, advancing 3.9% in May, marking the third consecutive monthly advance. Excluding transportation, new orders increased 0.6% in May. Excluding defense, new orders rose 3.0%. Over the past 12 months, new orders for durable goods have increased 3.5%.
• Imports and exports: May saw both import and export prices decrease. Import prices fell 0.6%, following a 0.3% increase in April. Prices for imports declined 5.9% over the past year, the largest 12-month drop since the index declined 6.3% for the 12 months ended in May 2020. Import fuel prices decreased 6.4% in May, following a 4.1% jump in April. The May decline in import fuel prices was the largest monthly drop since August 2022. Nonfuel import prices edged down 0.1% in May after being unchanged in the previous month. Lower prices in May for nonfuel industrial supplies and materials and foods, feeds, and beverages more than offset higher prices for automotive vehicles and capital goods. Nonfuel import prices declined 1.6% over the past year. Export prices dropped 1.9% in May, the largest monthly decrease since December 2022. Falling prices for both agricultural and nonagricultural exports contributed to the overall decline in export prices in May. Export prices fell 10.1% for the year ended in May, the largest 12-month decline since the series was first published in September 1984.
• The international trade in goods deficit fell $6.0 billion, or 6.1%, in May over April. Exports of goods for May were $1.0 billion, or 0.6%, below April exports. Imports of goods were $6.9 billion, or 2.7%, less than April imports. The May decrease in exports was mainly attributable to declines in other goods (-13.2%) and foods, feeds, and beverages (-14.2%). The decrease in May imports was largely driven by a 7.3% decline in consumer goods.
• The latest information on international trade in goods and services, released June 7, was for April and revealed that the goods and services trade deficit was $74.6 billion, an increase of 23.0% from the March deficit. April exports were $249.0 billion, 3.6% less than March exports. April imports were $323.6 billion, 1.5% above March imports. For the 12 months ended in April, the goods and services deficit decreased 23.9%. Exports increased 5.8%, while imports decreased 2.3%.
• International markets: China’s post-pandemic economic recovery showed new signs of weakness in June. Manufacturing in China contracted for the third straight month in June, while the services sector also weakened. The latest data likely prompted the Chinese government to lower the one-year loan prime rate by 10 basis points. With inflationary pressures continuing to rise, the Bank of England hiked interest rates by 50 basis points in June, marking the 13th consecutive interest rate increase. Elsewhere, in Germany, manufacturing declined in both goods and services sectors. What was often the fulcrum of the German economy, weak global demand has impacted German exports. For June, the STOXX Europe 600 Index was flat; the United Kingdom’s FTSE slid 0.8%; Japan’s Nikkei 225 Index gained 5.3%; and China’s Shanghai Composite Index dipped 0.9%.
• Consumer confidence: The Conference Board Consumer Confidence Index® increased in June to 109.7, up from a revised 102.5 in May. The Present Situation Index, based on consumers’ assessment of current business and labor market conditions, rose to 155.3 in June, higher than the May reading of 148.9. The Expectations Index, based on consumers’ short-term outlook for income, business, and labor market conditions, advanced to 79.3 in June from 71.5 in May. According to the Conference Board’s report, the Expectations Index has remained below 80.0, the level associated with a recession within the next year, since February 2022, with the exception of a brief uptick in December 2022. However, June’s reading was just a shade below 80.0 and up sharply from prior month’s rate.

Eye on the Quarter Ahead

During the third quarter, investors will likely focus on inflation data and the Federal Reserve’s response. Concerns over slowing economic activity, both here and globally, also will influence the market going forward.

The Markets (as of market close June 30, 2023)

Stocks moved higher last week as favorable inflation data added to investor hopes that the Federal Reserve would relax its monetary policy, despite Fed Chair Powell’s statement that at least two more rate hikes are in the offing prior to the end of the year. The small caps of the Russell 2000 performed the best, followed by the S&P 500, the Global Dow, the Nasdaq, and the Dow. Bond prices declined as investors focused on stocks. The dollar inched higher, while gold prices fell for the third straight week. Crude oil prices closed higher, following the prior week’s plunge.

The last week of June picked up where the prior week left off with the market in a bit of a tailspin. Last Monday saw the Nasdaq fall 1.2% and the S&P 500 slide 0.5% as communication services, consumer discretionary, and information technology dragged the indexes lower. The Dow and the Global Dow were flat, while the Russell 2000 eked out a 0.1% gain. Ten-year Treasury yields fell 2.0 basis points to settle at 3.71%. Crude oil prices rose about 0.6% to end the session at about $69.59 per barrel. The dollar dipped lower, while gold prices inched higher.

Stocks ended their losing streak last Tuesday as each of the benchmark indexes listed here posted gains. Investors received encouraging economic data with better-than-expected reports on consumer confidence and new home sales. The Nasdaq (1.7%) and the Russell 2000 (1.5%) led the indexes, followed by the S&P 500 (1.2%), the Global Dow (0.9%), and the Dow (0.6%). Bond prices slid lower, pushing yields higher, with 10-year Treasury yields climbing to 3.76%. Crude oil prices fell 2.3%, settling at $67.76 per barrel. The dollar and gold prices declined.

In a day marked by volatile trading, Wall Street ended last Wednesday with mixed results. The Russell 2000 gained 0.5%, while the Nasdaq and the Global Dow rose 0.3%. The large caps of the Dow and the S&P 500 slipped minimally. The yield on 10-year Treasuries fell 5.8 basis points to 3.71%. Crude oil prices jumped 2.2% to close at about $69.18 per barrel. The dollar advanced nearly 0.5%, while gold prices declined.

Stocks closed mostly higher last Thursday. Most of the benchmark indexes posted gains, despite Federal Reserve Chair Jerome Powell’s assertion that interest rates will be increased at least two more times this year. Powell noted that inflation continues to run high and that culling it back to the 2.0% target has a long way to go. By the close of trading, the small caps of the Russell 2000 gained 1.2%, followed by the Dow (0.8%), the S&P 500 (0.5%), and the Global Dow (0.2%). The Nasdaq ended the day flat. Ten-year Treasury yields jumped to 3.85% after adding 14.4 basis points. Crude oil prices advanced for the second straight day, closing at about $69.81 per barrel. The dollar moved higher, while gold prices fell for the third consecutive session.

Wall Street closed higher last Friday, with each of the benchmark indexes listed here securing positive returns. The Nasdaq (1.5%) led the way, followed by the S&P 500 (1.2%), the Global Dow (1.0%), the Dow (0.8%), and the Russell 2000 (0.4%). Ten-year Treasury yields fell 3.5 basis points to close the day and the week at 3.81%. Crude oil prices increased for the third consecutive day after gaining 0.9%. The dollar slid lower, while gold prices advanced, ending a brief three-day downturn.

Stock Market Indexes

Market/Index	2022 Close	Prior Week	As of 6/30	Weekly Change	YTD Change
DJIA	33,147.25	33,727.43	34,407.60	2.02%	3.80%
Nasdaq	10,466.48	13,492.52	13,787.92	2.19%	31.73%
S&P 500	3,839.50	4,348.33	4,450.38	2.35%	15.91%
Russell 2000	1,761.25	1,821.63	1,888.73	3.68%	7.24%
Global Dow	3,702.71	4,014.15	4,103.46	2.22%	10.82%
Fed. Funds target rate	4.25%-4.50%	5.00%-5.25%	5.00%-5.25%	0 bps	75 bps
10-year Treasuries	3.87%	3.73%	3.81%	8 bps	-6 bps
US Dollar-DXY	103.48	102.88	102.93	0.05%	-0.53%
Crude Oil-CL=F	$80.41	$69.34	$70.47	1.63%	-12.36%
Gold-GC=F	$1,829.70	$1,929.50	$1,926.20	-0.17%	5.27%

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 expanded at an annualized rate of 2.0%, according to the third and final estimate of first-quarter gross domestic product. GDP expanded at an annualized rate of 2.6% in the fourth quarter of 2022. Compared to the fourth quarter, the deceleration in real GDP in the first quarter primarily reflected a downturn in private inventory investment and a slowdown in nonresidential fixed investment that was partly offset by an acceleration in consumer spending, an upturn in exports, and a smaller decrease in residential fixed investment. Imports climbed higher. The personal consumption expenditures (PCE) price index increased 4.1%, revised down 0.1 percentage point. The PCE price index excluding food and energy prices increased 4.9%, a downward revision of 0.1 percentage point from the fourth quarter.
• Personal income and disposable (after-tax) income rose 0.4% in May, according to the latest report from the Bureau of Economic Analysis. Consumer spending inched up 0.1%, after rising 0.6% in April. Consumer prices for goods and services advanced 0.1% in May, following a 0.4% increase in April. Consumer prices, excluding food and energy rose 0.3%. Over the last 12 months, consumer prices have increased 3.8%, while prices less food and energy rose 4.6%.
• New orders for manufactured durable goods rose for the third consecutive month in May, after climbing 1.7%. Transportation equipment, also up three consecutive months, led the increase, up 3.9% in May. Excluding transportation, new orders increased 0.6%. Excluding defense, new orders increased 3.0%. New orders for capital goods advanced 2.8% in May, bolstered by new orders for nondefense capital goods, which rose 6.7%. New orders for defense capital goods fell 14.7% in May.
• Sales of new single-family homes rose for the third straight month after increasing 12.2% in May. The median sales price of new houses sold in May 2023 was $416,300. The average sales price was $487,300. Inventory for available new single-family homes for sale sat at a 6.7-month supply at the current sales pace.
• The advance report on the international trade in goods balance for May showed a 6.1% decline in the trade deficit from the prior month. Exports fell 0.6%, while imports decreased 2.7%.
• The national average retail price for regular gasoline was $3.571 per gallon on June 26, $0.006 per gallon lower than the prior week’s price and $1.301 less than a year ago. Also, as of June 26, the East Coast price decreased $0.014 to $3.405 per gallon; the Midwest price fell $0.037 to $3.452 per gallon; the Gulf Coast price increased $0.081 to $3.190 per gallon; the Rocky Mountain price rose $0.013 to $3.734 per gallon; and the West Coast price dipped $0.013 to $4.556 per gallon.
• For the week ended June 24, there were 239,000 new claims for unemployment insurance, a decrease of 26,000 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 June 17 was 1.2%, unchanged from the previous week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended June 17 was 1,742,000, a decrease of 19,000 from the previous week’s level, which was revised up by 2,000. States and territories with the highest insured unemployment rates for the week ended June 10 were California (2.3%), New Jersey (2.1%), Massachusetts (1.8%), Puerto Rico (1.8%), New York (1.6%), Oregon (1.6%), Illinois (1.5%), Pennsylvania (1.5%), Rhode Island (1.5%), and Washington (1.5%). The largest increases in initial claims for unemployment insurance for the week ended June 17 were in California (+6,279), New Jersey (+2,412), Connecticut (+1,888), Texas (+1,636), and Puerto Rico (+1,288), while the largest decreases were in Georgia (-2,162), Indiana (-1,983), Missouri (-1,794), South Carolina (-1,672), and Minnesota (-1,576).

Eye on the Week Ahead

The employment figures for June are out this week. The labor sector has continued to show strength this year, averaging nearly 290,000 new jobs per month. Also out this week are the results from the monthly survey of purchasing managers for manufacturing and services. May saw manufacturing slip, while services expanded.

The Markets (as of market close June 23, 2023)

Recession fears sent stocks lower during the holiday-shortened week. Each of the benchmark indexes listed here closed in the red, with the small caps of the Russell 2000 and the Global Dow losing over 2.50%. The downturn ended a three-week rally for the Dow, a five-week winning streak for the S&P 500, and an eight-week surge by the Nasdaq. Concerns about rising interest rates and slowing economic growth weighed on equities. Rising inflation in Europe and Asia prompted more interest rate hikes by many central banks, which also dampened market growth. Ten-year Treasury yields dipped lower, while the dollar eked out a gain. Gold prices declined for the second straight week. Crude oil prices declined on fears of waning demand.

Wall Street ended last Tuesday lower as investors awaited House testimony from Federal Reserve Chair Jerome Powell, hoping to glean any clues as to the prospects of further interest rate hikes. Each of the benchmark indexes listed here closed the session lower, with the Dow falling 0.7%, followed by the Global Dow (-0.6%), the S&P 500 (-0.5%), the Russell 2000 (-0.4%), and the Nasdaq (-0.2%). Crude oil prices slid 1.2% to close at around $70.94 per barrel amid concerns over weakening demand. Ten-year Treasury yields declined 4.0 basis points to settle at 3.72%. The dollar was flat, while gold prices dipped lower.

Last Wednesday saw stocks fall for the second straight session, following Federal Reserve Chair Jerome Powell’s intimation that interest rate increases will continue until inflation recedes to the Fed’s 2.0% target rate. Tech shares slid lower, dragging the Nasdaq down 1.2%. The S&P 500 fell 0.5%, the Dow dipped 0.3%, the Russell 2000 declined 0.2%, and the Global Dow ended where it began. Crude oil prices rebounded, rising nearly 2.0% to reach $72.58 per barrel. Ten-year Treasury yields fell 0.6 basis points to close at 3.72%. The dollar dropped nearly 0.5%, while gold prices fell 0.2%.

Stocks ended last Thursday with mixed results. The Nasdaq (1.0%) and the S&P 500 (0.4%) posted gains, buoyed by rallies in consumer discretionary, information technology, and communications. The small caps of the Russell 2000 (-0.9%) and the Global Dow (-0.4%) slid lower. The Dow was flat. Several central banks, including the Bank of England, raised interest rates, following a spike in inflation data. Ten-year Treasury yields closed at 3.79%, up 7.6 basis points from the previous day. Crude oil prices plunged 4.3%, to $69.38 per barrel, impacted by the aforementioned interest rate hikes. The dollar rose 0.3%, while gold prices fell 1.1%.

Last Friday saw stocks close lower, with each of the benchmark indexes listed here losing value. The Russell 2000 fell the furthest, dropping 1.4%, followed by the Global Dow (-1.1%), the Nasdaq (-1.0%), the S&P 500 (-0.8%), and the Dow (-0.7%). Ten-year Treasury yields slipped 6.0 basis points, settling at 3.73%. Crude oil prices declined 0.4% to end the day at about $69.34 per barrel. The dollar and gold prices advanced.

Stock Market Indexes

Market/Index	2022 Close	Prior Week	As of 6/23	Weekly Change	YTD Change
DJIA	33,147.25	34,299.12	33,727.43	-1.67%	1.75%
Nasdaq	10,466.48	13,689.57	13,492.52	-1.44%	28.91%
S&P 500	3,839.50	4,409.59	4,348.33	-1.39%	13.25%
Russell 2000	1,761.25	1,875.47	1,821.63	-2.87%	3.43%
Global Dow	3,702.71	4,118.61	4,014.15	-2.54%	8.41%
Fed. Funds target rate	4.25%-4.50%	5.00%-5.25%	5.00%-5.25%	0 bps	75 bps
10-year Treasuries	3.87%	3.76%	3.73%	-3 bps	-14 bps
US Dollar-DXY	103.48	102.30	102.88	0.57%	-0.58%
Crude Oil-CL=F	$80.41	$71.57	$69.34	-3.12%	-13.77%
Gold-GC=F	$1,829.70	$1,970.00	$1,929.50	-2.06%	5.45%

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 number of residential building permits issued in May rose 5.2% over the previous month’s total, but was 12.7% below the May 2022 rate. Issued building permits for single-family construction in May rose 4.8% above the April figure. Housing starts increased 21.7% in May and are 5.7% above the May 2022 rate. Single-family housing starts jumped 18.5% in May. The overall rise in housing starts was driven by construction in the Midwest, which saw the number of housing starts increase 66.9% in May. Lastly, housing completions in May were 9.5% above the April total. Single-family housing completions were 3.9% above April’s pace.
• Existing home sales inched up 0.2% in May from April, but were down 20.4% from May 2022. According to the latest report from the National Association of REALTORS®, rising mortgage rates and lower inventory have impacted sales of existing homes. Total housing inventory sat at a three-month supply at the current sales pace, up from 2.9 months in April. The median existing-home price for all housing types in May was $396,100, up from $385,900 in April, but down from $408,600 in May 2022. Sales of single-family homes dipped 0.3% in May and 20.0% from May 2022. The median existing single-family home price was $401,100 in May, 2.8% above the April figure ($390,200), but down 3.4% from May 2022 ($415,400).
• The national average retail price for regular gasoline was $3.577 per gallon on June 19, $0.018 per gallon lower than the prior week’s price and $1.385 less than a year ago. Also, as of June 19, the East Coast price decreased $0.013 to $3.419 per gallon; the Midwest price fell $0.024 to $3.489 per gallon; the Gulf Coast price declined $0.036 to $3.109 per gallon; the Rocky Mountain price increased $0.014 to $3.721 per gallon; and the West Coast price dipped $0.015 to $4.569 per gallon.
• For the week ended June 17, there were 264,000 new claims for unemployment insurance, unchanged from the previous week’s level, which was revised up by 2,000. According to the Department of Labor, the advance rate for insured unemployment claims for the week ended June 10 was 1.2%, unchanged from the previous week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended June 10 was 1,759,000, a decrease of 13,000 from the previous week’s level, which was revised down by 3,000. States and territories with the highest insured unemployment rates for the week ended June 3 were California (2.3%), New Jersey (2.1%), Massachusetts (1.9%), New York (1.6%), Oregon (1.6%), Puerto Rico (1.6%), Rhode Island (1.5%), Washington (1.5%), Illinois (1.4%), Nevada (1.4%), and Pennsylvania (1.4%). The largest increases in initial claims for unemployment insurance for the week ended June 10 were in Texas (+7,327), Minnesota (+3,653), Pennsylvania (+3,455), Georgia (+1,918), and Indiana (+1,591), while the largest decreases were in Tennessee (-716), Massachusetts (-655), Idaho (-313), and Iowa (-200).

Eye on the Week Ahead

There’s plenty of important economic data available this week, including two of the more important economic indicators; gross domestic product and the report on personal income and outlays. The third and final iteration of first-quarter GDP is released this week. The latest data showed the economy advanced at a rate of 1.3%. Also, the report on personal income and outlays includes two important sub-categories: personal consumption expenditures and the personal consumption expenditures price index. Consumer spending rose 0.8% in April, while consumer prices for goods and services increased 0.4%.

The Markets (as of market close June 16, 2023)

Stocks advanced for the third straight week, as each of the benchmark indexes listed here climbed higher. Inflationary pressures may finally be subsiding, according to the latest data (see below). In addition, the Federal Reserve held interest rates at their current range following their meeting last week, although there are indications that at least one, and possibly two more rate hikes are in store by the end of the year. With more interest rate hikes forecast, long- and short-term Treasury yields advanced. Despite a dip at the end of the week, the Nasdaq and the S&P 500 had their best week since March. Crude oil prices ebbed and flowed throughout much of the week, ultimately rallying to close higher. The dollar and gold prices declined.

Wall Street saw stocks rally last Monday ahead of inflation data and the Federal Reserve meeting. Traders may have acted based on the anticipation that the Fed would not hike interest rates. Information technology, consumer discretionary, and communication services led the market sectors. The Nasdaq gained 1.5%, the S&P 500 rose 0.9%, the Dow added 0.6%, the Russell 2000 advanced 0.4%, and the Global Dow increased 0.3%. Crude oil prices dropped 4.2%, settling at about $67.24 per barrel, the lowest price since December 2021. Ten-year Treasury yields inched up 2.0 basis points to 3.76%. The dollar climbed marginally higher, while gold prices dipped lower.

Stocks followed last Monday’s solid performance with another rally last Tuesday. The Russell 2000, which is generally sensitive to economic data, jumped 1.2% following last Tuesday’s Consumer Price Index (see below). The Global Dow rose 0.9%, the Nasdaq gained 0.8%, the S&P 500 advanced 0.7%, and the Dow edged up 0.4%. With the possibility that the Federal Reserve might pause interest rate increases, the dollar and gold prices slid lower. The yield on 10-year Treasuries rose 7.4 basis points to close at 3.83%. Crude oil prices jumped 3.1% to reach $69.20 per barrel.

Last Wednesday saw stocks end mixed, with the Dow sliding 0.7% and the Russell 2000 falling 1.2%, while the Global Dow (0.7%), the Nasdaq (0.4%), and the S&P 500 (0.1%) closed higher. The day began with a moderate selloff, only to pick up the pace following the Federal Reserve’s policy announcement (see below). The yield on 10-year Treasuries dipped 4.3 basis points to close at 3.79%. The dollar and gold prices declined. Crude oil prices gave back gains from the previous day after falling 1.1% to settle at about $68.68 per barrel.

Investors moved to equities last Thursday, driving each of the benchmark indexes listed here higher. Inflation indicators out last week showed price pressures may be cooling, although the Federal Reserve is suggesting more interest rate hikes are in the offing this year. The Dow led the indexes, climbing 1.3%, followed by the S&P 500 and the Nasdaq (1.2%), the Russell 2000 (0.9%), and the Global Dow (0.7%). In what is proving to be a volatile week, crude oil prices reversed the prior day’s trend, closing up 3.4% to about $70.58 per barrel. Ten-year Treasury yields fell 6.8 basis points, closing at 3.72%. The dollar fell, while gold prices inched higher.

Stocks slid lower to close out the week. Of the benchmark indexes listed here, only the Global Dow posted a gain, advancing 0.2% by the close of trading last Friday. The Russell 2000 (-0.8%), the Nasdaq (-0.7%), the S&P 500 (-0.4%), and the Dow (-0.3%) closed lower. Ten-year Treasury yields added 4.1 basis points to close at 3.76%. Crude oil prices rose for the second straight day, advancing $1.04, or 1.5%. The dollar inched higher, while gold prices dipped lower.

Stock Market Indexes

Market/Index	2022 Close	Prior Week	As of 6/16	Weekly Change	YTD Change
DJIA	33,147.25	33,876.78	34,299.12	1.25%	3.48%
Nasdaq	10,466.48	13,259.14	13,689.57	3.25%	30.79%
S&P 500	3,839.50	4,298.86	4,409.59	2.58%	14.85%
Russell 2000	1,761.25	1,865.71	1,875.47	0.52%	6.49%
Global Dow	3,702.71	4,005.54	4,118.61	2.82%	11.23%
Fed. Funds target rate	4.25%-4.50%	5.00%-5.25%	5.00%-5.25%	0 bps	75 bps
10-year Treasuries	3.87%	3.74%	3.76%	2 bps	-11 bps
US Dollar-DXY	103.48	103.57	102.30	-1.23%	-1.14%
Crude Oil-CL=F	$80.41	$70.38	$71.57	1.69%	-10.99%
Gold-GC=F	$1,829.70	$1,975.00	$1,970.00	-0.25%	7.67%

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

• In a move that was not totally unexpected, the Federal Open Market Committee decided to maintain the present target range for the federal funds rate at 5.00%-5.25%. The Committee noted that, while economic activity continued to expand and job growth was robust, inflation remained elevated. However, the FOMC proffered that it was unable to determine the effects that tighter credit conditions would have on households and businesses. To that extent, holding the target range steady allows the Committee to assess additional information and its implications for monetary policy. In determining the direction of its monetary policy going forward, the Committee will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments.
• The Consumer Price Index edged up 0.1% in May, slightly below most expectations and under the April increase of 0.4%. For the 12 months ended in May, the CPI rose 4.0%, the smallest 12-month increase since the period ended March 2021. The index for shelter (+0.6%) was the largest contributor to the monthly increase, followed by an increase in the index for used cars and trucks (+4.4%). The food index increased 0.2% in May after being unchanged in the previous two months. The energy index declined 3.6% in May. The CPI less food and energy rose 0.4% in May, the same increase as in April and March. This report might support a pause in interest rate increases by the Federal Reserve.
• Prices producers received for the sale of goods and services declined 0.3% in May after advancing 0.2% in April. For the 12 months ended in May, producer prices moved up 1.1%. The decrease in producer prices is attributable to a 1.6% drop in prices for goods, the largest decrease since July 2022. Prices for services increased 0.2% in May. Producer prices less foods, energy, and trade services were unchanged in May after inching up 0.1% in April. For the 12 months ended in May, prices less foods, energy, and trade services increased 2.8%. In May, prices for energy fell 6.8%, while prices for food decreased 1.3%.
• In yet another sign that inflation might be declining, May saw import prices fall 0.6% and export prices decline 1.9%, according to the latest report from the Bureau of Labor Statistics. Import prices fell 5.9% for the year ended in May, the largest 12-month decline since the comparable period ended May 2020. Import prices for fuel fell 6.4% in May after rising 4.1% in April. This is the largest one-month drop in import fuel prices since August 2022. Nonfuel import prices dipped 0.1% in May. Nonfuel import prices declined 1.6% since May 2022. The May decrease in export prices was the largest monthly decline since December 2022. In May, lower prices for nonagricultural exports and agricultural exports each contributed to the overall decrease in export prices. Export prices fell 10.1% for the year ended in May, the largest 12-month decline since the series was first published in September 1984.
• Sales at the retail level rose 0.3% in May and have increased 1.6% since May 2022. Retail trade sales also increased 0.3% in May. Nonstore retail sales were up 6.5% from last year, while sales at food services and drinking places were up 8.0% from May 2022.
• Industrial production declined 0.2% in May, following two consecutive monthly increases. Most of the major market groups declined in May, with final products and materials down 0.1% and 0.3%, respectively. Manufacturing edged up 0.1% in May, while the indexes for utilities and mining fell 1.8% and 0.4%, respectively. Despite the downturn in May, total industrial production was 0.2% above its year-earlier level.
• The government deficit for May was $240.0 billion, well above the May 2022 deficit of $66.2 billion. In May, government receipts were $307.5 billion and expenditures totaled $547.8 billion. Through the first eight months of the fiscal year, the government deficit sits at $1,164.9 trillion, significantly higher than the $426.2 billion deficit over the comparable period from the previous fiscal year.
• The national average retail price for regular gasoline was $3.595 per gallon on June 12, $0.054 per gallon higher than the prior week’s price but $1.411 less than a year ago. Also, as of June 12, the East Coast price increased $0.022 to $3.432 per gallon; the Midwest price rose $0.083 to $3.513 per gallon; the Gulf Coast price advanced $0.080 to $3.145 per gallon; the Rocky Mountain price increased $0.053 to $3.707 per gallon; and the West Coast price rose $0.061 to $4.584 per gallon.
• For the week ended June 10, there were 262,000 new claims for unemployment insurance, unchanged 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 June 3 was 1.2%, unchanged from the previous week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended June 3 was 1,775,000, an increase of 20,000 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 May 27 were California (2.2%), New Jersey (2.1%), Massachusetts (1.9%), New York (1.6%), Oregon (1.6%), Puerto Rico (1.5%), Rhode Island (1.5%), Washington (1.5%), Alaska (1.4%), and Illinois (1.4%). The largest increases in initial claims for unemployment insurance for the week ended June 3 were in Ohio (+6,447), California (+4,103), Minnesota (+2,693), Pennsylvania (+2,069), and Tennessee (+732), while the largest decreases were in Connecticut (-2,544), New York (-1,325), Texas (-617), New Jersey (-560), and Oregon (-450).

Eye on the Week Ahead

This week focuses on the housing sector. The May figures on housing starts and building permits are out this week. In April, the number of issued building permits declined for all housing types, however building permits for single-family construction advanced over 3.0%. Housing starts increased for all housing types. The latest data on existing home sales is also available this week. Sales of existing homes declined in April, as total housing inventory sat at just below three months, while existing home prices increased.

The Markets (as of market close June 9, 2023)

Stocks closed another week higher, with each of the benchmark indexes listed here posting gains. With last week’s advance, the Nasdaq has risen for seven consecutive weeks, while the S&P 500 hit its highest level since August 2022. The S&P 500 is more than 20% above its October 2022 low, putting it in bull territory. The Russell 2000 led the indexes, despite falling at the end of last week. The Global Dow also gained more than 1.0%. Long-term bond prices held steady, with yields on 10-year Treasuries inching up 5.0 basis points on the week. Crude oil prices fell for the second consecutive week. The dollar dipped lower, while gold prices edged higher.

Stocks ended last Monday lower, as late-day selling wiped out gains from earlier in the day. The small caps of the Russell 2000 took the biggest hit among the benchmark indexes listed here, falling 1.3%. The Dow lost 0.6%, the S&P 500 slipped 0.2%, while the Global Dow and the Nasdaq dipped less than 0.1%. The dollar and yields on 10-year Treasuries were flat, while gold prices edged higher. Crude oil prices barely moved, closing at $71.80 per barrel, even after Saudi Arabia indicated it would cut oil output by 1 million barrels per day starting in July. The remaining OPEC+ countries agreed to hold to their current oil production through the remainder of the year.

Wall Street rebounded last Tuesday, with several sectors performing well including financials and consumer discretionary. The Russell 2000 more than recouped its losses from the previous day, climbing 2.7%. The Global Dow and the Nasdaq rose 0.4%, followed by the S&P 500 (0.2%). The Dow ended the session flat. Yields on 10-year Treasuries remained at 3.69% for the third straight session. Crude oil prices fell nearly 1.0% to close at around $71.52 per barrel. The dollar and gold prices advanced.

Stocks closed with mixed results last Wednesday. A downturn in mega-cap tech stocks pulled the Nasdaq (-1.30%) and the S&P 500 (-0.4%) lower. The Russell 2000 jumped 1.8%, the Dow added 0.3%, while the Global Dow eked out a 0.1% gain. Bond prices slid, driving yields higher, with 10-year Treasury yields gaining 8.5 basis points to close at 3.78%. The Bank of Canada hiked interest rates in a somewhat unexpected move, which may have led some investors to believe the Fed is not done with its rate increases. Crude oil prices rose 1.1% to hit $72.52 per barrel. The dollar was flat, while gold prices slumped 1.3% to $1,956.20 per ounce.

Last Thursday saw mega caps recover much of Wednesday’s losses, helping to lift the benchmark indexes higher. The Nasdaq added 1.0%, followed by the S&P 500 (0.6%), with the Dow and the Global Dow gaining 0.5%. The small caps of the Russell 2000 edged lower, falling 0.4%. Ten-year Treasury yields dipped 7.0 basis points to close at 3.71%. Crude oil prices continued to ride an ebb and flow, following last Wednesday’s gains by falling 0.6% to $70.89 per barrel. The dollar and gold prices were flat.

Stocks ended last week on a high note (expect for small-cap stocks). While last Friday’s gains enjoyed by most of the benchmark indexes listed here weren’t particularly notable, each index added between 0.1%-0.2% by the close of trading. Only the small-cap heavy Russell 2000 closed the session in the red, falling 0.8%. Ten-year Treasury yields settled at 3.74%, up about 3.1 basis points from the previous day’s close. Crude oil prices fell 1.3% to $70.38 per barrel. The dollar advanced, while gold prices slid marginally.

Stock Market Indexes

Market/Index	2022 Close	Prior Week	As of 6/9	Weekly Change	YTD Change
DJIA	33,147.25	33,762.76	33,876.78	0.34%	2.20%
Nasdaq	10,466.48	13,240.77	13,259.14	0.14%	26.68%
S&P 500	3,839.50	4,282.37	4,298.86	0.39%	11.96%
Russell 2000	1,761.25	1,830.91	1,865.71	1.90%	5.93%
Global Dow	3,702.71	3,953.32	4,005.54	1.32%	8.18%
Fed. Funds target rate	4.25%-4.50%	5.00%-5.25%	5.00%-5.25%	0 bps	75 bps
10-year Treasuries	3.87%	3.69%	3.74%	5 bps	-13 bps
US Dollar-DXY	103.48	104.05	103.57	-0.46%	0.09%
Crude Oil-CL=F	$80.41	$71.92	$70.38	-2.14%	-12.47%
Gold-GC=F	$1,829.70	$1,964.90	$1,975.00	0.51%	7.94%

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

• In May, business activity in the services sector expanded at the fastest pace since April 2022, according to the S&P Global US Services PMI™. Increased demand drove new orders in both the domestic and export markets, which drove firms to increase their hiring activity. Survey respondents noted that greater client confidence supported the expansion in new orders, as customers, especially in consumer markets, were more inclined to spend.
• In April, the goods and services trade deficit increased by $14.0 billion to $74.6 billion. Exports fell $9.2 billion, while imports increased $4.8 billion. Year to date, the goods and services deficit decreased $86.5 billion, or 23.9%, from the same period in 2022. Exports increased $55.9 billion, or 5.8%. Imports decreased $30.6 billion, or 2.3%.
• The national average retail price for regular gasoline was $3.541 per gallon on June 5, $0.030 per gallon lower than the prior week’s price and $1.335 less than a year ago. Also, as of June 5, the East Coast price decreased $0.017 to $3.410 per gallon; the Midwest price declined $0.054 to $3.430 per gallon; the Gulf Coast price fell $0.056 to $3.065 per gallon; the Rocky Mountain price advanced $0.032 to $3.654 per gallon; and the West Coast price decreased $0.011 to $4.523 per gallon.
• For the week ended June 3, there were 261,000 new claims for unemployment insurance, an increase of 28,000 from the previous week’s level, which was revised up by 1,000. This is the highest level for initial claims since October 30, 2021, when it was 264,000. According to the Department of Labor, the advance rate for insured unemployment claims for the week ended May 27 was 1.2%, unchanged from the previous week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended May 27 was 1,757,000, a decrease of 37,000 from the previous week’s level, which was revised down by 1,000. States and territories with the highest insured unemployment rates for the week ended May 20 were California (2.2%), New Jersey (2.1%), Massachusetts (1.8%), New York (1.6%), Oregon (1.6%), Puerto Rico (1.5%), Rhode Island (1.5%), Washington (1.5%), Alaska (1.4%), and Illinois (1.4%). The largest increases in initial claims for unemployment insurance for the week ended May 27 were in Ohio (+2,159), Texas (+1,229), New York (+1,177), Illinois (+1,117), and Missouri (+962), while the largest decreases were in California (-771), Arkansas (-455), Iowa (-419), North Carolina (-388), and Michigan (-365).

Eye on the Week Ahead

The Federal Open Market Committee meets this week. Many speculate that the Committee will not raise interest rates at this time. However, it is unlikely that the abatement of interest rate increases will last past the July meeting.

The Markets (as of market close June 2, 2023)

Stocks began the week on a downturn, but rallied later to end last week higher. Each of the benchmark indexes listed here posted solid weekly gains, led by the Russell 2000, followed by the Nasdaq, the Dow, the S&P 500, and the Global Dow. Investors began the week concerned that the debt ceiling agreement between President Biden and House Speaker McCarthy would not pass the House and Senate. However, both chambers of Congress passed the debt ceiling bill later in the week, removing the risk of government default. In addition, investors may have been encouraged by a strong jobs report (see below), which is somewhat paradoxical as a strong labor market could support more interest rate hikes by the Federal Reserve. Nevertheless, Wall Street ended the week on a positive note. The Nasdaq rose for the sixth consecutive week, the longest weekly winning streak since January 2020. Despite a surge last Thursday and Friday, crude oil prices ended the week lower. The yield on 10-year Treasuries slipped lower, while the dollar changed little. Gold prices advanced nearly 1.0%.

Stocks were mixed last Tuesday following the Memorial Day holiday. Despite an apparent debt ceiling agreement between President Biden and House Speaker McCarthy, investors remained jittery ahead of a Congressional vote. The Nasdaq (0.3%) was the only benchmark index of those listed here to post a gain. The S&P 500 ended the session flat, the Russell 2000 and the Global Dow fell 0.3%, and the Dow dipped 0.2%. Ten-year Treasury yields dropped 11.0 basis points to close at 3.70%. The dollar dipped lower, while gold prices rose 0.8%. Crude oil prices declined 4.0% to $69.75 per barrel, impacted by debt ceiling worries and reported tensions between Saudi Arabia and Russia ahead of an important OPEC+ meeting.

Wall Street endured another sour day last Wednesday as investors remained concerned about the passage of the debt ceiling bill. In addition, the latest JOLTS report (see below) showed the number of job openings increased, raising the prospects of another interest rate hike by the Federal Reserve in June. The Global Dow fell 1.3%, likely impacted by China’s lackluster industrial production report. The Russell 2000 dipped 1.0%, the Nasdaq and the S&P 500 lost 0.6%, while the Dow slipped 0.4%. Bond prices jumped higher, pulling yields lower. Ten-year Treasury yields lost 6.3 basis points to close at 3.63%. Crude oil prices fell 2.5% to $67.71 per gallon. The dollar and gold prices advanced.

Equities advanced last Thursday as stocks kicked off June on an upswing, with each of the benchmark indexes listed here posting notable gains. No doubt investors were encouraged by the House’s passage of the debt ceiling bill. The Global Dow (1.5%) led the way, followed by the Nasdaq (1.3%), the Russell 2000 (1.1%), the S&P 500 (1.00%), and the Dow (0.5%). Ten-year Treasury yields continued to trend lower, falling 2.9 basis points to settle at 3.60%. Crude oil prices rebounded, climbing 3.1% to reach $70.18 per barrel. The dollar slid lower, while gold prices advanced 0.7%.

Stocks pushed higher last Friday on positive jobs data (see below) and the passage of the debt ceiling bill by Congress. The Russell 2000 jumped 3.6%, followed by the Dow (2.1%), which enjoyed its best day of the year. The Global Dow rose 1.7%, the S&P 500 advanced 1.5%, and the Nasdaq increased 1.1%. Ten-year Treasury yields closed at 3.69%. Crude oil prices increased 2.7% to $71.97 per barrel, the dollar edged higher, while gold prices declined.

Stock Market Indexes

Market/Index	2022 Close	Prior Week	As of 6/2	Weekly Change	YTD Change
DJIA	33,147.25	33,093.34	33,762.76	2.02%	1.86%
Nasdaq	10,466.48	12,975.69	13,240.77	2.04%	26.51%
S&P 500	3,839.50	4,205.45	4,282.37	1.83%	11.53%
Russell 2000	1,761.25	1,773.02	1,830.91	3.27%	3.96%
Global Dow	3,702.71	3,894.49	3,953.32	1.51%	6.77%
Fed. Funds target rate	4.25%-4.50%	5.00%-5.25%	5.00%-5.25%	0 bps	75 bps
10-year Treasuries	3.87%	3.81%	3.69%	-12 bps	-18 bps
US Dollar-DXY	103.48	104.21	104.05	-0.15%	0.55%
Crude Oil-CL=F	$80.41	$72.78	$71.92	-1.18%	-10.56%
Gold-GC=F	$1,829.70	$1,947.00	$1,964.90	0.92%	7.39%

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 labor sector remained strong in May. According to the latest data from the Bureau of Labor Statistics, there were 339,000 new jobs added in May, in line with the average monthly gain of 341,000 over the prior 12 months. In May, job gains occurred in professional and business services, government, health care, construction, transportation and warehousing, and social assistance. Despite the new hires, May saw the unemployment rate rise by 0.3 percentage point to 3.7%, and the number of unemployed persons increase by 440,000 to 6.1 million. The unemployment rate has ranged from 3.4% to 3.7% since March 2022. The labor force participation rate, at 62.6% has not changed over the past three months. The employment-population ratio dipped 0.1 percentage point to 60.3%. In May, average hourly earnings rose by $0.11, or 0.3%, to $33.44. Over the past 12 months, average hourly earnings have increased by 4.3%. The average workweek edged down by 0.1 hour to 34.3 hours in May.
• The number of job openings edged up 358,000 to 10.1 million in April. Job openings increased in retail trade, health care and social assistance, and transportation, warehousing, and utilities. In April, the number of hires changed little at 6.1 million. Total separations, which include quits, layoffs, discharges, and other separations, declined 286,000 to 5.7 million.
• Manufacturing slowed in May after expanding in April. The S&P Global US Manufacturing Purchasing Managers’ Index™ posted 48.4 in May, down from 50.2 in April. A reading under 50 indicates contraction. A reduction in new orders and muted overall demand slowed manufacturing. Despite the regression in demand, manufacturers increased output and employment, partly to fulfill existing backlogs of work, and to take advantage of a reduction in input costs to manufacturers, which fell for the first time since May 2020.
• The national average retail price for regular gasoline was $3.571 per gallon on May 29, $0.037 per gallon higher than the prior week’s price but $1.053 less than a year ago. Also, as of May 29, the East Coast price increased $0.046 to $3.427 per gallon; the Gulf Coast price rose $0.081 to $3.121 per gallon; the Midwest price increased $0.015 to $3.484 per gallon; the Rocky Mountain price advanced $0.043 to $3.622 per gallon; and the West Coast price climbed $0.020 to $4.534 per gallon.
• For the week ended May 27, there were 232,000 new claims for unemployment insurance, an increase of 2,000 from the previous week’s level, which was revised up by 1,000. According to the Department of Labor, the advance rate for insured unemployment claims for the week ended May 20 was 1.2%, unchanged from the previous week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended May 20 was 1,795,000, an increase of 6,000 from the previous week’s level, which was revised down by 5,000. States and territories with the highest insured unemployment rates for the week ended May 13 were California (2.2%), New Jersey (2.1%), Massachusetts (2.0%), New York (1.6%), Oregon (1.6%), Puerto Rico (1.6%), Alaska (1.5%), Rhode Island (1.5%), Washington (1.5%), and Illinois (1.4%). The largest increases in initial claims for unemployment insurance for the week ended May 20 were in Texas (+2,808), Connecticut (+2,091), Iowa (+621), Pennsylvania (+540), and Missouri (+324), while the largest decreases were in Massachusetts (-2,127), Michigan (-1,024), Illinois (-1,000), New York (-625), and Oregon (-565).

Eye on the Week Ahead

There is very little economic data available during the first full week of June. The services purchasing managers’ index for May is available. April saw growth in the services sector, with new orders posting their best rate of growth since May 2022. Also out this week is the report on international trade in goods and services for April. March saw the trade deficit narrow by about $64.0 billion, as both imports and exports edged higher.

The Markets (as of market close May 31, 2023)

The markets in May were marked by ongoing volatility. Inflation, questions over the direction of monetary policy, and slower liquidity growth impacted equities. The ongoing debt ceiling negotiations cast a cloud over financial markets for much of May. Investors worried about the ramifications of inaction as the June 5 deadline loomed. Even after the president and House speaker reached an agreement toward the end of May, concerns persisted over whether Congress would pass the bill to lift the $31.4 trillion U.S. debt ceiling.

Tech shares and artificial intelligence stocks captured the attention of investors in May. One prominent chipmaker in particular saw its market capitalization briefly touch $1 trillion, with its stock up 36.0% in May. The Nasdaq was the clear winner in May among the benchmark indexes listed here, while the S&P 500 was able to eke out a monthly gain. The Dow, the Russell 2000, and the Global Dow finished the month lower. Year to date, the Nasdaq was well ahead of its 2022 closing value, followed by the S&P 500 and the Global Dow. The Dow and the Russell 2000 have fallen below their 2022 year-end values.

Investors saw the Federal Reserve hike the federal funds target rate 25 basis points in May. Whether the Fed raises rates again in June is open to conjecture. Several Fed officials have intimated that a pause may be appropriate, although inflation continues to far exceed the Fed’s 2.0% target. The labor market remained tight with the addition of 253,000 new jobs in April, coupled with a rise in the number of job openings, which fueled rate-hike jitters.

In May, there was a clear line between winners and losers among the market sectors. Information technology (10.5%), communication services (6.3%), and consumer discretionary (4.0%) moved higher. The remaining sectors declined, led by energy (-8.9%), utilities (-7.3%), consumer staples (-6.3%), and materials (-6.0%).

Industrial production in general, and manufacturing activity in particular, expanded in May. Durable goods orders increased for the second straight month in April. The purchasing managers’ indexes for both manufacturing and services rose in May, with manufacturing exceeding 50.0 for the first time in six months (a reading of 50.0 or higher indicates expansion).

Inflationary indicators showed price pressures remained somewhat elevated. Both the Consumer Price Index and the Personal Consumption Expenditures Price Index rose 0.4% in May.

Bond prices fell lower in May, with yields increasing over the previous month. Ten-year Treasury yields rose 18 basis points from April. The 2-year Treasury yield ended May at 4.42%, up 42 basis points from a month earlier. The dollar advanced against a basket of world currencies. Gold prices ended May lower.

Crude oil prices declined in May marking the fifth monthly decrease in the last six months. Oil prices have fallen due to an unusually warm winter in the United States and Europe, ongoing monetary tightening, U.S. bank failures, and China’s slowing economic recovery. The retail price of regular gasoline was $3.656 per gallon on April 24, $0.235 higher than the price a month earlier but $0.451 lower than a year ago.

Stock Market Indexes

Market/Index	2022 Close	Prior Month	As of May 31	Monthly Change	YTD Change
DJIA	33,147.25	34,098.16	32,908.27	-3.49%	-0.72%
Nasdaq	10,466.48	12,226.58	12,935.29	5.80%	23.59%
S&P 500	3,839.50	4,169.48	4,179.83	0.25%	8.86%
Russell 2000	1,761.25	1,768.99	1,749.65	-1.09%	-0.66%
Global Dow	3,702.71	3,984.56	3,839.44	-3.64%	3.69%
Fed. Funds target rate	4.25%-4.50%	4.75%-5.00%	5.00%-5.25%	25 bps	75 bps
10-year Treasuries	3.87%	3.45%	3.63%	18 bps	-24 bps
US Dollar-DXY	103.48	101.67	104.23	2.52%	0.72%
Crude Oil-CL=F	$80.41	$76.73	$67.71	-11.76%	-15.79%
Gold-GC=F	$1,829.70	$1,997.90	$1,981.20	-0.84%	8.28%

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 253,000 in April from March compared with an average monthly gain of 290,000 over the prior six months. In April, employment continued to trend upward in professional and business services, health care, leisure and hospitality, and social assistance. The unemployment rate edged down 0.1 percentage point to 3.4%. In April, the number of unemployed persons fell by 182,000 to 5.7 million. The employment-population ratio, at 60.4%, and the labor force participation rate, at 62.6%, were unchanged in April from the previous month. Both measures have shown little net change since early 2022. In April, average hourly earnings increased by $0.16 to $33.36. Over the past 12 months ended in April, average hourly earnings rose by 4.4%. The average workweek, at 34.4 hours, was unchanged in April.
• There were 229,000 initial claims for unemployment insurance for the week ended May 20, 2023. The total number of workers receiving unemployment insurance was 1,794,000. By comparison, over the same period last year, there were 215,000 initial claims for unemployment insurance, and the total number of claims paid was 1,432,000.
• FOMC/interest rates: The Federal Open Market Committee raised the federal funds target range rate by 25 basis points in May. The Committee noted that inflation remained elevated, while economic activity expanded at a modest pace in the first quarter. Job gains have been robust, and the unemployment rate remained low. Despite regional bank closures and takeovers, the FOMC statement indicated that the U.S. banking system was sound and resilient. Overall, the FOMC will base its decisions on available data, and “will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.” While future rate hikes are not off the table, the Committee intimated that a pause may be appropriate.
• GDP/budget: Economic growth is slowing, as gross domestic product increased only 1.3% in the first quarter, according to the second estimate from the Bureau of Economic Analysis. GDP rose 2.6% in the fourth quarter. The deceleration in first-quarter GDP compared to the previous quarter primarily reflected downturns in private inventory investment and residential fixed investment. Consumer spending, as measured by personal consumption expenditures, rose 3.8% in the first quarter compared to a 1.0% increase in the fourth quarter. Consumer spending on long-lasting durable goods jumped 16.4% in the first quarter after decreasing 1.3% in the prior quarter. Spending on services rose 2.5% (1.6% in the fourth quarter). Nonresidential fixed investment increased 1.4% after climbing 4.0% in the fourth quarter. Residential fixed investment fell 5.4% in the first quarter, significantly better than the 25.1% decrease in the fourth quarter. Exports increased 5.2% in the first quarter, following a decrease of 3.7% in the fourth quarter. Imports, which are a negative in the calculation of GDP, increased 4.0% in the first quarter after declining 5.5% in the previous quarter. Consumer prices increased 4.2% in the first quarter compared to a 3.7% advance in the fourth quarter. Excluding food and energy, consumer prices advanced 5.0% in the first quarter (4.4% in the fourth quarter).
• April is a month that usually sees the federal budget enjoy a surplus, primarily attributable to income tax receipts. This April was no different, as the federal budget had a $176.2 billion surplus, well short of the April 2022 surplus of $308.2 billion. The deficit for the first seven months of fiscal year 2023, at $924.5 billion, is $564.5 billion more than the comparable period of the previous fiscal year. In April, government receipts totaled $638.5 billion and $2.7 trillion for the current fiscal year. Government outlays were $462.3 billion in April and $3.6 trillion through the first seven months of fiscal year 2023. By comparison, receipts in April 2022 were $863.6 billion and $3.0 trillion through the first seven months of the previous fiscal year. Expenditures were $555.4 billion in April 2022 and $3.3 trillion through the comparable period in FY22.
• Inflation/consumer spending: According to the latest Personal Income and Outlays report, the Personal Consumption Expenditures Price Index increased 0.4% in April and 4.4% since April 2022. Prices excluding food and energy also advanced 0.4% in April, following increases of 0.3% in March and 0.4% in February. Prices for goods rose 0.3%, while prices for services increased 0.4% in April. Prices for food dipped 0.1%, while energy prices increased 0.7%. Since April 2022, consumer prices for food increased 6.9%, while energy prices declined 6.3%. Personal income rose 0.4% in April, 0.1 percentage point greater than the March increase. Disposable personal income increased 0.4% in April after advancing 0.3% in March. Consumer spending increased 0.8% in April, after inching up 0.1% in the previous month.
• The Consumer Price Index rose 0.4% in April after increasing 0.1% in March. Over the 12 months ended in April, the CPI advanced 4.9%, down from 5.0% for the year ended in March. Excluding food and energy prices, the CPI rose 0.4% in April and 5.5% over the last 12 months. Contributing to the April CPI advance were increases in prices for shelter (0.4%), used cars and trucks (4.4%), and gasoline (3.0%). In April, food prices were flat for the second straight month, although they’re up 7.7% over the last 12 months. For the 12 months ended in April, energy prices decreased 5.1%, while prices for shelter advanced 8.1%.
• Prices that producers received for goods and services increased 0.2% in April, following a 0.4% decline in the previous month. Producer prices increased 2.3% for the 12 months ended in April. The Producer Price Index saw prices for both goods (0.2%) and services (0.3%) increase. Producer prices less foods, energy, and trade services edged up 0.2% in April after increasing 0.1% in the previous month. Prices less foods, energy, and trade services advanced 3.4% for the year ended in April after increasing 3.7% from the 12 months ended in March.
• Housing: Sales of existing homes decreased 3.4% in April. Since April 2022, existing-home sales dropped 23.2%. According to the report from the National Association of Realtors®, job gains, a dearth of inventory, and fluctuating mortgage rates have contributed to the decline in sales of existing homes. The median existing-home price was $388,800 in April, up from $375,400 in March but lower than the April 2022 price of $395,500. In April, unsold inventory of existing homes represented a 2.9-month supply at the current sales pace, up from the March pace of 2.6 months. Sales of existing single-family homes dropped 3.5% in April and 22.4% from April 2022. The median existing single-family home price was $393,300 in April, up from the March price of $379,500 but well below the April 2022 price of $401,700.
• New single-family home sales advanced in April, climbing 4.1%, marking the second consecutive monthly increase. Sales were up 11.8% from a year earlier. The median sales price of new single-family houses sold in April was $420,800 ($455,800 in March). The April average sales price was $501,000 ($559,200 in March). The inventory of new single-family homes for sale in April decreased to 7.6 months, down from 7.9 months in March.
• Manufacturing: Industrial production rose 0.5% in April after moving sideways the previous two months. Manufacturing increased 1.0% in April, bolstered by a strong gain in the output of motor vehicles and parts. In April, mining rose 0.6%, while utilities dropped 3.1%, as milder temperatures in April lowered demand for heating. Total industrial production in April was 0.2% above its year-earlier level. Most major market groups recorded growth in April. The production of consumer durables was boosted by an 8.4% jump in the output of automotive products. Elsewhere, there were gains in business equipment (1.2%), defense and space equipment (1.1%), non-energy materials (0.8%), and construction supplies (0.4%). In contrast, nondurable consumer goods, business supplies, and energy materials all posted slight declines in April.
• New orders for durable goods increased 1.1% in April after increasing 3.3% in March. New orders for transportation equipment led the overall increase, advancing 3.7% in April, marking the second consecutive monthly advance. Excluding transportation, new orders decreased 0.2% in April. Excluding defense, new orders fell 0.6%. Over the past 12 months, new orders for durable goods have increased 2.6%.
• Imports and exports: April saw both import and export prices increase. Import prices rose 0.4%, following an 0.8% decline in March. The April increase in import prices was the first since December 2022. Higher fuel prices drove the April increase in import prices. Despite the April increase, prices for imports declined 4.8% over the past year, the largest 12-month drop since the index declined 6.3% for the 12 months ended in May 2020. Import fuel prices increased 4.5% in April, following a 3.9% drop in March. The April increase in import fuel prices was the first monthly advance since June 2022. Nonfuel import prices were unchanged in April after decreasing 0.5% in March. Export prices advanced 0.2% in April, after declining 0.6% in the previous month. Higher prices in April for agricultural exports and nonagricultural exports each contributed to the overall increase. Export prices decreased 5.9% for the year ended in April, the largest 12-month decline since a 6.7% drop for the 12 months ended in May 2020.
• The international trade in goods deficit rose $14.1 billion, or 17.0%, in April over March. Exports of goods for April were $9.5 billion, or 5.5%, below March exports. Imports of goods were $4.5 billion, or 1.8%, more than March imports. The April decrease in exports was attributable to several categories, including other goods (-11.9%), industrial supplies (-9.8%), consumer goods (-7.4%), and foods, feeds, and beverages (-5.2%). The increase in April imports was largely driven by a 6.0% advance in automotive vehicles.
• The latest information on international trade in goods and services, released May 4, was for March and revealed that the goods and services trade deficit was $64.2 billion, a decrease of 9.1% from the February deficit. March exports were $256.2 billion, 2.1% more than February exports. March imports were $320.4 billion, 0.3% below February imports. For the 12 months ended in March, the goods and services deficit decreased 27.6%. Exports increased 8.7%, while imports decreased 1.6%.
• International markets: China’s post-pandemic economic recovery showed signs of sputtering in May. Weak factory activity further evidenced China’s economic slowdown. Elsewhere, Europe’s largest economy has slipped into recession. Germany’s economy dropped 0.3% in the first quarter after contracting 0.5% at the end of 2022. In Germany, consumer spending declined, falling 1.2% in the first quarter, as large price increases, particularly for food and energy, slowed personal consumption expenditures. Rising inflation continued to be an issue in Europe in May. However, the European Central Bank slowed the pace of its interest-rate hikes, raising the key rate by 0.25 percentage point to 3.25%, still a near 15-year high. For May, the STOXX Europe 600 Index decreased 2.2%; the United Kingdom’s FTSE slid 4.2%; Japan’s Nikkei 225 Index gained 5.9%; and China’s Shanghai Composite Index dipped 3.6%.
• Consumer confidence: The Conference Board Consumer Confidence Index® decreased in May to 102.3, down from a revised 103.7 in April. The Present Situation Index, based on consumers’ assessment of current business and labor market conditions, decreased to 148.6 in May, down from 151.8 in the previous month. The Expectations Index, based on consumers’ short-term outlook for income, business, and labor market conditions, fell to 71.5 in May from 71.7 in April. According to the Conference Board’s report, the Expectations Index has remained below 80.0, the level associated with a recession within the next year, since February 2022, with the exception of a brief uptick in December 2022.

Eye on the Month Ahead

Inflation and the Federal Reserve are likely to remain at the forefront for investors heading into June. According to the Federal Reserve, which meets in the middle of June, inflation remains accelerated, although another interest rate hike this month is not a certainty.

The Markets (as of market close May 26, 2023)

Wall Street ended last week with mixed returns. The Nasdaq and the S&P 500 were pushed higher by tech shares and artificial intelligence (AI) stocks. The Global Dow, the Dow, and the Russell 2000 closed in the red. Ten-year Treasury yields rose 11.0 basis points, as they drew closer to their 2022 year-end values. For much of last week, investors kept a close watch on negotiations involving the U.S. debt ceiling. By last Friday, it appeared progress was being made on a deal to raise the debt limit and cap federal spending for two years. Crude oil prices advanced for the second straight week. The dollar advanced against a basket of currencies, while gold prices declined for the third consecutive week.

Stocks closed last Monday generally higher, driven by advances in technology, communications, small-cap stocks, and financials. Investors focused on late-afternoon debt ceiling talks between President Biden and House Speaker McCarthy. The Russell 2000 gained 1.2% to lead the benchmark indexes listed here, followed by the Nasdaq, which climbed 0.5%. The S&P 500 and the Global Dow ended the day flat, while the Dow dipped 0.4%. Ten-year Treasury yields inched up 2.7 basis points to 3.71%. Crude oil prices gained 0.4% to $71.81 per barrel. The dollar edged higher, while gold prices fell 0.4%.

Debt ceiling worries hit Wall Street last Tuesday, sending stocks lower. The Nasdaq fell 1.3%, followed by the S&P 500 (-1.1%), the Global Dow and the Dow (-0.7%), with the Russell 2000 dipping 0.3%. Ten-year Treasury yields slipped 2.1 basis points to 3.69%. Crude oil prices advanced for the second consecutive day, climbing 1.4% to $73.06 per barrel. The dollar and gold prices increased.

Last Wednesday saw stocks slide lower for a second straight session. Once again, investors worried about a potential U.S. debt default. The Russell 2000 and the Global Dow dropped 1.2%, the Dow fell 0.8%, the S&P 500 lost 0.7%, and the Nasdaq slipped 0.6%. Ten-year Treasury yields inched higher to close at 3.71%. Crude oil prices continued to climb, jumping 1.3% to $73.86 per barrel. The dollar advanced, while gold prices fell 0.6%.

AI stocks surged last Thursday, pushing the Nasdaq and the S&P 500 higher among the benchmark indexes listed here. Communication services and information technology posted notable gains, which, along with consumer discretionary, were the only market sectors to close higher. The Nasdaq gained 1.7% and the S&P 500 rose 0.9%. The Russell 2000 fell 0.7%, the Global Dow dropped 0.3%, and the Dow slipped 0.1%. Yields on 10-year Treasuries added 9.5 basis points to close at 3.81%. The dollar advanced for the fourth straight session. Gold prices dipped 1.2%. Crude oil prices reversed course, slumping 3.3% to $71.92 per barrel.

Stocks closed higher last Friday, as traders grew more confident that a deal on the U.S. debt ceiling would be reached. For the second straight day, tech and AI stocks drove the indexes. The Nasdaq gained 2.2%, the S&P 500 rose 1.3%, the Russell 2000 climbed 1.1%, the Dow added 1.0%, and the Global Dow advanced 0.8%. Ten-year Treasury yields were flat, closing at 3.81%. Crude oil prices advanced 1.3% to $72.78 per barrel. The dollar dipped lower, while gold prices inched higher.

Stock Market Indexes

Market/Index	2022 Close	Prior Week	As of 5/26	Weekly Change	YTD Change
DJIA	33,147.25	33,426.63	33,093.34	-1.00%	-0.16%
Nasdaq	10,466.48	12,657.90	12,975.69	2.51%	23.97%
S&P 500	3,839.50	4,191.98	4,205.45	0.32%	9.53%
Russell 2000	1,761.25	1,773.72	1,773.02	-0.04%	0.67%
Global Dow	3,702.71	3,946.24	3,894.49	-1.31%	5.18%
Fed. Funds target rate	4.25%-4.50%	5.00%-5.25%	5.00%-5.25%	0 bps	75 bps
10-year Treasuries	3.87%	3.70%	3.81%	11 bps	-6 bps
US Dollar-DXY	103.48	103.19	104.21	0.99%	0.71%
Crude Oil-CL=F	$80.41	$71.83	$72.78	1.32%	-9.49%
Gold-GC=F	$1,829.70	$1,978.10	$1,947.00	-1.57%	6.41%

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

Last Week’s Economic News

• The second estimate for the first-quarter gross domestic product was revised up 0.2 percentage point to 1.3%. GDP expanded at an annualized rate of 2.6% in the fourth quarter. Personal consumption expenditures increased 3.8%. Consumer spending on durable goods rose 6.3%, while spending on services increased 2.5%. Residential fixed investment dropped 5.4%, while nonresidential fixed investment increased 1.4%. Exports advanced 5.2%, while imports, which are a negative in the calculation of GDP, increased 4.0%. The personal consumption expenditures price index increased 4.2%.
• Inflationary pressures increased in April, giving more reason for the Federal Reserve to continue to increase interest rates. The personal consumption expenditures price index rose 0.4% in April after inching up 0.1% in March. Consumer prices less food and energy also rose 0.4% in April. Over the last 12 months, consumer prices have increased 4.4%, well above the Fed target rate of 2.0%. Personal income and disposable personal income rose 0.4% in April. Consumer spending jumped 0.8% in April after increasing 0.1% in March.
• The international trade in goods deficit widened more than expected in April, up 17.0% from March. Exports decreased 5.5%, while imports rose 1.8%. Since April of 2022, exports of goods have declined 5.8%, while imports are down 7.1%.
• New orders for durable goods increased for the second straight month in April, after increasing 1.1% from March. Transportation equipment, also up for two consecutive months, drove the increase, up 3.7% in April.
• Sales of new single-family homes increased for the second straight month in April, climbing 4.1% over the March total. Available inventory in April declined to a supply of 7.6 months, down from the March pace of 7.9 months. The median single-family home price in April was $420,800, a decline of 8.3% from March ($455,800) and 8.9% below the April 2022 median sales price of $458,200. The average sales price in April was $501,000, 11.6% under the March price of $559,200 and 12.2% below the April 2022 average sales price of $562,400.
• The national average retail price for regular gasoline was $3.534 per gallon on May 22, $0.002 per gallon lower than the prior week’s price and $1.059 less than a year ago. Also, as of May 22, the East Coast price decreased $0.016 to $3.381 per gallon; the Gulf Coast price fell $0.039 to $3.040 per gallon; the Midwest price increased $0.029 to $3.469 per gallon; the Rocky Mountain price rose $0.061 to $3.579 per gallon; and the West Coast price dipped $0.005 to $4.514 per gallon.
• For the week ended May 20, there were 229,000 new claims for unemployment insurance, an increase of 4,000 from the previous week’s level, which was revised down by 17,000. According to the Department of Labor, the advance rate for insured unemployment claims for the week ended May 13 was 1.2%, unchanged from the previous week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended May 13 was 1,794,000, a decrease of 5,000 from the previous week’s level. States and territories with the highest insured unemployment rates for the week ended May 6 were California (2.3%), New Jersey (2.2%), Massachusetts (2.0%), Alaska (1.6%), New York (1.6%), Oregon (1.6%), Puerto Rico (1.5%), Rhode Island (1.5%), Washington (1.5%), and Illinois (1.4%). The largest increases in initial claims for unemployment insurance for the week ended May 13 were in Ohio (+1,608), Connecticut (+975), Illinois (+868), Tennessee (+640), and Colorado (+599), while the largest decreases were in Missouri (-2,234), Massachusetts (-1,660), New Jersey (-1,016), Pennsylvania (-742), and Virginia (-715).

Eye on the Week Ahead

The labor sector is front and center this week with the releases of the April Job Openings and Labor Turnover Survey (JOLTS) and the May report on employment. In March, the number of job openings decreased 384,000, while the number of hires and separations changed little. The employment situation report showed 253,000 jobs were added in April, while the number of unemployed was relatively unchanged.