What I’m Watching This Week – 5 September 2017

The Markets (as of market close September 1, 2017)

Equities were back in the black last week, with each of the indexes listed here posting end-of-week gains. The Nasdaq soared to its largest weekly gain of the year. The large caps of the Dow and S&P 500 enjoyed noticeable gains, despite last Friday’s mundane jobs report. Even the Russell 2000, which had been lagging of late, climbed over 2.50% for the week and is now 4.16% ahead of its 2016 closing value.

The price of crude oil (WTI) closed at $47.35 per barrel, down from the prior week’s closing price of $47.87 per barrel. The price of gold (COMEX) reached $1,329.90 by early Friday evening, $33.40 higher than the prior week’s price of $1,296.50. The national average retail regular gasoline price decreased to $2.399 per gallon on August 28, 2017, $0.039 lower than the prior week’s price and $0.162 more than a year ago.

Market/Index 2016 Close Prior Week As of 9/1 Weekly Change YTD Change
DJIA 19762.60 21813.67 21987.56 0.80% 11.26%
Nasdaq 5383.12 6265.64 6435.33 2.71% 19.55%
S&P 500 2238.83 2443.05 2476.55 1.37% 10.62%
Russell 2000 1357.13 1377.45 1413.57 2.62% 4.16%
Global Dow 2528.21 2834.52 2852.47 0.63% 12.83%
Fed. Funds target rate 0.50%-0.75% 1.00%-1.25% 1.00%-1.25% 0 bps 50 bps
10-year Treasuries 2.44% 2.17% 2.16% -1 bps -28 bps

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

Last Week’s Economic Headlines

  • The latest report on the second-quarter gross domestic product proved to be very solid, as the GDP climbed to 3.0% — 0.4 percentage point higher than the first estimate. The first-quarter GDP increased 1.2%. Economic growth was led by increases in consumer spending, nonresidential (business) fixed investment, federal government spending, and private inventory investment. Downturns occurred in residential fixed investment, state and local government spending, and a deceleration in exports. Increased consumer spending could be related to weak price inflation. How the Fed views this information when it meets later this month could go a long way in determining whether interest rates are raised.
  • The number of new hires took a step back in August with only 156,000 jobs added during the month. Job gains occurred in manufacturing, construction, professional and technical services, health care, and mining. Employment growth has averaged 176,000 per month thus far this year, down from the average monthly gain of 187,000 in 2016. The unemployment rate ticked up 0.1 percentage point to 4.4%. The labor force participation rate, at 62.9%, was unchanged in August and has shown little movement on net over the past year. The employment-population ratio, at 60.1%, was little changed over the month and thus far this year. The average workweek for all employees on private nonfarm payrolls declined by 0.1 hour to 34.4 hours in August. Average hourly earnings for all employees on private nonfarm payrolls rose by $0.03 to $26.39, after rising by $0.09 in July. Over the past 12 months, average hourly earnings have increased by $0.65, or 2.5%.
  • Consumers’ income and spending increased in July but not prices, according to the latest report from the Bureau of Economic Analysis. Personal (pre-tax) income increased $65.6 billion (0.4%) in July while disposable (after-tax) personal income (DPI) increased $39.6 billion (0.3%). Personal consumption expenditures (PCE) increased $44.7 billion (0.3%). Prices for consumer goods and services as measured by the PCE price index increased a marginal 0.1%, as did core (excluding food and energy) PCE.
  • The international trade in goods deficit expanded to $65.1 billion in July, up $1.1 billion from $64.0 billion in June. Exports of goods for July were $127.1 billion, $1.6 billion less than June exports. Imports of goods for July were $192.2 billion, $0.5 billion less than June imports.
  • According to the August survey from IHS Markit, manufacturing output was the weakest since June 2016. U.S. Manufacturing Purchasing Managers’ Index™ (PMI™) registered 52.8 in August, down slightly from July’s reading of 53.3. Since a reading over 50 signifies growth, manufacturing output grew in August, but at a slower pace than July’s growth. The purchasing managers index from the Institute for Supply Management showed output increased last month. The August PMI® registered 58.8%, an increase of 2.5 percentage points from the July reading of 56.3%. The survey sample size for the purchasing managers’ index of the ISM is generally smaller than the one used by Markit, which may explain discrepancies between the reports.
  • The Conference Board Consumer Confidence Index® increased to 122.9 in August, up from July’s reading of 120.0. Survey respondents were bullish on current economic conditions, while their short-term expectations were tepid. The Index of Consumer Sentiment from the University of Michigan’s Surveys of Consumers increased from July’s 93.4% to 96.9% in August.
  • In the week ended August 26, the advance figure for initial claims for unemployment insurance was 236,000, an increase of 1,000 from the previous week’s revised level. The previous week’s level was revised up by 1,000 from 234,000 to 235,000. The advance insured unemployment rate remained at 1.4%. The advance number of those receiving unemployment insurance during the week ended August 19 was 1,942,000, a decrease of 12,000 from the previous week’s unrevised level of 1,954,000.

Eye on the Week Ahead

The Gulf region continues to recover from the effects of Hurricane Harvey. It will be several weeks before the economic impact of that devastating storm can be measured. July’s report on international trade for goods and services is out this week. Last week’s report showed that the goods trade deficit expanded in July. Despite efforts on the part of the current administration to control foreign trade, imports continue to expand at a faster rate than exports, pushing the trade deficit higher.

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Monthly Market Review – August 2017

The Markets (as of market close August 31, 2017)

Equities in August saw many peaks and valleys throughout the month, finally rallying at the end of the month. Strong second-quarter GDP figures, steady job gains, and increased consumer spending sent stocks higher, despite stagnant inflation and heavy personal and financial losses caused by Hurricane Harvey. The large caps of the S&P 500 and Dow posted marginal monthly gains with the tech-heavy Nasdaq leading the way closing August up 1.27%. The small caps of the Russell 2000 continued to lag, falling 1.39% from its July closing value. The Global Dow inched down 0.32% for the month, but is still strong year-to-date, up over 12.50%. The prices of 10-year Treasuries climbed, sending yields lower.

By the close of trading on August 31, the price of crude oil (WTI) was $47.07 per barrel, down from the July 31 price of $50.18 per barrel. The national average retail regular gasoline price was $2.399 per gallon on August 28, up from the July 31 selling price of $2.352 and $0.162 more than a year ago. The price of gold increased by the end of August, closing at $1,327.20 on the last trading day of the month, up $51.60 from its July 31 price of $1,275.60.

Market/Index 2016 Close Prior Month As of August 31 Month Change YTD Change
DJIA 19762.60 21891.12 21948.10 0.26% 11.06%
NASDAQ 5383.12 6348.12 6428.66 1.27% 19.42%
S&P 500 2238.83 2470.30 2471.65 0.05% 10.40%
Russell 2000 1357.13 1425.14 1405.28 -1.39% 3.55%
Global Dow 2528.21 2856.10 2846.93 -0.32% 12.61%
Fed. Funds 0.50%-0.75% 1.00%-1.25% 1.00%-1.25% 0 bps 50 bps
10-year Treasuries 2.44% 2.29% 2.12% -17 bps -32 bps

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

Last Month’s Economic News

  • Employment: The second half of the year began with a strong showing in the employment sector. In July, job growth expanded by 209,000 and the unemployment rate slid 0.1 percentage point to 4.3%, representing about 7.0 million unemployed persons. Employment growth has averaged 184,000 per month thus far this year, in line with the average monthly gain of 187,000 in 2016. Notable employment gains occurred in health care, professional and business services, and food services and drinking places. The labor participation rate was essentially unchanged at 62.9%. The average workweek for all employees was unchanged from June at 34.5 hours. Average hourly earnings rose by $0.09 to $26.36. Over the year, average hourly earnings have risen by $0.65, or 2.5%.
  • FOMC/interest rates: The Federal Open Market Committee did not meet in August, so the target federal funds rate range remained at 1.00%-1.25%. If upward price inflation continues to stagger, the Committee may be hard-pressed to raise interest rates when it next meets in mid-September.
  • GDP/budget: The gross domestic product expanded over the second quarter at an annual rate of 3.0%, according to the second estimate from the Bureau of Economic Analysis. The first-quarter GDP grew at an annualized rate of 1.2%. Consumer and government spending and business investment were positives in the report, offset by deceleration in residential investment and net exports. As to the government’s budget, the federal deficit for July was $42.9 billion, $47.3 billion lower than the June deficit. Through the first 10 months of the fiscal year, the deficit sits at $566 billion, which is about 10.6% above the deficit over the same period last year.
  • Inflation/consumer spending: Upward price inflation continues to be weak. Consumer spending, on the other hand, is increasing. The personal consumption expenditures (PCE) price index (a measure of what consumers pay for goods and services) ticked up only 0.1% in July. The core PCE (excluding energy and food) price index also inched ahead 0.1% for the month. Personal (pre-tax) income climbed 0.4% and disposable personal (after-tax) income increased 0.3% from the prior month. With increased income, consumer expenditures rose, climbing 0.3% in July.
  • The prices companies receive for goods and services fell 0.1% in July from June, according to the Producer Price Index. Year-over-year, producer prices have increased 1.9%. Over 80% of the July decrease in prices is attributable to services, which fell 0.2%. Prices for goods edged down 0.1%. Prices less food, energy, and trade were unchanged in July from the prior month and are up 1.9% over the last 12 months.
  • Consumer prices rose a scant 0.1% in July, after recording no change in June. For the 12 months ended in July, consumer prices are up 1.7%, a mark that remains below the Fed’s 2.0% target for inflation. Core prices, which exclude food and energy, edged up 0.1% in July, the same increase as June, and are up 1.7% year-over-year.
  • Housing: Scant inventory and rising prices have slowed sales of new and existing homes in July. Total existing-home sales slipped 1.3% for the month and are up only 2.1% from a year ago. The July median price for existing homes was $258,300, which is 2.1% below June’s median price of $263,800 but up 6.2% from the price last July. Housing inventory declined 1.0% for the month and is now 9.0% lower than a year ago. The Census Bureau’s latest report reveals sales of new single-family homes fell 9.4% in July to an annual rate of 571,000 — down from June’s upwardly revised rate of 630,000. The median sales price of new houses sold in July was $313,700 ($310,800 in June). The average sales price was $371,200 ($379,500 in June). The seasonally adjusted estimate of new houses for sale at the end of July was 276,000. This represents a supply of 5.8 months at the current sales rate, which is an increase in inventory from May and June (5.2 months).
  • Manufacturing: Industrial production expanded by 0.2% in July following an increase of 0.4% in June, according to the Federal Reserve’s monthly report on Industrial Production and Capacity Utilization. Manufacturing output edged down 0.1% after increasing 0.2% in June. Contributing to the recession in manufacturing output was a drop in production of motor vehicles and parts, which decreased 3.5%. Mining output was again strong, posting a gain of 0.5% in July after increasing 1.6% in June. The index for utilities rose 1.6% after remaining stagnant in June. Capacity utilization for the industrial sector was unchanged in July to 76.7%, a rate that is 3.2 percentage points below its long-run average. New orders for durable goods fell in July on the heels of a steep drop in aircraft orders. The Census Bureau reports new orders decreased $16.7 billion, or 6.8%, from June, which saw new orders increase 6.4%. However, excluding the transportation segment, new durable goods orders increased 0.5%. Orders for core capital goods (excluding defense and transportation) jumped 0.4% in July. Over the 12 months ended in July, core capital goods orders are up 3.5%.
  • Imports and exports: The advance report on international trade in goods revealed that the trade gap widened 1.7% in July over June. The overall trade deficit was $65.1, up $1.1 billion from the prior month. The total volume of exports of goods decreased $1.6 billion to $127.1 billion. Imports of goods fell $0.5 billion to $192.2 billion. Prices for U.S. imports edged up 0.1% in July, led by higher fuel prices, which more than offset lower prices for nonfuel imports. The July increase in import prices followed declines in each of the two previous months. U.S. export prices advanced 0.4% in July, after decreasing 0.2% in June.
  • International markets: In anticipation of its departure from the European Union, the United Kingdom’s Department for Business, Energy, and Industrial Strategy published a set of reforms aimed at strengthening the country’s image as a leader in corporate governance. Negotiations between the UK and the EU continued with nothing of substance resolved to date. China’s stocks surged on strong corporate earnings reports. Otherwise, world markets were mixed, particularly at the end of August as investors wait for the economic impact of Hurricane Harvey.
  • Consumer sentiment: The Conference Board Consumer Confidence Index® for August rose to 122.9, up from July’s revised 120.0. Consumers expressed growing confidence in current economic conditions but were reticent about future economic prospects.

Eye on the Month Ahead

Investors will look for stock values to continue to climb in September following a bumpy August. The month kicks off with the jobs report for August, which comes out the first day of September. The FOMC meets in September following a break last month. Slowing inflation has tempered the Committee’s push for higher interest rates. The final second-quarter GDP figures come out at month’s end.

What I’m Watching This Week – 28 August 2017

The Markets (as of market close August 25, 2017)

Amid a scarcity of economic data and the lightest trading levels of the year, stocks managed to end the week in positive territory, as measured by the indexes tracked below. The Russell 2000 was the week’s leader, notching a weekly gain of nearly 1.5%, with all other indexes posting advances of between 0.5% and 1%.

The price of crude oil (WTI) closed at $47.87 per barrel, down from the prior week’s closing price of $48.73 per barrel. The price of gold (COMEX) reached $1,296.50 by early Friday evening, $6.20 higher than the prior week’s price of $1,290.30. The national average retail regular gasoline price decreased to $2.360 per gallon on August 21, 2017, $0.024 lower than the prior week’s price and $0.167 more than a year ago.

Market/Index 2016 Close Prior Week As of 8/25 Weekly Change YTD Change
DJIA 19762.60 21674.51 21813.67 0.64% 10.38%
Nasdaq 5383.12 6216.53 6265.64 0.79% 16.39%
S&P 500 2238.83 2425.55 2443.05 0.72% 9.12%
Russell 2000 1357.13 1357.79 1377.45 1.45% 1.50%
Global Dow 2528.21 2810.24 2834.52 0.86% 12.12%
Fed. Funds target rate 0.50%-0.75% 1.00%-1.25% 1.00%-1.25% 0 bps 50 bps
10-year Treasuries 2.44% 2.19% 2.17% -2 bps -27 bps

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

Last Week’s Economic Headlines

  • New home sales fell by a whopping 9.4% in July to a total of 571,000 (from 630,000 in June), the lowest rate in seven months, according to the U.S. Census Bureau and the Department of Housing and Urban Development. That figure is also 8.9% below the July 2016 sales figure of 627,000. The median sales price of new houses sold in July 2017 was $313,700, while the average sales price was $371,200. The seasonally adjusted estimate of new houses for sale at the end of July was 276,000. This represents a supply of 5.8 months at the current sales rate.
  • The National Association of Realtors® reported that existing home sales followed a similar trend for the same month, as large demand drops in the Northeast and Midwest outweighed increases in the South and West. Overall, total existing-home sales, which include single-family homes, townhomes, condominiums, and co-ops, fell 1.3% to a seasonally adjusted annual rate of 5.44 million in July from a downwardly revised 5.51 million in June. July’s sales pace is still 2.1% above a year ago but is the lowest of 2017.
  • New orders for manufactured durable goods decreased $16.7 billion, or 6.8%, to $229.2 billion in July, reported the U.S. Census Bureau. This decrease, down three of the last four months, followed a 6.4% June increase. Excluding transportation, new orders increased 0.5%. Excluding defense, new orders decreased 7.8%. Transportation equipment, also down three of the last four months, drove the decrease, $17.4 billion, or 19.0%, to $74.3 billion.
  • In what could be her last appearance at the Federal Reserve’s annual retreat in Jackson Hole, Wyoming, chair Janet Yellen defended regulations enacted in the wake of the financial crisis, while noting that the Fed remains open to possible “improvements” that would help “efficiently maintain a resilient financial system.” At the same meeting, European Central Bank President Mario Draghi voiced similar sentiment. He criticized a global trend toward economic protectionism and warned that looser financial regulations could reinvigorate the types of incentive scenarios that led to the financial crisis.
  • In the week ended August 19, the advance figure for seasonally adjusted initial claims for unemployment insurance was 234,000, an increase of 2,000 from the previous week’s unrevised level. The advance seasonally adjusted insured unemployment rate was 1.4% for the week ended August 12, unchanged from the previous week’s unrevised rate. During the week ended August 12, there were 1,954,000 receiving unemployment insurance benefits, unchanged from the previous week’s revised level.

Eye on the Week Ahead

Observers will be monitoring the lingering effects of Hurricane Harvey on the Gulf region and the storm’s potential economic and market impacts, including possible increases in oil and gas prices. Other potential influences during the week will likely include the second estimate of Q2 GDP figures and the August employment figures.

What I’m Watching This Week – 21 August 2017

The Markets (as of market close August 18, 2017)

Last week saw domestic and global conflicts heighten investors’ concerns, pushing stocks lower in what was a slow week for trading. The Dow lost over 270 points last Thursday, offsetting robust gains the prior Monday. The S&P 500 fell 0.65%, while the Nasdaq dropped .64% last week. Once again, the biggest fall struck the small-cap Russell 2000, which lost 1.20% for the week and is essentially at its 2016 year-end closing value, having lost all of the gains amassed during 2017. Long-term bond prices remained the same as the yield on 10-year Treasuries was unchanged from the prior week.

The price of crude oil (WTI) closed at $48.73 per barrel, down slightly from the prior week’s closing price of $48.79 per barrel. The price of gold (COMEX) closed last week at $1,290.30 by late Friday afternoon, $4.70 lower than the prior week’s price of $1,295.00. The national average retail regular gasoline price increased for the fourth week in a row to $2.384 per gallon on August 14, 2017, $0.006 higher than the prior week’s price and $0.235 more than a year ago.

Market/Index 2016 Close Prior Week As of 8/18 Weekly Change YTD Change
DJIA 19762.60 21858.32 21674.51 -0.84% 9.67%
Nasdaq 5383.12 6256.56 6216.53 -0.64% 15.48%
S&P 500 2238.83 2441.32 2425.55 -0.65% 8.34%
Russell 2000 1357.13 1374.23 1357.79 -1.20% 0.05%
Global Dow 2528.21 2821.52 2810.24 -0.40% 11.16%
Fed. Funds target rate 0.50%-0.75% 1.00%-1.25% 1.00%-1.25% 0 bps 50 bps
10-year Treasuries 2.44% 2.19% 2.19% 0 bps -25 bps

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

Last Week’s Economic Headlines

  • The volume of retail and food services sales picked up in July, increasing 0.6% over June’s sales figures. Sales were 4.2% above July 2016. Sectors whose sales expanded in July included motor vehicle and parts dealers (1.2%); building materials and garden equipment and supplies dealers (1.2%); and online retailers (1.3%).
  • The dollar is declining in value, which is good news for exporters but not so good for importers. July’s import and export prices report shows that both import and export prices increased over the prior month. Import prices increased 0.1% as petroleum imports jumped 0.7%. Export prices climbed 0.4% following a -0.2% fall in June. Export prices were helped by a 2.1% spike in prices for agricultural products.
  • The momentum created in June for new home construction did not carry over to July. According to the latest figures from the Census Bureau, building permits (-4.1%), housing starts (-4.8%), and housing completions (-6.2%) each decreased from their respective June rates. A slowdown in home building will not help an already dwindling supply and could prove to be a drag on overall economic growth.
  • According to the latest report from the Federal Reserve, industrial production rose 0.2% in July following an increase of 0.4% in June. Overall, total industrial production was 2.2% above its year-earlier level. In July, manufacturing output edged down 0.1%; the production of motor vehicles and parts fell substantially, but that decrease was mostly offset by a net gain of 0.2% for other manufacturing industries. The indexes for mining and utilities in July rose 0.5% and 1.6%, respectively.
  • In the week ended August 12, the advance figure for seasonally adjusted initial claims for unemployment insurance was 232,000, a decrease of 12,000 from the previous week’s unrevised level. The advance seasonally adjusted insured unemployment rate remained 1.4%, unchanged from the previous week’s unrevised rate. During the week ended August 5, there were 1,953,000 receiving unemployment insurance benefits, a decrease of 3,000 from the previous week’s revised level. The previous week’s level was revised up 5,000 from 1,951,000 to 1,956,000.

Eye on the Week Ahead

Stocks were unable to shake a recent slump last week. A week without violence would go a long way toward quelling investor concerns and pushing equities higher. On the economic front, the housing sector is an important gauge of economic momentum. In the first quarter, sales of new and existing homes were robust. However, lack of inventory and rising prices have stymied sales during the second quarter. High demand for housing may be a sign that people are comfortable enough with their financial situation to make a large purchase. However, the lack of inventory means builders can’t keep up with the demand for new housing, and homeowners aren’t inclined to sell their current homes. This week’s reports on sales of new and existing homes in July may shed some light on whether sales are picking up or lagging.

What I’m watching This Week – 14 August 2017

The Markets (as of market close August 11, 2017)

Investors may have been disturbed by the rising tensions between the United States and North Korea last week, resulting in a shift from stocks to long-term bonds. The Dow, which had surged to a new record high the prior week, sunk over 1.0% last week, while the large-cap S&P 500 fell almost 1.5% following some less than stellar second-quarter corporate earnings reports. Once again, the biggest drop was felt by the small-cap Russell 2000, which suffered the largest weekly decline of the indexes listed here, and has lost most of its year-to-date gains. On the other hand, demand for 10-year Treasuries increased, sending yields to their lowest level since June.

The price of crude oil (WTI) closed at $48.79 per barrel, down from the prior week’s closing price of $49.52 per barrel. The price of gold (COMEX) closed last week at $1,295.00 by late Friday afternoon, $30.70 higher than the prior week’s price of $1,264.30. The national average retail regular gasoline price increased to $2.378 per gallon on August 7, 2017, $0.026 higher than the prior week’s price and $0.228 more than a year ago.

Market/Index 2016 Close Prior Week As of 8/11 Weekly Change YTD Change
DJIA 19762.60 22092.81 21858.32 -1.06% 10.60%
Nasdaq 5383.12 6351.56 6256.56 -1.50% 16.23%
S&P 500 2238.83 2476.83 2441.32 -1.43% 9.04%
Russell 2000 1357.13 1412.32 1374.23 -2.70% 1.26%
Global Dow 2528.21 2870.04 2821.52 -1.69% 11.60%
Fed. Funds target rate 0.50%-0.75% 1.00%-1.25% 1.00%-1.25% 0 bps 50 bps
10-year Treasuries 2.44% 2.26% 2.19% -7 bps -25 bps

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

Last Week’s Economic Headlines

  • According to the Job Openings and Labor Turnover report for June, the number of job openings increased to 6.2 million (+461,000). Over the month, the number of hires fell from 5.5 million in May to 5.4 million in June. There were 5.2 million total separations in June, little changed from May. Job openings increased in a number of industries, with the largest increases occurring in professional and business services (+179,000), health care and social assistance (+125,000), and construction (+62,000).
  • The monthly federal government budget deficit was $43 billion in July on the heels of a June deficit of $90 billion. Total government receipts were $232 million, while total outlays were $275 million. The total budget deficit for fiscal 2017 sits at $566 billion — 10.6% higher than the $512 billion deficit over the same 10-month period last year.
  • There continues to be little upward movement in consumer prices. The Consumer Price Index rose 0.1% in July following no movement in June and a 0.1% drop in May. The CPI has risen 1.7% over the last 12 months ended in July. Prices less food and energy also increased 0.1% for the month and 1.7% over the last 12 months.
  • Dwindling inflationary pressure has been the theme over much of 2017, and the latest figures from the Producer Price Index continue that trend. The prices producers receive for their goods and services declined 0.1% in July, following a 0.1% increase in June. Over 80% of the decrease is attributable to a 0.2% drop in services, although prices for goods edged down 0.1%. Prices less the volatile components of food, energy, and trade services were unchanged in July, while prices less food and energy fell 0.1%.
  • In the week ended August 5, the advance figure for seasonally adjusted initial claims for unemployment insurance was 244,000, an increase of 3,000 from the previous week’s revised level. The previous week’s level was revised up by 1,000 from 240,000 to 241,000. The advance seasonally adjusted insured unemployment rate remained 1.4%, unchanged from the previous week’s unrevised rate. During the week ended July 29, there were 1,951,000 receiving unemployment insurance benefits, a decrease of 16,000 from the previous week’s revised level. The previous week’s level was revised down 1,000 from 1,968,000 to 1,967,000.

Eye on the Week Ahead

July’s report on housing starts is out this week. The housing market has been up and down so far this year, with low inventory and rising prices discouraging would-be home shoppers. However, housing starts and building permits were up in June — a trend builders and home buyers would like to see continue in July. Another report released this week, the Treasury’s Industrial Production Index, not only shows how much factories are producing, but it also measures how much factory capacity is in use.

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What I’m Watching This Week – 7 August 2017

The Markets (as of market close August 4, 2017)

 Last week ended with a mixed bag of stock market performances. The Dow, influenced by a favorable jobs report and strong corporate quarterly earnings, surged to a new record high. The S&P 500 also ended last week in positive territory. Tech stocks did not fare as well as the large caps, pushing the Nasdaq to its second straight week of negative returns. But the worst performance befell the Russell 2000, which plummeted about 1.20% for the week, after falling nearly 0.50% the prior week. Long-term Treasury yields rose last week as prices dropped.

The price of crude oil (WTI) closed at $49.52 per barrel, down slightly from the prior week’s closing price of $49.79 per barrel. The price of gold (COMEX) closed last week at $1,264.30 by late Friday afternoon, $11.30 below the prior week’s price of $1,275.60. The national average retail regular gasoline price increased to $2.352 per gallon on July 31, 2017, $0.040 higher than the previous week’s price and $0.193 higher than a year ago.

Market/Index 2016 Close Prior Week As of 8/4 Weekly Change YTD Change
DJIA 19762.60 21830.31 22092.81 1.20% 11.79%
Nasdaq 5383.12 6374.68 6351.56 -0.36% 17.99%
S&P 500 2238.83 2472.10 2476.83 0.19% 10.63%
Russell 2000 1357.13 1429.26 1412.32 -1.19% 4.07%
Global Dow 2528.21 2849.54 2870.04 0.72% 13.52%
Fed. Funds target rate 0.50%-0.75% 1.00%-1.25% 1.00%-1.25% 0 bps 50 bps
10-year Treasuries 2.44% 2.29% 2.26% -3 bps -18 bps

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

Last Week’s Economic Headlines

  • Another strong month of growth in the employment sector as there were 209,000 new jobs added in July. This follows the 231,000 new jobs added in June. Employment growth has averaged 184,000 per month thus far this year. Job gains occurred in food services and drinking places, professional and business services, and health care. The unemployment rate for the month was 4.3%, down from 4.4% in June. The average workweek was unchanged at 34.5 hours in July. Average hourly earnings rose by $0.09 to $26.36 in July. Over the year, average hourly earnings have risen by $0.65, or 2.5%.
  • Not unexpectedly, growth in consumer income and spending was essentially nonexistent in June. Pre-tax personal income and after-tax personal income were unchanged in June from May. Consumer spending, as measured by personal consumption expenditures (PCE), increased 0.1% in June. Core personal consumption expenditures (excluding food and energy) also increased 0.1% for the month. For the 12 months ended in June, the PCE was up 1.4%, while the core PCE has gained 1.5%. This report confirms that entering the summer months, inflation is relatively flat and consumers are not seeing an increase in their income. Consumer spending, which accounts for roughly two-thirds of overall economic activity, has also stagnated.
  • The final report on the international trade in goods and services deficit for June showed the total trade deficit to be $43.6 billion, down $2.7 billion from May. June exports were $194.4 billion, $2.4 billion more than May exports. June imports were $238.0 billion, $0.4 billion less than May imports. Year-to-date, the goods, and services deficit increased $26.7 billion, or 10.7%, from the same period in 2016.
  • The purchasing managers’ index is a survey of selected companies relative to manufacturing output, new orders, inventory, employment, and prices. IHS Markit and the Institute for Supply Management (ISM) each put out a monthly index. The results of each survey are not always similar, as is the case for July. Markit’s U.S. Manufacturing Purchasing Managers’ Index™ (PMI™) registered 53.3 in July, up from 52.0 in June, indicating an increase in production. On the other hand, the ISM purchasing managers’ index was 56.3%, down 1.5 percentage points from the June reading of 57.8%. It should be noted that a reading over 50% indicates growth, which means manufacturing expanded in July according to the ISM report, but at a slower pace than June.
  • According to the Institute for Supply Management’s Non-Manufacturing ISM® Report On Business®, the non-manufacturing index slipped 3.5 percentage points in July to 53.9%. This represents continued growth in the non-manufacturing sector, but at a slower rate than in June. Survey respondents thought business activity, new orders, and employment decelerated while prices increased in July from June. The report covers industries such as accommodation and food services; utilities; wholesale and retail trade; real estate, rental, and leasing; health care and social assistance; and finance and insurance.
  • In the week ended July 29, the advance figure for seasonally adjusted initial claims for unemployment insurance was 240,000, a decrease of 5,000 from the previous week’s revised level. The previous week’s level was revised up by 1,000 from 244,000 to 245,000. The advance seasonally adjusted insured unemployment rate remained 1.4%, unchanged from the previous week’s unrevised rate. During the week ended July 22, there were 1,968,000 receiving unemployment insurance benefits, an increase of 3,000 from the previous week’s revised level. The previous week’s level was revised up 1,000 from 1,964,000 to 1,965,000.

Eye on the Week Ahead

Trading should continue to be light as the summer rolls on. Both producer prices and consumer prices showed little upward movement in June. July’s figures are not expected to change that much as reports on the Producer Price Index and the Consumer Price Index are out this week.