What I'm Watching This Week

The Markets (as of market close July 15, 2022)

Despite a late-week rally, stocks ended last week lower. A strong retail sales report for June showed continued economic strength, even in the face of rising inflation and concerns over an economic recession. Investors still aren’t totally sold on risk, however. Each of the benchmark indexes listed here ended last week lower, led by the Global Dow, which fell more than 2.0%. Year to date, the Nasdaq is nearing a 30.0% downturn from its value at the end of 2021. Crude oil prices fell by nearly $7.00 to end the week below $100 per barrel. The dollar continued to rise, while gold prices faltered. Fed rate hikes and fears of a recession have sent the dollar to the highest level since March 2020.

Monday saw stocks slump, as trading volume was at its lowest pace in 2022. Tech shares led the sell-off, pulling the Nasdaq down 2.3%. The Russell 2000 also dipped a little more than 2.00%, followed by the Global Dow and the S&P 500, which slid 1.2%. The Dow lost 0.5%. Ten-year Treasury yields tumbled 11.0 basis points to close at 2.99%. Crude oil prices dropped $1.20 to sit at $103.50 per barrel. The dollar advanced, while gold prices declined. Traders may have pulled back from stocks as they awaited inflation data with the release of the June Consumer Price Index on Wednesday.

Stocks tumbled lower for the second consecutive day last Tuesday. Once again, the Nasdaq led the downturn, giving back 1.0%, followed by the S&P 500 (-0.9%), the Dow (-0.6%), the Global Dow (-0.4%), and the Russell 2000 (-0.2%). The yield on 10-year Treasuries dipped lower last Tuesday and is about 12.0 basis points below the two-year rate. This so-called “inversion curve” is often a sign of a contracting economy. Crude oil prices fell $8.40 to hit $95.68 per barrel. The dollar rose against a basket of currencies, while gold prices lagged.

Wall Street saw equities slide last Wednesday as investors retreated from risk following a greater-than-expected jump in the latest Consumer Price Index. Both the Dow and the Global Dow fell 0.7%, while the S&P 500 dropped 0.5%. The Nasdaq dipped 0.2%, while the Russell 2000 broke even on the day. Ten-year Treasury yields fell 5.4 basis points, settling at 2.90%, while the two-year rate rose to 3.14%, deepening the “inversion” of the yield curve. Crude oil prices and the dollar were relatively unchanged, while gold prices reversed course, gaining $6.30 to reach $1,731.10 per ounce.

Last Thursday, traders spent most of the day retreating from stocks, worried that recent inflation data would prompt a 100-basis point rate hike at the end of the month. However, Wall Street recovered somewhat after Federal Reserve officials seemed to quel those concerns. Nevertheless, the Global Dow (-1.6%), the Russell 2000 (-1.1%), the Dow (-0.5%), and the S&P 500 (-0.3%) still ended the day in the red. The Nasdaq ended the day flat. Crude oil prices and the dollar advanced marginally, while gold prices slid lower. The yield on 10-year Treasuries climbed to 2.96%, up 5.6 basis points. Two-year Treasury yields dipped lower, but not enough to make a dent in the inverted yield curve. Disappointing quarterly results from some major financial firms pulled the financial sector lower and added to the concern that an economic downturn is coming.

Stocks rallied last Friday to end a topsy-turvy week of trading. It’s possible that some investors were buoyed by a solid retail sales report, while other traders may have been taking advantage of some possible low-hanging bargains. In any case, each of the benchmark indexes listed here posted solid gains, led by the Russell 2000 and the Dow, which advanced 2.2%. The S&P 500 climbed 1.9%, the Nasdaq added 1.8%, and the Global Dow gained 1.7%. Long-term bond prices advanced, dragging the yield on 10-year Treasuries down marginally to 2.93%. Crude oil prices rose to $97.66 per barrel. The dollar and gold prices dipped lower.

Stock Market Indexes

Market/Index	2021 Close	Prior Week	As of 7/15	Weekly Change	YTD Change
DJIA	36,338.30	31,338.15	31,288.26	-0.16%	-13.90%
Nasdaq	15,644.97	11,635.31	11,452.42	-1.57%	-26.80%
S&P 500	4,766.18	3,899.38	3,863.16	-0.93%	-18.95%
Russell 2000	2,245.31	1,769.36	1,744.37	-1.41%	-22.31%
Global Dow	4,137.63	3,514.36	3,439.84	-2.12%	-16.86%
Fed. Funds target rate	0.00%-0.25%	1.50%-1.75%	1.50%-1.75%	0 bps	150 bps
10-year Treasuries	1.51%	3.10%	2.93%	-17 bps	142 bps
US Dollar-DXY	95.64	106.95	108.03	1.01%	12.95%
Crude Oil-CL=F	$75.44	$104.86	$97.66	-6.87%	29.45%
Gold-GC=F	$1,830.30	$1,740.40	$1,704.00	-2.09%	-6.90%

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

Last Week’s Economic News

• The Consumer Price Index rose 1.3% in June and is up 9.1% over the past 12 months. This is the largest 12-month increase in the CPI since 1981. Both the monthly and 12-month rates were greater than expected and will almost certainly prompt the Federal Reserve to raise interest rates by at least 75.0 basis points following its next meeting at the end of July. The June increase was broad-based, with gasoline, shelter, and food being the largest contributors. The energy index rose 7.5% and contributed nearly half of the overall increase, with the gasoline index rising 11.2%. The food index rose 1.0% in June, while the shelter index increased 0.6%. Since June 2021, the food index has risen 10.4%, the energy index has advanced 41.6% (gasoline is up 59.9% and fuel oil has risen 98.5%), and prices for shelter have increased 5.6%.
• Producer prices climbed higher in June. The Producer Price Index advanced 1.1% last month after increasing 0.9% in May. Over the past 12 months, the PPI has risen 11.3%, the largest increase since a record 11.6% increase in March 2022. In June, prices for goods rose 2.4%, while prices for services increased 0.4%. A 10.0% increase in energy prices accounted for 90% of the increase in prices for goods. Prices for goods less foods and energy advanced 0.5%. Gasoline prices jumped 18.5% in June, while prices for foods ticked up 0.1%.
• Sales of food services and retail items rose 1.0% in June over the previous month. Retail and food services sales are up 8.4% since June 2021. In many cases, the increase in June retail sales is attributable to higher prices and not necessarily greater demand. Excluding gasoline sales, retail sales rose 0.7% in June. Sales from gasoline stations increased 3.6% in June and were up 49.1% from June 2021, while food services and drinking places sales advanced 1.0% last month and 13.4% from last year. On the other hand, department store sales dropped 2.6% in June, while clothing and clothing accessories sales dipped 0.4%. Retail trade sales were up 1.0% from May and have increased 7.7% over the last 12 months.
• Prices for imports rose 0.2% in June over May. Export prices rose 0.7% last month. Import prices have risen 10.7% over the last 12 months, while export prices increased 18.2%. Import fuel prices rose 5.7% last month and 73.9% for the year ended in June, which is the largest 12-month increase since November 2021. Excluding fuel, import prices declined for the second consecutive month, decreasing 0.5% in June. The June decline in nonfuel imports was the largest one-month decrease since April 2020. In June, lower prices for nonfuel industrial supplies and materials; consumer goods; and foods, feeds, and beverages more than offset higher capital goods prices. On the other side of the ledger, agricultural export prices dipped 0.3% in June, falling for the first time since September 2021. Nonagricultural export prices increased 0.9% last month and have not decreased since December 2021.
• The monthly Treasury statement for June showed a budget deficit of $88.8 billion, up from May’s $66.2 billion but well below the June 2021 deficit of $174.2 billion. Through the first nine months of the fiscal year, the government budget deficit sits at $515.1 billion, nearly $1.8 billion less than the deficit over the same period in the previous fiscal year. Individual income taxes are up $544.8 billion in the current fiscal year, while corporate income taxes are up $40.9 billion.
• In June, total industrial production fell 0.2% and has not increased since April 2022. Manufacturing output declined 0.5% for the second consecutive month in June. Mining rose 1.7%, although utilities fell 1.4%. Despite the downturn, total industrial production was 4.2% above its level in June 2021. The June decrease in production was widespread, with durable and nondurable consumer good falling 1.0% and 0.7%, respectively. Last month, the appliance, furniture, and carpeting category posted the largest loss among the components of consumer goods (-3.3%), while only home electronics, miscellaneous goods, and clothing recorded gains.
• The national average retail price for regular gasoline was $4.646 per gallon on July 11, $0.125 per gallon below the prior week’s price but $1.513 higher than a year ago. Also as of July 11, the East Coast price decreased $0.119 to $4.472 per gallon; the Gulf Coast price fell $0.161 to $4.190 per gallon; the Midwest price dropped $0.130 to $4.599 per gallon; the West Coast price slid $0.123 to $5.571 per gallon; and the Rocky Mountain price fell $0.054 to $4.947 per gallon. Residential heating oil prices averaged $3.673 per gallon on July 8, about $0.266 per gallon less than the prior week’s price. According to the U.S. Energy Information Administration report of July 13, gasoline production decreased, averaging 5.1 million barrels per day. Refineries operated at 94.9% of their capacity. 53 U.S. exploration and production (E&P) companies reported higher revenue in the first quarter of 2022, passing some of those profits on to shareholders in the form of dividends. In addition, as crude oil prices and returns on investment rise, the valuation of these companies has increased to just below the previous five-year high.
• For the week ended July 9, there were 244,000 new claims for unemployment insurance, an increase of 9,000 from the previous week’s level. According to the Department of Labor, the advance rate for insured unemployment claims for the week ended July 2 was 0.9%, a decrease of 0.1 percentage point from the previous week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended July 2 was 1,331,000, a decrease of 41,000 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 25 were New Jersey (2.0%), Puerto Rico (1.9%), California (1.9%), Rhode Island (1.6%), Pennsylvania (1.5%), Massachusetts (1.4%), New York (1.4%), Alaska (1.3%), and Georgia (1.3%). The largest increases in initial claims for the week ended July 2 were in New York (+5,165), Michigan (+5,104), Georgia (+2,935), California (+2,823), and Mississippi (+1,364), while the largest decreases were in Illinois (-1,508), Kentucky (-1,232), Missouri (-1,061), Ohio (-998), and Pennsylvania (-971).

Eye on the Week Ahead

The latest data on the housing market for June is out this week with reports on housing starts and existing home sales. The housing market has definitely slowed in 2022 after setting a torrid pace the previous year. In May, residential building permits and housing starts fell, while sales of existing homes dipped for the fourth consecutive month.

The Markets (as of market close July 8, 2022)

Last Friday’s strong jobs report may have alleviated fears of a recession for the time being, but it also likely supported a more aggressive response from the Federal Reserve as it tries to dampen rising inflation. Stocks started July on a strong note, with each of the benchmark indexes listed here posting solid gains. The tech-heavy Nasdaq, which has been hit hard during the first half of the year, gained over 4.5%, although it remains more than 25.0% below its 2021 year-end value. The small caps of the Russell 2000, down more than 21.0% from the beginning of the year, jumped nearly 2.5% higher last week. Wall Street is likely to see volatility continue until investors see signs that the Fed is backing off its current path of rate increases. With corporate earnings season right around the corner, traders will focus on company forecasts as well as inflation data to assess the health of the economy.

Stocks began the holiday-shortened week generally higher last Tuesday, with the Nasdaq gaining 1.8%. Treasury prices rallied, sending yields lower, despite talks of easing trade sanctions against China, as worries of an economic recession persisted among investors. The Russell 2000 gained 0.8%, while the S&P 500 eked out a 0.2% advance. The Global Dow (-1.8%) and the Dow (-0.4%) dipped lower. Ten-year Treasury yields slid 8 basis points, falling to 2.80%. Crude oil prices posted their largest decline since March, dropping to just below $100 per barrel. On the other hand, the dollar jumped higher against a basket of currencies.

Last Wednesday saw equities close generally higher for the third consecutive session. The Nasdaq and the S&P 500 each added 0.4%, while the Dow gained 0.2%. The small caps of the Russell 2000 (-0.8%) and the Global Dow (-0.4%) closed lower. Bond prices dipped lower, sending the yield on 10-year Treasuries up 10.4 basis points to reach 2.91% by the close of trading. Crude oil prices fell for a second straight day, falling $1.40 to end the day at $98.10 per barrel. The dollar advanced, while gold prices sank to $1.73 per ounce. Investors apparently weren’t influenced by last Wednesday’s economic data, which evidenced some softening. Job openings dipped in May, and growth in the services sector eased in June to a more than two-year low. Minutes from the Federal Reserve’s last meeting in June reflected a Fed that is very much concerned with inflation, to the point of talking about the potential for an even more restrictive policy over time.

Stocks gained for the fourth session in a row last Thursday. Investors may be banking on the Federal Reserve being able to curb inflation without sending the economy into a recession. The dollar dropped for the first time in five days as each of the benchmark indexes posted solid gains, led by the Russell 2000 (2.4%), closely followed by the Nasdaq (2.3%). The Global Dow (1.8%), the S&P 500 (1.5%), and the Dow (1.1%) also advanced. Ten-year Treasury yields ended the day at 3.00%, an increase of 9.5 basis points. Crude oil prices jumped $3.67 to $102.20 per barrel. Gold prices ended a downward trend after climbing $2.90 to reach $1,739.40 per ounce.

Friday closed the week for stocks with mixed results. The Nasdaq inched up 0.1% and the Global Dow rose 0.2%. The remaining benchmark indexes listed here slipped marginally lower. Ten-year Treasury yields gained 9.3 basis points to reach 3.10%. Crude oil prices continued to advance, climbing nearly $2.00 to sit at $104.69 per barrel. The dollar fell, while gold prices rose for the second consecutive day.

Stock Market Indexes

Market/Index	2021 Close	Prior Week	As of 7/8	Weekly Change	YTD Change
DJIA	36,338.30	31,097.26	31,338.15	0.77%	-13.76%
Nasdaq	15,644.97	11,127.84	11,635.31	4.56%	-25.63%
S&P 500	4,766.18	3,825.33	3,899.38	1.94%	-18.19%
Russell 2000	2,245.31	1,727.76	1,769.36	2.41%	-21.20%
Global Dow	4,137.63	3,513.94	3,514.36	0.01%	-15.06%
Fed. Funds target rate	0.00%-0.25%	1.50%-1.75%	1.50%-1.75%	0 bps	150 bps
10-year Treasuries	1.51%	2.88%	3.10%	22 bps	159 bps
US Dollar-DXY	95.64	105.09	106.95	1.77%	11.83%
Crude Oil-CL=F	$75.44	$108.39	$104.86	-3.26%	39.00%
Gold-GC=F	$1,830.30	$1,809.00	$1,740.40	-3.79%	-4.91%

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

Last Week’s Economic News

• Employment rose by a higher-than-expected 372,000 in June, with notable job growth occurring in professional and business services, leisure and hospitality, and health care. The unemployment rate was 3.6% for the fourth month in a row, and the number of unemployed persons was essentially unchanged at 5.9 million in June. These measures are little different from their values in February 2020 (3.5% and 5.7 million, respectively), prior to the coronavirus (COVID-19) pandemic. The labor force participation rate, at 62.2%, and the employment-population ratio, at 59.9%, were little changed over the month. Both measures remain below their February 2020 values (63.4% and 61.2%, respectively). In June, 2.1 million persons reported that they had been unable to work because their employer closed or lost business due to the pandemic, up from 1.8 million in May. In June, average hourly earnings rose by $0.10, or 0.3%, to $32.08. Over the past 12 months, average hourly earnings have increased by 5.1%. The average work week was unchanged from the previous month at 34.5 hours in June.
• The services sector saw new orders decrease in June, with price pressures and economic uncertainty hitting demand. According to the latest report, the S&P Global US Services PMI Business Activity Index registered 52.7 in June, remaining above 50.0, thereby signaling an increase in business activity, albeit at a slower pace than in May when the PMI registered 53.4. Business confidence outlook for the year ahead dropped to a 21-month low. On a more positive note, employment continued to increase sharply.
• According to the latest Job Openings and Labor Turnover report, the number of job openings decreased in May to 11.3 million, a drop of about 427,000 from the April total. The largest decreases in job openings were in professional and business services (-325,000), durable goods manufacturing (-138,000), and nondurable goods manufacturing (-70,000). In May, the number of hires, at 6.5 million, and the number of total separations, at 6.0 million, were little changed from the prior month’s respective totals. Over the 12 months ended in May, hires totaled 78.4 million and separations totaled 72.0 million, yielding a net employment gain of 6.4 million.
• The international goods and services trade deficit for May was $85.5 billion, down $1.1 billion, or 1.3%, from the April deficit. According to the latest information from the Bureau of Economic Analysis, in May exports increased 1.2% and imports advanced 0.6%. Year to date, the goods and services deficit increased $126.5 billion, or 38.4%, from the same period in 2021. Exports increased $197.1 billion, or 19.4%. Imports increased $323.6 billion, or 24.0%.
• The national average retail price for regular gasoline was $4.77 per gallon on July 4, $0.101 per gallon below the prior week’s price but $1.649 higher than a year ago. Also as of July 4, the East Coast price decreased $0.10 to $4.59 per gallon; the Gulf Coast price fell $0.15 to $4.35 per gallon; the Midwest price dropped $0.09 to $4.73 per gallon; the West Coast price slid $0.09 to $5.69 per gallon; and the Rocky Mountain price rose $0.02 to $5.00 per gallon. Residential heating oil prices averaged $3.94 per gallon on July 1, about $0.42 per gallon less than the prior week’s price. According to the U.S. Energy Information Administration, gasoline consumption during the second quarter of 2022 and into the beginning of July remained lower than 2021 levels. Excluding the pandemic year of 2020, this would be the lowest second quarter of gasoline consumption since 2001. Although U.S. gasoline consumption has not completely returned to pre-pandemic levels, it generally increased from mid-2020 through the first quarter of 2022. April was the first month this trend reversed.
• For the week ended July 2, there were 235,000 new claims for unemployment insurance, an increase of 4,000 from the previous week’s level. According to the Department of Labor, the advance rate for insured unemployment claims for the week ended June 25 was 1.0%, an increase of 0.1 percentage point from the previous week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended June 25 was 1,375,000, an increase of 51,000 from the previous week’s level, which was revised down by 4,000. States and territories with the highest insured unemployment rates for the week ended June 18 were New Jersey (1.9%), Puerto Rico (1.9%), California (1.8%), Pennsylvania (1.5%), New York (1.4%), Alaska (1.3%), Rhode Island (1.3%), Connecticut (1.2%), Hawaii (1.2%), Illinois (1.2%), and Massachusetts (1.2%). The largest increases in initial claims for the week ended June 25 were in New Jersey (+5,569), Massachusetts (+3,217), Ohio (+2,588), Kentucky (+1,478), and Missouri (+1,375), while the largest decreases were in California (-2,504), Texas (-2,074), Michigan (-1,683), Pennsylvania (-1,628), and Georgia (-1,606).

Eye on the Week Ahead

This is a busy week for the release of important economic data. Most of the attention, however, will focus on the Consumer Price Index for June. May saw consumer prices jump unexpectedly higher at 1.0%. Consumer prices have risen 8.6% since June 2021. Several analysts suggest that the June CPI will come in lower than the May figure.

The Markets (as of market close July 1, 2022)

Despite an end-of-week surge, stocks closed last week lower. Recession fears resulted in traders moving to bonds, driving prices higher and yields lower. As another round of corporate earnings reports nears, investors are bracing for weaker results, which could dampen trader sentiment and send stocks tumbling lower. With last Friday marking the start of the second half of the year, stocks are likely to continue to ride the volatility train. By the end of last week, each of the indexes listed here slid lower, led by the tech-heavy Nasdaq. Ten-year Treasury yields fell 25 basis points. The dollar rose marginally. Gold prices dipped lower. Crude oil prices climbed higher.

Stocks kicked off last week on a down note as Wall Street was unable to maintain the prior week’s rally. The Nasdaq (-0.7%), the S&P 500 (-0.3%), and the Dow (-0.2%) underperformed, while the Russell 2000 (0.3%) and the Global Dow (0.5%) edged higher. Among the market sectors of the S&P 500, only energy, utilities, and health care advanced. Ten-year Treasury yields advanced nearly 7 basis points to close at 3.19%. Crude oil prices rose by more than $2.00 to reach $109.82 per barrel. The dollar and gold prices fell.

Equities continued to tumble last Tuesday, with each of the benchmark indexes listed here closing the day in the red. Megacaps and growth stocks lagged, giving back gains from the previous week. The Nasdaq fell 3.0%, followed by the S&P 500 (-2.0%), the Russell 2000 (-1.8%), the Dow (-1.6%), and the Global Dow (-0.5%). Traders may have reacted to the latest report on waning consumer confidence, with economic expectations hitting a nearly 10-year low. Crude oil prices advanced for the third day as prices jumped another $2.00 to reach $111.68 per barrel. Ten-year Treasury yields climbed marginally higher, while the dollar rose against a bucket of currencies.

Only the Dow was able to eke out a gain last Wednesday after another choppy day of trading. The Russell 2000 fell the furthest, dropping 1.1%, followed by the Global Dow, which lost 1.0%. The S&P 500 and the Nasdaq slid less than 0.1%. Bond prices jumped higher, sending yields lower. Ten-year Treasury yields declined 11.3 basis points to close at 3.09%. Crude oil prices fell for the first time in four days, dropping $2.44 to $109.32 per barrel. The dollar advanced for a second consecutive day. Although Federal Reserve Chair Jerome Powell said the U.S. is in “strong shape” and “well positioned to withstand tighter monetary policy,” first-quarter consumer spending expanded at its softest pace since the beginning of the pandemic, possibly indicating the economy isn’t on such strong footing.

June ended last Thursday with equities continuing to tumble lower. Fears of a recession on the heels of rising inflation swayed investors from risk. Megacaps, banks, retailers, metals and mining, and airlines lagged on the day. Once again, the Nasdaq led the losing benchmark indexes, dropping 1.3%, followed by the Global Dow (-1.2%), the S&P 500 (-0.9%), the Dow (-0.8%), and the Russell 2000 (-0.7%). Treasury yields shed 12 basis points, finishing the day at 2.97%. Crude oil prices inched higher, along with the dollar. Gold prices lagged marginally.

July started last Friday with Treasury prices surging driving yields lower. The yield on 10-year Treasuries lost 8.3 basis points to end the day at 2.88%. Each of the benchmark indexes listed here added value, led by the Russell 2000 (1.2%), followed by the S&P 500 and the Dow, which each gained 1.1%. The Nasdaq rose 0.9%, while the Global Dow advanced 0.3%. Crude oil prices jumped $2.63 to close at $108.39 per barrel amid supply outages in Libya and expected shutdowns in Norway. The dollar and gold prices also advanced on the day.

Stock Market Indexes

Market/Index	2021 Close	Prior Week	As of 7/1	Weekly Change	YTD Change
DJIA	36,338.30	31,500.68	31,097.26	-1.28%	-14.42%
Nasdaq	15,644.97	11607.62	11,127.84	-4.13%	-28.87%
S&P 500	4,766.18	3911.74	3,825.33	-2.21%	-19.74%
Russell 2000	2,245.31	1765.74	1,727.76	-2.15%	-23.05%
Global Dow	4,137.63	3576.14	3,513.94	-1.74%	-15.07%
Fed. Funds target rate	0.00%-0.25%	1.50%-1.75%	1.50%-1.75%	0 bps	150 bps
10-year Treasuries	1.51%	3.13%	2.88%	-25 bps	137 bps
US Dollar-DXY	95.64	104.14	105.09	0.91%	9.88%
Crude Oil-CL=F	$75.44	$104.03	$108.39	4.19%	43.68%
Gold-GC=F	$1,830.30	$1,824.00	$1,809.00	-0.82%	-1.16%

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

• First-quarter gross domestic product decelerated at an annual rate of 1.6%, according to the final estimate from the Bureau of Economic Analysis. In the fourth quarter of 2021, GDP increased 6.9%. The decrease in GDP reflected declines in exports, federal, state, and local government spending, and private inventory investment, while imports, which are a subtraction in the calculation of GDP, increased. Nonresidential fixed investment, personal consumption expenditures, and residential fixed investment increased. The increase in personal consumption expenditures, a main driver of overall GDP, increased 1.8% following a 2.5% increase in the previous quarter. Driving PCE higher was an increase in spending on services (led by housing and utilities) that was partly offset by a decrease in spending on goods. Within goods, widespread decreases in nondurable goods (led by groceries as well as gasoline and other energy goods) were largely offset by an increase in durable goods (led by motor vehicles and parts). The personal consumption expenditures price index, a measure of inflation, increased 7.1%. Excluding food and energy, consumer prices increased 5.2%.
• Consumer prices rose 0.6% in May and are up 6.3% over the past 12 months, according to the latest report from the Bureau of Economic Analysis. Personal income and disposable (after-tax) personal income increased 0.5% in May. Personal consumption expenditures rose 0.2% in May, a much smaller increase than in April (0.6%) and March (1.2%), likely indicative of a shift in household spending away from discretionary items as prices for necessities, such as food and energy, increased.
• New orders for long-lasting durable goods increased 0.7% in May, the seventh monthly increase out of the last eight months. The May increase was widespread. Materials that notably increased include primary metals (3.1%), machinery (1.1%), communications equipment (2.0%), defense aircraft and parts (8.1%), and transportation equipment (0.8%). New orders for nondefense capital goods in May increased 0.5%, while new orders for defense capital goods jumped 2.6%.
• According to the S&P Global US Manufacturing PMI™ report, the purchasing managers’ index dropped to its lowest level since July 2020 amid a near-stagnation of factory output and a fall in new orders. The PMI posted 52.7 in June, down from 57.0 in May. The June reading was the lowest in nearly two years. The decrease in sales was the first since May 2020, with domestic and foreign client demand falling. A reduction in new orders, combined with a sustained rise in employment, led to greater success clearing backlogs of work. While inflationary pressures remained historically elevated, increases in input costs and output charges eased to three-month lows.
• The international trade in goods deficit for May was $104.3 billion, down $2.4 billion, or 2.2%, from the April deficit. Exports of goods for May were $2.0 billion, or 1.2%, more than April exports. However, imports of goods for May were $0.4 billion, or -0.1%, less than April imports. Since May 2021, exports are up 22.0% and imports have risen 21.3%.
• The national average retail price for regular gasoline was $4.87 per gallon on June 27, $0.090 per gallon below the prior week’s price but $1.781 higher than a year ago. Also as of June 27, the East Coast price decreased $0.10 to $4.69 per gallon; the Gulf Coast price fell $0.11 to $4.50 per gallon; the Midwest price dropped $0.09 to $4.82 per gallon; the West Coast price slid $0.07 to $5.79 per gallon; and the Rocky Mountain price dipped $0.01 to $4.98 per gallon. Residential heating oil prices averaged $4.36 per gallon on June 24, about $0.02 per gallon more than the prior week’s price. According to the U.S. Energy Information Administration, gas demand currently sits at 8.93 million barrels per day, which is lower than last year’s rate of 9.11 million barrels per day at the end of June. On the other hand, total domestic gasoline stocks increased by 2.6 million barrels. These supply/demand dynamics and decreasing oil prices have pushed pump prices lower.
• For the week ended June 25, there were 231,000 new claims for unemployment insurance, a decrease of 2,000 from the previous week’s level, which was revised up by 4,000. According to the Department of Labor, the advance rate for insured unemployment claims for the week ended June 18 was 0.9%, a decrease of 0.1 percentage point from the previous week’s rate, which was revised up by 0.1 percentage point to 1.0%. The advance number of those receiving unemployment insurance benefits during the week ended June 18 was 1,328,000, a decrease of 3,000 from the previous week’s level, which was revised up by 16,000. States and territories with the highest insured unemployment rates for the week ended June 11 were California (1.8%), New Jersey (1.8%), Puerto Rico (1.6%), Alaska (1.4%), New York (1.4%), Pennsylvania (1.4%), Rhode Island (1.3%), Hawaii (1.2%), Illinois (1.2%), and Massachusetts (1.2%). The largest increases in initial claims for the week ended June 18 were in Michigan (+1,849), Texas (+1,350), New Jersey (+897), Connecticut (+863), and Puerto Rico (+860), while the largest decreases were in Illinois (-2,595), California (-1,189), South Carolina (-731), Georgia (-621), and Florida (-535).

Eye on the Week Ahead The employment data for June is available this week. May saw 390,000 new jobs added, and hourly wages increased by 0.3%. For the 12 months ended in May, wages have risen 5.2%, driven higher by greater employer demand for workers.

The Markets (second quarter through June 30, 2022)

For the first time since 2015, each of the benchmark indexes lost value for two consecutive quarters. They also posted losses for June, marking three consecutive down months for the tech-heavy Nasdaq, its longest losing streak since 2015. Investors watched for signs of an economic deceleration in the U.S., with inflation continuing to run at multi-decade highs, and monetary policymakers maintaining a firm stance that their priority remains bringing down prices even if it means slowing economic growth. Nevertheless, Wall Street has suffered one of its worst six-month stretches in decades. The S&P 500 is poised for its worst first half since 1962. Ten-year Treasury yields climbed from 2.37% at the beginning of the quarter to over 3.00%. The dollar is on pace for its best quarter since 2016. Consumer spending slowed for the first time this year, possibly indicating that the economy is indeed weakening. Consumer sentiment fell to its lowest level since 2021. Crude oil prices rose marginally in the quarter, spiking at $123.18 per barrel in early June, ultimately settling at around $105.00 by the end of the quarter. Gold prices declined each month of the quarter as investors weighed rising interest rates against fears of a recession. According to AAA, as of June 30, the average price for regular gasoline was $4.857 per gallon, $0.90 less than the previous week but $1.80 per gallon more than than a year ago. As prices for crude oil and gasoline increased, demand waned, helping to pull prices lower. In addition, OPEC+ agreed to increase output in July and August to compensate for the drop in production due to the sanctions placed on Russia.

Equities fell sharply in April as some disappointing earnings data from several mega-cap companies added to investor worries about rising inflation, the war in Ukraine, and the possibility of an economic pullback. The Nasdaq dropped the most since October 2008, falling nearly 24.0% from its peak as it entered bear territory. The S&P 500 notched its worst month since the beginning of the pandemic, dragged lower by heavy losses in communication services, consumer discretionary, and information technology. Bond prices also lagged as yields increased in anticipation of rising interest rates as part of the Federal Reserve’s plan to quell inflation. While consumers worried about cost containment and its impact on the economy, one factor helping to drive inflation higher was strong wage growth propelled by a tight labor market. Weekly jobless claims fell to their lowest level since 1970, while the unemployment rate dropped to a pre-pandemic 3.6%. Entering May, Americans remained focused on rising inflation, the ongoing war in Ukraine, lockdowns in China due to rising COVID numbers, and the impact of the Fed’s program of fiscal tightening.

May proved to be a month of market swings. Equities lost value for the first three weeks of the month. However, a late rally helped the benchmark indexes close the month relatively flat, with the exception being the tech-heavy Nasdaq, which followed April’s sharp declines by falling another 2.0%. Early in the month the Federal Reserve raised interest rates 50 basis points and announced plans to start reducing its balance sheet in June. The Fed’s hawkish pronouncements in its effort to curb rising inflation spurred worries of a recession, despite solid economic data from the prior month.

Stocks soured in June as a slowdown in consumer spending (personal consumption expenditures), which accounts for nearly 70% of economic activity, prompted concerns about a recession. The Federal Reserve increased the target range for the federal funds rate 75 basis points, more than expected, as forecasters estimated a 50-basis point rate increase. Despite a surge mid-month, each of the benchmark indexes ended June in the red. Crude oil prices fell in June, the first monthly decrease since November. The dollar advanced, while gold prices slid lower.

Stock Market Indexes

Market/Index	2021 Close	As of June 30	Monthly Change	Quarterly Change	YTD Change
DJIA	36,338.30	30,775.43	-6.71%	-11.25%	-15.31%
Nasdaq	15,644.97	11,028.74	-8.71%	-22.44%	-29.51%
S&P 500	4,766.18	3,785.38	-8.39%	-16.45%	-20.58%
Russell 2000	2,245.31	1,707.99	-8.79	-17.49%	-23.93%
Global Dow	4,137.63	3,507.37	-10.11%	-14.43%	-15.23%
Fed. Funds	0.00%-0.25%	1.50%-1.75%	75 bps	125 bps	150 bps
10-year Treasuries	1.51%	2.97%	13 bps	65 bps	146 bps
US Dollar-DXY	95.64	104.70	2.85%	6.46%	9.47%
Crude Oil-CL=F	$75.44	$105.82	-7.90%	4.83%	40.27%
Gold-GC=F	$1,830.30	$1,808.00	-1.71%	-6.88%	-1.22%

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 390,000 in May. Notable job gains occurred in leisure and hospitality, in professional and business services, and in transportation and warehousing. Despite the increase, employment is down by 822,000, or 0.5%, from its pre-pandemic level in February 2020. The unemployment rate remained at 3.6% for the third month in a row. The number of unemployed persons was essentially the same at 6.0 million. By comparison, in February 2020 prior to the coronavirus (COVID-19) pandemic, the unemployment rate was 3.5%, and the number of unemployed persons was 5.7 million. Among the unemployed, the number of workers who permanently lost their jobs was unchanged at 1.4 million in May. The number of persons who were unable to work because their employer closed or lost business due to the pandemic fell to 1.8 million. The labor force participation rate increased 0.3 percentage point to 62.3% in May. The employment-population ratio increased by 0.3 percentage point to 60.2%. In May, average hourly earnings rose by $0.10 to $31.95. Over the last 12 months ended in May, average hourly earnings increased by 5.2%. The average work week was 34.6 hours in May, unchanged for the third consecutive month.
• There were 231,000 initial claims for unemployment insurance for the week ended June 25, while the total number of insured unemployment claims was 1,328,000 as of June 18. During the second quarter of the year, claims for unemployment fell to their lowest levels since 1970. A year ago, there were 3,266,000 insured unemployment claims.
• FOMC/interest rates: Following its meeting in June, the Federal Open Market Committee increased the federal funds target rate range by 75 basis points to 1.50%-1.75%. In support of its decision, the Committee noted that it is “highly attentive to inflation risks” and that it “is strongly committed to returning inflation to its 2.0% objective.”
• GDP/budget: Gross domestic product decreased 1.6% in the first quarter of 2022. GDP advanced 6.9% in the fourth quarter of 2021. A record surge in the trade deficit was largely responsible for the decline in first-quarter GDP. Also, consumer spending, as measured by personal consumption expenditures, rose 1.8%, down from 2.5% in the fourth quarter of 2021. Consumers cut spending on goods such as clothes, home furnishings, and food. Fixed investment advanced 7.4%, driven higher by a 10.0% increase in nonresidential (business) fixed investment. Exports dropped 4.8%, while imports, a negative in the calculation of GDP, increased 18.9%. Also dragging GDP lower was a 6.8% decrease in federal government spending, while state and local government spending dipped 0.5%. The personal consumption expenditures (PCE) price index, a measure of inflation, increased 7.1%. Excluding food and energy prices, the PCE price index increased 5.2%.
• The Treasury budget deficit came in at $66.2 billion in May, 50.0% smaller than the $132.0 billion shortfall in May 2021. Through the first eight months of fiscal year 2022, the deficit sits at $426.2 billion, 79.0% lower than the deficit over the same period in fiscal year 2021 as outlays dropped 19.0%, while receipts increased 29.0%. So far in this fiscal year, individual income tax receipts have risen 46.0% and corporate income tax receipts have increased 17.0%.
• Inflation/consumer spending: According to the latest Personal Income and Outlays report for May, both personal income and disposable personal income rose 0.5%, the same increase as in the previous month. Consumer spending increased 0.2% following a 0.6% jump in April. Consumer prices climbed 0.6% in May after advancing 0.2% in April. Consumer prices have risen 6.3% since May 2021.
• The Consumer Price Index climbed 1.0% in May after climbing 0.3% in the previous month. The May increase was broad-based, with advances in prices for shelter, gasoline, and food being the largest contributors. The gasoline index rose 4.1% in May, prices for food rose 1.0%, and the index for shelter increased 0.6%. The CPI increased 8.6% for the 12 months ended in May, the largest 12-month increase since the period ending December 1981.
• Prices that producers receive for goods and services jumped 0.8% in May following a 0.4% increase in April. Producer prices have increased 10.8% since May 2021. Prices less foods, energy, and trade services increased 0.5% in May and 6.8% since May 2021. In May, nearly two-thirds of the rise in the PPI was due to a 1.4% advance in prices for final demand goods. Prices for final demand services increased 0.4%. A major factor in the May increase in the prices for goods was a 5.0% increase in energy prices, within which gasoline prices spiked 8.4%.
• Housing: Sales of existing homes retreated for the fourth consecutive month in May, falling 3.4% from the April estimate. Year over year, existing home sales were 8.6% under the May 2021 total. According to the latest survey from the National Association of Realtors®, home sales have essentially returned to the levels seen in 2019, prior to the pandemic, after two years of exceptional performance. The median existing-home price was $407,600 in May, up from $395,500 in April and 14.8% more than May 2021 ($355,000). Unsold inventory of existing homes represents a 2.6-month supply at the current sales pace. Sales of existing single-family homes also fell, down 3.6% in May. Sales of existing single-family homes have fallen 7.7% since May 2021. The median existing single-family home price was $414,200 in May, up from $401,700 in April and up 14.6% from May 2021 ($361,300).
• Sales of new single-family homes rose 10.7% in May, the first advance in the last five months. The median sales price of new single-family houses sold in May was $449,000 ($454,700 in April). The May average sales price was $511,400 ($569,500 in April). The inventory of new single-family homes for sale in May represented a supply of 7.0 months at the current sales pace, down from April’s 7.6-month supply. Sales of new single-family homes in May were 5.9% below the May 2021 estimate.
• Manufacturing: Industrial production increased 0.2% in May following a 1.4% increase in April. In May, manufacturing output declined 0.1% after three months when growth averaged nearly 1.0%. The indexes for utilities and mining rose 1.0% and 1.3%, respectively, in May. Total industrial production was 5.8% higher than it was a year earlier. Since May 2021, manufacturing has risen 4.8%, mining has jumped 9.0%, while utilities increased 8.4%.
• May saw new orders for durable goods increase $1.9 billion, or 0.7%, marking the seventh monthly increase out of the last eight months. Excluding transportation, new orders rose 0.7% in May. Excluding defense, new orders increased 0.6%. Transportation equipment, up two consecutive months, led the increase, up $0.7 billion, or 0.8%.
• Imports and exports: Import prices rose 0.6% in May after advancing 0.4% in April, according to the U.S. Bureau of Labor Statistics. Higher fuel prices offset lower nonfuel prices to account for the overall May increase. Fuel import prices rose 7.5% in May, with higher petroleum and natural gas prices both contributing to the increase. The price index for import fuel rose 73.5% over the past year, the largest 12-month advance since increasing 87.0% in November 2021. Prices for nonfuel imports declined 0.3% in May, the first monthly decrease since November 2020. Prices for U.S. exports advanced 2.8% in May following a 0.8% rise the previous month. Higher prices for both nonagricultural and agricultural exports contributed to the export price rise in May. Export prices have risen 18.9% since May 2021, the largest year-over-year rise since September 1984.
• The international trade in goods deficit was $104.3 billion in May, down $2.4 billion, or 2.2%, from April. Exports of goods were $176.6 billion in May, $2.0 billion more than in April. Imports of goods were $280.9 billion, $0.4 billion less than April imports.
• The latest information on international trade in goods and services, released June 7, is for April and shows that the goods and services trade deficit declined by $20.6 billion to $87.1 billion from the March deficit. April exports were $252.6 billion, $8.5 billion more than March exports. April imports were $339.7 billion, $12.1 billion less than March imports. Year over year, the goods and services deficit increased $107.9 billion, or 41.1%, from the same period in 2021. Exports increased $151.3 billion, or 18.8%. Imports increased $259.2 billion, or 24.3%.
• International markets: The United States is not the only country seeing rising costs. Several European nations, plus Israel and South Korea, have seen surges in inflation since the start of the pandemic. Germany, France, Spain, and Italy have seen inflation spike recently. South Korea’s inflation reached a 13-year high in April, while Israel, which had maintained low inflation rates through 2021, saw inflation jump 25.0% from the first quarter of 2020 to the beginning of 2022. Inflation rates in the United Kingdom hit a 40-year high in May, up 9.1%. Several countries have taken various measures to try to curb inflationary pressures, from freezing the price of gas and electricity (“tariff shield”), to transfers to the most vulnerable (e.g., energy vouchers), temporary tax reductions or discounts on fuel prices, and price regulation. Of course, several countries have also tightened monetary policy by raising interest rates. Overall, for the markets in June, the STOXX Europe 600 Index declined 5.7%. The United Kingdom’s FTSE slid 2.7%. Japan’s Nikkei 225 Index fell 2.4%, while China’s Shanghai Composite Index rose 5.6%.
• Consumer confidence: The Conference Board Consumer Confidence Index® decreased in June following a decline in May. The index stands at 98.7, down from 103.2 in May. The overall index is at its lowest level since February 2021. The Present Situation Index, based on consumers’ assessment of current business and labor market conditions, declined to 147.1 in June, down marginally from 147.4 in May. The Expectations Index, based on consumers’ short-term outlook for income, business, and labor market conditions, declined to 66.4 in June (73.7 in May), its lowest level since March 2013.

Eye on the Month Ahead

Inflation continued to run hot in June, prompting a plan of fiscal tightening from the Federal Reserve, which included a 75-basis point interest rate increase. The Fed meets again in July and is certain to increase interest rates by at least 50 basis points, with the growing likelihood of another 75-basis point jump, particularly since the Fed does not meet again until September. The first estimate of second-quarter gross domestic product is also out in July. The economy retracted 1.5% in the first quarter.

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

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

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

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

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

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

Stock Market Indexes

Market/Index	2021 Close	Prior Week	As of 6/24	Weekly Change	YTD Change
DJIA	36,338.30	29,888.78	31,500.68	5.39%	-13.31%
Nasdaq	15,644.97	10,798.35	11607.62	7.49%	-25.81%
S&P 500	4,766.18	3,674.84	3911.74	6.45%	-17.93%
Russell 2000	2,245.31	1,665.69	1765.74	6.01%	-21.36%
Global Dow	4,137.63	3,487.21	3576.14	2.55%	-13.57%
Fed. Funds target rate	0.00%-0.25%	1.50%-1.75%	1.50%-1.75%	0 bps	150 bps
10-year Treasuries	1.51%	3.23%	3.13%	-10 bps	162 bps
US Dollar-DXY	95.64	104.61	104.14	-0.45%%	8.89%
Crude Oil-CL=F	$75.44	$109.95	$104.03	-5.38%	37.90%
Gold-GC=F	$1,830.30	$1,842.00	$1,824.00	-0.98%	-0.34%

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

Last Week’s Economic News

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

Eye on the Week Ahead

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

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

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

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

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

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

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

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

Stock Market Indexes

Market/Index	2021 Close	Prior Week	As of 6/17	Weekly Change	YTD Change
DJIA	36,338.30	31,392.79	29,888.78	-4.79%	-17.75%
Nasdaq	15,644.97	11,340.02	10,798.35	-4.78%	-30.98%
S&P 500	4,766.18	3,900.86	3,674.84	-5.79%	-22.90%
Russell 2000	2,245.31	1,800.28	1,665.69	-7.48%	-25.81%
Global Dow	4,137.63	3,700.33	3,487.21	-5.76%	-15.72%
Fed. Funds target rate	0.00%-0.25%	0.75%-1.00%	1.50%-1.75%	75 bps	150 bps
10-year Treasuries	1.51%	3.15%	3.23%	8 bps	172 bps
US Dollar-DXY	95.64	104.18	104.61	0.41%	9.38%
Crude Oil-CL=F	$75.44	$120.49	$109.95	-8.75%	45.74%
Gold-GC=F	$1,830.30	$1,875.60	$1,842.00	-1.79%	0.64%

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

Last Week’s Economic News

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

Eye on the Week Ahead

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

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

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

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

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

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

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

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

Stock Market Indexes

Market/Index	2021 Close	Prior Week	As of 6/10	Weekly Change	YTD Change
DJIA	36,338.30	32,899.70	31,392.79	-4.58%	-13.61%
Nasdaq	15,644.97	12,012.73	11,340.02	-5.60%	-27.52%
S&P 500	4,766.18	4,108.54	3,900.86	-5.05%	-18.16%
Russell 2000	2,245.31	1,883.05	1,800.28	-4.40%	-19.82%
Global Dow	4,137.63	3,881.92	3,700.33	-4.68%	-10.57%
Fed. Funds target rate	0.00%-0.25%	0.75%-1.00%	0.75%-1.00%	0 bps	75 bps
10-year Treasuries	1.51%	2.95%	3.15%	20 bps	164 bps
US Dollar-DXY	95.64	102.17	104.18	1.97%	8.93%
Crude Oil-CL=F	$75.44	$120.26	$120.49	0.19%	59.72%
Gold-GC=F	$1,830.30	$1,853.90	$1,875.60	1.17%	2.48%

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

Last Week’s Economic News

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

Eye on the Week Ahead

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

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

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

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

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

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

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

Stock Market Indexes

Market/Index	2021 Close	Prior Week	As of 6/3	Weekly Change	YTD Change
DJIA	36,338.30	33,212.96	32,899.70	-0.94%	-9.46%
Nasdaq	15,644.97	12,131.13	12,012.73	-0.98%	-23.22%
S&P 500	4,766.18	4,158.24	4,108.54	-1.20%	-13.80%
Russell 2000	2,245.31	1,887.86	1,883.05	-0.25%	-16.13%
Global Dow	4,137.63	3,913.19	3,881.92	-0.80%	-6.18%
Fed. Funds target rate	0.00%-0.25%	0.75%-1.00%	0.75%-1.00%	0 bps	75 bps
10-year Treasuries	1.51%	2.74%	2.95%	21 bps	144 bps
US Dollar-DXY	95.64	101.68	102.17	0.48%	6.83%
Crude Oil-CL=F	$75.44	$115.12	$120.26	4.46%	59.41%
Gold-GC=F	$1,830.30	$1,857.20	$1,853.90	-0.18%	1.29%

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

Last Week’s Economic News

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

Eye on the Week Ahead

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

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

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

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

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

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

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

Stock Market Indexes

Market/Index	2021 Close	Prior Month	As of May 31	Monthly Change	YTD Change
DJIA	36,338.30	32,977.21	32,990.12	0.04%	-9.21%
Nasdaq	15,644.97	12,334.64	12,081.39	-2.05%	-22.78%
S&P 500	4,766.18	4,131.93	4,132.15	0.01%	-13.30%
Russell 2000	2,245.31	1,862.16	1,872.55	0.56%	-16.60%
Global Dow	4,137.63	3,815.07	3,901.99	2.28%	-5.70%
Fed. Funds target rate	0.00%-0.25%	0.25%-0.50%	0.75%-1.00%	50 bps	75 bps
10-year Treasuries	1.51%	2.88%	2.84%	-4 bps	133 bps
US Dollar-DXY	95.64	103.17	101.80	-1.33%	6.44%
Crude Oil-CL=F	$75.44	$104.07	$114.90	10.41%	52.31%
Gold-GC=F	$1,830.30	$1,897.90	$1,839.40	-3.08%	0.50%

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

Latest Economic Reports

• Employment: Employment rose by 428,000 in April, about the same increase as in March. Notable job gains occurred in leisure and hospitality, in manufacturing, and in transportation and warehousing. However, employment is down by 1.2 million, or 0.8%, from its pre-pandemic level in February 2020. In April, the unemployment rate remained at 3.6%. The number of unemployed persons remained relatively unchanged at 5.9 million. These measures are little different from their pre-pandemic values in February 2020 (3.5% and 5.7 million, respectively). Among the unemployed, the number of workers who permanently lost their jobs remained at 1.4 million in April. Also in April, the number of persons who were unable to work because their employer closed or lost business due to the pandemic fell to 1.7 million — down from 2.5 million in the previous month. The labor-force participation rate decreased 0.2 percentage point to 62.2% in April. The employment-population ratio fell by 0.1 percentage point to 60.0%. In April, average hourly earnings rose by $0.10, or 0.3%, to $31.85. Over the last 12 months, average hourly earnings rose by 5.5%. The average work week was unchanged at 34.6 hours in April.
• There were 210,000 initial claims for unemployment insurance for the week ended May 21, up from a month earlier when there were approximately 180,000 new claims filed. As of May 14, there were 1,346,000 total claims for unemployment benefits. A year ago, there were 3,618,000 total claims for unemployment insurance benefits.
• FOMC/interest rates: The Federal Open Market Committee met at the beginning of May, and in a move specifically directed at tempering rising inflationary pressures, the Committee increased the federal funds target range by 50 basis points. The FOMC also decided to begin reducing its balance sheet starting June 1 until the size can “maintain securities holdings in amounts needed to implement monetary policy efficiently and effectively in its ample reserves regime.”
• GDP/budget: Gross domestic product contracted at an annualized rate of -1.5% in the first quarter of 2022 compared with a 6.9% advance in the fourth quarter of 2021. The decrease in GDP primarily reflected decreases in private inventory investment, exports, federal government spending, and state and local government spending; while imports, which are a subtraction in the calculation of GDP, increased. Personal consumption expenditures (3.1%), nonresidential fixed investment (9.2%), and residential fixed investment (0.4%) increased. Spending on goods was unchanged, while spending on services climbed 4.8%. The personal consumption price index, a measure of inflation, increased 7.0% in the first quarter after advancing 6.4% in the fourth quarter. Imports increased 18.3% in the first quarter, while exports fell 5.4%.
• There was a surplus of $308.2 billion in the April Treasury budget deficit, in sharp contrast to the $225.6 billion deficit in April 2021. Through the first seven months of fiscal year 2022, the deficit sits at $360.0 billion, 81.0% lower than the deficit over the same period in fiscal year 2021. So far in this fiscal year, government expenditures are down 18.0%, while receipts are up 39.0%. Individual income tax receipts have risen 69.0% and corporate income tax receipts have increased 22.0% compared to April 2021.
• Inflation/consumer spending: According to the latest Personal Income and Outlays report for April, personal income increased 0.4% and disposable personal income rose 0.3% after rising 0.5% and 0.4%, respectively, in March. Consumer spending increased 0.9% following a 1.4% jump in March. Consumer prices rose 0.2% in April after advancing 0.9% the previous month. Consumer prices have risen 6.3% since April 2021. Year over year, energy prices vaulted 30.4%, while food prices increased 10.0%.
• The Consumer Price Index increased 0.3% in April after climbing 1.2% the previous month. Increases in the indexes for shelter, food, airline fares, and new vehicles were the largest contributors to the April CPI increase. Food prices rose 0.9% in April after advancing 1.0% in March, for a 12-month increase of 9.4%, the largest year-over-year gain since April 1981. The gasoline index fell 6.1% in April but is up 43.6% since April 2021. The CPI has risen 8.3% over the last 12 months, a slight decrease from the 8.5% March figure.

• Prices that producers receive for goods and services jumped 0.5% in April following a 1.6% increase in March. Producer prices have increased 11.0% since April 2021. Prices less foods, energy, and trade services increased 0.6% in April after climbing 0.9% the previous month. For the year, prices less foods, energy, and trade services moved up 6.9%. In April, prices for goods jumped 1.3%, while prices for services were unchanged after increasing 1.2% in March. In April, producer prices for foods rose 1.5% and energy prices increased 1.7%.

• Housing: Sales of existing homes declined for the third consecutive month, falling 2.4% in April after dropping 2.7% in March. Year over year, existing home sales were 5.9% under the April 2021 estimate. According to the latest survey from the National Association of Realtors®, home shoppers are feeling the effects of rising mortgage rates and higher home prices. The median existing-home price was $391,200 in April, up from $374,800 in March and 14.8% more than April 2021 ($347,100). Unsold inventory of existing homes represents a 2.2-month supply at the current sales pace. Sales of existing single-family homes also fell in April, down 2.5% after dropping 2.7% in March. Since April 2021, sales of existing single-family homes have fallen 4.8%. The median existing single-family home price was $397,600 in April, up from $381,300 in March.
• Sales of new single-family homes fell 16.6% in April after decreasing 11.7% (revised) in March. The median sales price of new single-family houses sold in April was $450,600 ($435,000 in March). The April average sales price was $570,300 ($522,500 in March). The inventory of new single-family homes for sale in April represented a supply of 8.3 months at the current sales pace, up from March’s 5.9-month supply. Sales of new single-family homes in April were 26.9% below the April 2021 estimate.
• Manufacturing: Industrial production increased 1.1% in April following a 0.9% jump in March. The April increase marks the fourth consecutive month of gains of at least 0.8%. All three major industry groups advanced in April. Manufacturing rose 0.8%, mining increased 1.6%, and utilities climbed 2.4%. Total industrial production in April was 6.4% higher than it was a year earlier. Since April 2021, manufacturing has risen 5.8%, mining has jumped 8.6%, and utilities increased 7.5%.
• April saw new orders for durable goods increase 0.4% following a 0.6% March increase. A 0.6% increase in transportation equipment led the April increase in new orders. Excluding transportation, new orders rose 0.3% in April. Excluding defense, new orders increased 0.3%. In addition to the increase in transportation equipment, areas that contributed to the overall April increase in new durable goods orders included primary metals (0.6%), machinery (1.0%), and nondefense aircraft and parts (4.3%). New orders for nondefense capital goods increased 0.4% in April, while new orders for defense capital goods rose 2.5%. Since April 2021, new orders for durable goods have increased 10.5%.
• Imports and exports: Both import and export price inflation slowed in April. Import prices were unchanged in April after increasing 2.9% in March, according to the U.S. Bureau of Labor Statistics. Import prices have advanced 12.0% since April 2021. Import fuel prices declined 2.4% in April, the first monthly decrease since December 2021. Prices for nonfuel imports increased 0.4% in April and have not recorded a monthly decrease since November 2020. Prices for exports advanced 0.6% in April following a 4.1% increase the previous month. Export prices rose 18.0% over the past year.
• The international trade in goods deficit was $105.9 billion in April, down $20.0 billion, or 15.9%, from March. Exports of goods for April were $173.9 billion, $5.2 billion more than March exports. Imports of goods for April were $279.9 billion, $14.8 billion less than March imports. The decrease in imports was largely driven by a drop in industrial supplies, capital goods, consumer goods, and other goods, while the increase in exports was tied to a 13.3% increase in foods, feeds, and beverages.
• The latest information on international trade in goods and services, released May 4, is for March and shows that the goods and services trade deficit increased $20.0 billion, or 22.3%, from $89.8 billion the previous month. March exports were $241.7 billion, 5.6% above the February estimate. March imports were $351.5 billion, 10.3% more than February imports. Year over year, the goods and services deficit increased $84.8 billion, or 41.5%, from the same period in 2021. Exports increased 17.7%. Imports increased 23.8%.
• International markets: Several European Union leaders pledged to cut oil purchases from Russia, which sent crude oil prices higher. Eurozone inflation reached an annualized rate of 8.1% in May, impacted by the Russia/Ukraine war and corresponding sanctions imposed by European governments. The potential of an economic slowdown in China and supply-chain disruptions due to the pandemic and the aforementioned war weighed on investors. China’s economy declined for the third consecutive month in May, although at a slower pace than in April, as COVID restrictions began to ease. Overall, for the markets in May, the STOXX Europe 600 Index dipped 0.4%. The United Kingdom’s FTSE rose 0.8%. Japan’s Nikkei 225 Index climbed 1.7%, while China’s Shanghai Composite Index increased 4.6%.
• Consumer confidence: The Conference Board Consumer Confidence Index® decreased slightly in May. The index stands at 106.4 in May, down from 108.6 in April. The Present Situation Index, based on consumers’ assessment of current business and labor market conditions, decreased to 149.6 in May, down from 152.9 in April. The Expectations Index, based on consumers’ short-term outlook for income, business, and labor market conditions, inched lower to 77.5 in May from 79.0 in April.

Eye on the Month Ahead

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

The Markets (as of market close May 27, 2022)

Stocks closed higher last week, ending a seven-week slide. More upbeat corporate news and favorable economic data helped quell investor angst, at least temporarily. The S&P 500 posted its best week since November 2020 and is headed for a positive month in May. A few factors may have helped increase investor confidence. Several large retailers released quarterly earnings results that largely exceeded Wall Street estimates. The personal consumption expenditures price index (the Fed’s preferred inflation indicator) rose 0.2% in April after increasing 0.9% in March, signaling that inflationary pressures may be subsiding. In addition to the S&P 500, the Dow, the Nasdaq, and the Russell 2000 gained more than 6.0% by week’s end. Nevertheless, to put the latest drought into perspective, the S&P 500 and the Nasdaq hadn’t suffered seven consecutive weekly declines since the dot.com bubble burst in early 2000. And the Dow’s eight-week slide was the longest since 1932.

Wall Street did something unusual last Monday: It opened the week on an uptick. Each of the benchmark indexes listed here posted solid gains, led by the Dow and the Global Dow (2.0%), followed by the S&P 500 (1.9%), the Nasdaq (1.6%), and the Russell 2000 (1.1%). Ten-year Treasury yields jumped 7.2 basis points to 2.85%. Crude oil prices climbed to $110.66 per barrel. The dollar slid lower, while gold prices advanced. The financial sector made the biggest gains as several major banks saw their stocks record notable gains.

Last Tuesday saw the Dow inch up 0.2%, while the remaining market indexes ended the day in the red. A tech sell-off pulled the Nasdaq down 2.4%. The Russell 2000 slid 1.6%, the S&P 500 dropped 0.8%, and the Global Dow declined 0.3%. Unfavorable economic news weighed on investors, following a substantial drop in new home sales last month (see below). Ten-year Treasury yields fell 9.9 basis points to 2.76%. Crude oil prices dipped to $109.72 per barrel and the dollar declined against a bucket of currencies.

Stocks ended higher last Wednesday following a choppy day of trading. The Nasdaq rebounded from last Tuesday’s decline, gaining 1.5%. The Russell 2000 jumped 2.0%. The Global Dow advanced 0.5%. The large caps of the S&P 500 (1.0%) and the Dow (0.6%) also advanced. Crude oil prices rose $1.07 to $110.84 per barrel. Ten-year Treasuries dipped 11 basis points to 2.74%. The dollar climbed higher, while gold prices fell. Investors gained some solace following the release of the minutes from the last Federal Reserve meeting. The Fed gave no indication that a more hawkish course of action is in the offing, lending credence to the expectation that the next two rate hikes will be no more than 50 basis points each.

Equities closed higher last Thursday for the second day in a row. Consumer shares led gains as several retailers raised their sales projections. The Nasdaq again led the surge, adding 2.7%, followed by the Russell 2000 (2.2%), the S&P 500 (2.0%), the Dow (1.6%), and the Global Dow (1.4%). The yield on 10-year Treasuries inched up to 2.75%. Crude oil prices jumped more than $3.50 to $113.87 per barrel. The dollar fell against a bucket of currencies. Gold prices advanced.

Stocks climbed higher last Friday, with each of the benchmark indexes listed here adding notable gains. The Nasdaq jumped 3.3%, the S&P 500 added 2.5%, the Russell 2000 rose 2.7%, the Dow gained 1.8%, and the Global Dow increased 1.4%. Investors were buoyed by more upbeat corporate results and economic indications that inflation may be slowing. Crude oil prices continued to increase, adding another $1.00 to reach $115.10 per barrel. Ten-year Treasury yields slid 13 basis points to 2.74%. The dollar declined for the second consecutive day, while gold prices climbed higher for the second day in a row.

Stock Market Indexes

Market/Index	2021 Close	Prior Week	As of 5/27	Weekly Change	YTD Change
DJIA	36,338.30	31,261.90	33,212.96	6.24%	-8.60%
Nasdaq	15,644.97	11,354.62	12,131.13	6.84%	-22.46%
S&P 500	4,766.18	3,901.36	4,158.24	6.58%	-12.76%
Russell 2000	2,245.31	1,773.27	1,887.86	6.46%	-15.92%
Global Dow	4,137.63	3,730.18	3,913.19	4.91%	-5.42%
Fed. Funds target rate	0.00%-0.25%	0.75%-1.00%	0.75%-1.00%	0 bps	75 bps
10-year Treasuries	1.51%	2.78%	2.74%	-4 bps	123 bps
US Dollar-DXY	95.64	103.06	101.68	-1.34%	6.32%
Crude Oil-CL=F	$75.44	$112.70	$115.12	2.15%	52.60%
Gold-GC=F	$1,830.30	$1,843.90	$1,857.20	0.72%	1.47%

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 of first-quarter gross domestic product showed that the economy contracted at an annualized rate of -1.5%. The decrease in GDP reflected decreases in private inventory investment, exports, federal government spending, and state and local government spending; imports, which are a subtraction in the calculation of GDP, increased. However, consumer spending, as measured by personal consumption expenditures, increased 3.1% in the first quarter. On the other hand, exports fell 5.4%, while imports increased 18.3%. The personal consumption expenditures price index (a measure of price inflation) increased 7.0% in the first quarter. Excluding food and energy prices, the PCE price index increased 5.1% (revised).
• According to the latest report on personal income and outlays, inflationary pressures waned in April as the personal consumption expenditures price index rose 0.2% after increasing 0.9% in March. Since April 2021, consumer prices have risen 6.3%. Personal consumption expenditures, a measure of consumer spending, increased 0.9% following a 1.4% advance in March. Personal income increased 0.4% in April, and disposable (after-tax) personal income rose 0.3%.
• The international trade in goods deficit was $105.9 billion in April, a decrease of 15.9% from March. Exports rose 3.1%, while imports fell 5.0%.
• The housing sector has slowed considerably from the pace set last year as rising home prices and mortgage rates have impacted the market. New single-family home sales fell 16.6% in April. Since April 2021, sales of new single-family homes are down 26.9%. The median sales price of new houses sold in April 2022 was $450,600 ($435,000 in March). The average sales price was $570,300 ($522,500 in March). Inventory of new single-family homes for sale sits at a supply of 9.0 months at the current sales rate, well off the April 2021 pace of 4.7 months.
• New durable goods orders increased 0.4% in April following a 0.6% advance in March. Durable goods orders have increased in six of the last seven months. Excluding transportation, new orders increased 0.3%. Excluding defense, new orders increased 0.3%. Transportation equipment, up following two consecutive monthly decreases, led the April increase after advancing 0.6%. Since April 2021, new orders for durable goods have risen 10.5%. New orders for nondefense capital goods used in the production of final products rose 0.4% in April. New orders for defense capital goods jumped 2.5% last month.
• The national average retail price for regular gasoline was $4.593 per gallon on May 23, $0.102 per gallon above the prior week’s price and $1.573 higher than a year ago. Also as of May 25, the East Coast price increased $0.10 to $4.53 per gallon; the Gulf Coast price rose $0.10 to $4.26 per gallon; the Midwest price climbed $0.10 to $4.40 per gallon; the West Coast price increased $0.13 to $5.49 per gallon; and the Rocky Mountain price increased $0.05 to $4.33 per gallon. Residential heating oil prices averaged $3.74 per gallon on May 20, about $0.18 per gallon less than the prior week’s price. According to the U.S. Energy Information Administration, the average retail price of regular gasoline is the highest inflation-adjusted price since 2012 and the fourth highest price on record. The high price of gasoline is currently driven by several factors, including the price of crude oil, the effects of Russia’s full-scale invasion of Ukraine, and U.S. gasoline demand growth outpacing refinery runs, resulting in large gasoline inventory draws.
• For the week ended May 21, there were 210,000 new claims for unemployment insurance, a decrease of 8,000 from the previous week’s level. According to the Department of Labor, the advance rate for insured unemployment claims for the week ended May 14 was 1.0%, an increase of 0.1 percentage point from the previous week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended May 14 was 1,346,000, an increase of 31,000 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 7 were California (2.0%), New Jersey (1.9%), Alaska (1.7%), New York (1.4%), Puerto Rico (1.4%), Rhode Island (1.3%), Massachusetts (1.3%), Minnesota (1.2%), Illinois (1.2%), Pennsylvania (1.2%), and the Virgin Islands (1.2%). The largest increases in initial claims for the week ended May 14 were in Kentucky (+6,712), California (+1,968), Illinois (+1,742), Ohio (+1,189), and Florida (+629), while the largest decreases were in Michigan (-384), Georgia (-325), Colorado (-301), Arizona (-278), and the District of Columbia (-251).

Eye on the Week Ahead

The employment figures for May are out at the end of this week. April saw over 400,000 new jobs added and the unemployment rate dipped to 3.6%. It will be interesting to see whether the labor sector remains strong in the face of the anticipated slowdown in the economy due to rising interest rates.