What I’m Watching This Week – 16 October 2017

The Markets (as of market close October 13, 2017)

Each of the benchmark indexes listed here posted gains by last week’s end, except for the Russell 2000, which fell 0.50%. The large caps of the Dow and S&P 500 enjoyed moderate increases, as did the Global Dow, which gained the most last week. Most impressively, the Nasdaq ended the week at a new all-time record. While equities marginally increased in value, investors favored gold and long-term bonds, both of which saw prices rise.

The price of crude oil (WTI) rose to $51.37 per barrel last Friday, up from the prior week’s closing price of $49.25 per barrel. The price of gold (COMEX) climbed to $1,305.60 by early Friday evening, an increase over the prior week’s price of $1,278.90. The national average retail regular gasoline price decreased to $2.504 per gallon on October 9, 2017, $0.061 lower than the prior week’s price but $0.232 more than a year ago.

Market/Index 2016 Close Prior Week As of 10/13 Weekly Change YTD Change
DJIA 19762.60 22773.67 22871.72 0.43% 15.73%
Nasdaq 5383.12 6590.18 6605.80 0.24% 22.71%
S&P 500 2238.83 2549.33 2553.17 0.15% 14.04%
Russell 2000 1357.13 1510.22 1502.66 -0.50% 10.72%
Global Dow 2528.21 2929.76 2955.99 0.90% 16.92%
Fed. Funds target rate 0.50%-0.75% 1.00%-1.25% 1.00%-1.25% 0 bps 50 bps
10-year Treasuries 2.44% 2.35% 2.27% -8 bps -17 bps

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

Last Week’s Economic Headlines

  • Inflationary pressure may be gaining some traction, but only minimally. The Consumer Price Index rose 0.5% in September, largely due to a 13.1% increase in the gasoline index. Over the last 12 months, the CPI has risen 2.2%. Core prices, less food and energy, increased a slight 0.1% in September. For the 12 months ended in September, the core CPI is up 1.7%.
  • Retail food and service sales increased 1.6% in September after falling 0.1% in August. Vehicle sales (3.6%) and gasoline sales (5.8%) contributed to the overall retail sales price increase. Retail prices, less auto and gas, increased 0.5% for the month. For the 12 months ended in September, retail sales have increased 4.4%.
  • The prices producers receive for goods and services advanced 0.4% in September after moving up 0.2% in August. For the 12 months ended in September, producer prices have increased 2.6%, the largest rise since a 2.8% increase for the 12 months ended February 2012. Prices for services climbed 0.4% and prices for goods rose 0.7%. Over 80% of the September advance for goods prices can be traced to rising energy prices (particularly gas prices), which climbed 3.4%. Higher energy prices were likely the result of reduced refining capacity in the Gulf Coast area due to Hurricane Harvey. Adding some perspective, prices less foods, energy, and trade services increased 0.2% in September, the same as in August.
  • According to the Bureau of Labor Statistics, the number of job openings decreased slightly in August, falling to 6.08 million from July’s 6.14 million. Job openings increased in health care and social assistance (+71,000) and in durable goods manufacturing (+31,000), and dropped in other services (-95,000), educational services (-51,000), and nondurable goods manufacturing (-48,000). Total hires declined from 5.52 million in July to 5.43 million in August, while total separations fell to 5.23 million from July’s total of 5.36 million. Over the 12 months ended in August, hires totaled 63.8 million and separations totaled 61.7 million, yielding a net employment gain of 2.1 million.
  • In the week ended October 7, the advance figure for initial claims for unemployment insurance was 243,000, a decrease of 15,000 from the previous week’s level, which was revised down by 2,000. The advance insured unemployment rate dropped slightly to 1.3%. The advance number of those receiving unemployment insurance during the week ended September 30 was 1,889,000, a decrease of 32,000 from the previous week’s revised level. This is the lowest level for insured unemployment since December 29, 1973, when it was 1,805,000.

Eye on the Week Ahead

Trading volume should pick up following the Columbus Day week. Hurricane Harvey affected industrial production in August. September’s report should reflect the impact, if any, of Hurricane Irma on industrial production in September. The latest report on existing home sales is available at the end of the week, followed by September’s new home sales figures, which come out next week.

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What I’m Watching This Week – 9 October 2017

The Markets (as of market close October 6, 2017)

Equities continued to surge last week as each of the benchmark indexes listed here posted notable gains — despite a late Friday’s downturn. The Dow rose by 1.65%, followed by the Nasdaq, Russell 2000, and the S&P 500. Only the Global Dow failed to increase by at least 1.0%. The labor report’s strong wage gains may have enticed long-term bond investors to sell, pushing prices on 10-year Treasuries lower while inflating yields.

The price of crude oil (WTI) reversed a rising trend over the past few weeks, falling to $49.25 per barrel, down from the prior week’s closing price of $51.64 per barrel. The price of gold (COMEX) fell to $1,278.90 by early Friday evening, down from the prior week’s price of $1,282.50. The national average retail regular gasoline price decreased to $2.565 per gallon on October 2, 2017, $0.018 less than the prior week’s price and $0.320 more than a year ago.

Market/Index 2016 Close Prior Week As of 10/6 Weekly Change YTD Change
DJIA 19762.60 22405.09 22773.67 1.65% 15.24%
Nasdaq 5383.12 6495.96 6590.18 1.45% 22.42%
S&P 500 2238.83 2519.36 2549.33 1.19% 13.87%
Russell 2000 1357.13 1490.86 1510.22 1.30% 11.28%
Global Dow 2528.21 2907.67 2929.76 0.76% 15.88%
Fed. Funds target rate 0.50%-0.75% 1.00%-1.25% 1.00%-1.25% 0 bps 50 bps
10-year Treasuries 2.44% 2.33% 2.35% 2 bps -9 bps

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

Last Week’s Economic Headlines

  • Hurricanes Harvey and Irma could have had a significant impact on the employment figures for September, according to the latest report from the Department of Labor Statistics. The unemployment rate declined to 4.2% — 0.2 percentage point below August’s rate. Hourly earnings rose by $0.12 to $26.55 and are up $0.74, or 2.9%, over the last 12 months. For the first time in seven years, nonfarm employment fell by 33,000 in September from August. This information, which may be revised over the next few months, certainly indicates that employment is reaching capacity and wage inflation is spiking, making it more likely that the Fed will raise interest rates in October.
  • Hurricane Harvey may have disrupted shipping along the Gulf Coast, impacting foreign trade in August. The goods and services deficit was $42.4 billion in August, down $1.2 billion from $43.6 billion in July, revised. August exports were $195.3 billion, $0.8 billion more than July exports. August imports were $237.7 billion, $0.4 billion less than July imports. Year-to-date, the goods, and services deficit increased $29.1 billion, or 8.8%, from the same period in 2016. Exports increased $84.9 billion, or 5.8%. Imports increased $114.0 billion, or 6.4%. A relatively weak dollar has made U.S. goods and services cheaper to buy for foreign consumers, expanding exports. Moderate domestic economic growth has encouraged buyers to shop in less expensive foreign markets, pushing imports higher.
  • Purchasing managers were optimistic about the manufacturing sector in September. The IHS Markit final U.S. Manufacturing Purchasing Managers’ Index™ expanded to 53.1 from August’s reading of 52.8. A similar survey, the Manufacturing ISM® Report On Business®, also grew from 58.8% in August to 60.8% in September. Both the Markit and ISM reports also showed growth in new orders, production, and employment.
  • In the services sector, purchasing managers were optimistic as reflected in the September non-manufacturing index of 59.8%, which is an increase of 4.5 percentage points over August. A reading over 50.0% represents growth, so September’s reading indicates continued growth in the non-manufacturing sector but at a faster rate. This is the highest reading since August 2005, when the index registered 61.3%. Non-manufacturing industries reporting growth in September include retail trade; real estate, rental & leasing; finance & insurance; and accommodation & food services.
  • In the week ended September 30, the advance figure for initial claims for unemployment insurance was 260,000, a decrease of 12,000 from the previous week’s unrevised level. The advance insured unemployment rate remained at 1.4%. The advance number of those receiving unemployment insurance during the week ended September 23 was 1,938,000, an increase of 2,000 from the previous week’s revised level.

Eye on the Week Ahead

Trading during the Columbus Day week is expected to be slow. From an economic perspective, the first reports of inflationary indicators for September are out next week, including the Consumer Price Index and the Producer Price Index. Price growth has been weak for 2017 and is not expected to have changed much in September.

What I’m watching This week – 2 October 2017

The Markets (as of market close September 29, 2017)

The large caps of the Dow and S&P 500 closed last week with moderate gains, while small caps of the Russell 2000 enjoyed substantial gains. The Nasdaq also climbed over 1.0% and continues to lead in the year-to-date race, having gained almost 21.0% over its 2016 year-end value. Analysts suspect that the Trump administration’s proposed tax plan, if passed, would add to the federal deficit. This possibility has helped push long-term Treasury yields higher in anticipation of the issuance of more government bonds to offset the deficit.

The price of crude oil (WTI) continued to climb, closing at $51.64 per barrel, up from the prior week’s closing price of $50.66 per barrel. The price of gold (COMEX) fell to $1,282.50 by early Friday evening, down from the prior week’s price of $1,300.50. The national average retail regular gasoline price decreased to $2.583 per gallon on September 25, 2017, $0.051 less than the prior week’s price and $0.359 more than a year ago.

Market/Index 2016 Close Prior Week As of 9/29 Weekly Change YTD Change
DJIA 19762.60 22349.59 22405.09 0.25% 13.37%
Nasdaq 5383.12 6426.92 6495.96 1.07% 20.67%
S&P 500 2238.83 2502.22 2519.36 0.68% 12.53%
Russell 2000 1357.13 1450.78 1490.86 2.76% 9.85%
Global Dow 2528.21 2907.95 2907.67 -0.01% 15.01%
Fed. Funds target rate 0.50%-0.75% 1.00%-1.25% 1.00%-1.25% 0 bps 50 bps
10-year Treasuries 2.44% 2.20% 2.33% 13 bps -11 bps

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

Last Week’s Economic Headlines

  • The value of the goods and services produced by the economy is measured by gross domestic product. In the second quarter, the GDP increased at a rate of 3.1% compared to an increase of 1.2% in the first quarter. The rise in the rate of economic growth in the second quarter is attributable to increasing personal consumption expenditures, business investment, exports, federal government spending, and private inventory investment. A measure of the income earned during the production of goods and services, the gross domestic income index increased 2.9% in the second quarter after climbing 2.7% in the first quarter. This report may be providing evidence that the economy is slowly but steadily gaining momentum heading into the third quarter.
  • August saw personal income (pre-tax), disposable personal income (after-tax), and consumer expenditures increase over July. Personal income increased $28.6 billion, or 0.2% disposable personal income gained $14.9 billion, or 0.1% and personal consumption expenditures increased $18.0 billion, or 0.1%. While each of these indicators increased, the gains are considered marginal at best and highlight what has been a weak stretch of upward inflation. Core personal consumption expenditures (excluding food and energy) is one of the inflation gauges relied upon by the Federal Reserve. Further evidencing weakness in price increases, the core PCE increased a scant 0.1% for the month and is up only 1.3% over the last 12 months.
  • Sales of single-family homes dropped 3.4% in August from July. The August sales rate is 1.2% below the August 2016 rate. New home sales prices fell in August. The median sales price of new houses sold in August 2017 was $300,200 ($319,900 in July). The average sales price was $368,100 ($371,300 in July). The estimate of new houses for sale at the end of August was 284,000. This represents a supply of 6.1 months at the current sales rate.
  • Manufacturers of durable goods saw a rebound in new orders and shipments in August following a slow July. New orders for durable goods increased $3.9 billion, or 1.7%, in August. Transportation equipment, up 2 of the last 3 months, led the increase, up $3.6 billion, or 4.9%. Shipments of machinery, which climbed 1.1% for the month, led a 0.3% increase in total shipments. Inventories of manufactured durable goods in August, up 13 of the last 14 months, increased $1.4 billion, or 0.3%. Again, machinery, up 9 of the last 10 months, led the increase, gaining 0.8%.
  • The international trade gap for goods narrowed in August. The international trade deficit was $62.9 billion in August, down $0.9 billion from $63.9 billion in July. Exports of goods for August were $128.9 billion, $0.3 billion more than July exports. Imports of goods for August were $191.8 billion, $0.6 billion less than July imports.
  • The Conference Board Consumer Confidence Index® and the University of Michigan’s Index of Consumer Sentiment each showed consumer confidence fell in September from August. The hurricanes, North Korea, Charlottesville, and the country’s growing divisiveness have affected consumers’ economic outlook.
  • In the week ended September 23, the advance figure for initial claims for unemployment insurance was 272,000, an increase of 12,000 from the previous week’s level, which was revised up 1,000. Hurricanes Harvey and Irma impacted initial claims. The advance insured unemployment rate remained at 1.4%. The advance number of those receiving unemployment insurance during the week ended September 16 was 1,934,000, a decrease of 45,000 from the previous week’s revised level.

Eye on the Week Ahead

The August report on international trade in goods and services is out this week. The trade deficit for July was about $44 billion. The week ends with employment figures for September. The labor market has been steady for much of the year, although wage increases have been minimal. Average hourly earnings for August increased only 0.1% and were up 2.5% year-over-year. The September report is not expected to significantly deviate from those figures.

What I’m Watching This week – 25 September 2017

The Markets (as of market close September 22, 2017)

The benchmark indexes listed here ended last week mixed, with the large caps of the S&P 500 and Dow posting modest gains, while the tech-heavy Nasdaq fell back a bit. The small-cap Russell 2000 performed the best, gaining 1.33%. Energy stocks climbed as oil prices hit a three-month high. The yield on 10-year Treasuries climbed as prices fell. Overall, trading was rather subdued, probably in response to the strong dialogue between the United States and North Korea.

The price of crude oil (WTI) cracked the $50 mark for the first time in a while, closing at $50.66 per barrel, up from the prior week’s closing price of $49.83 per barrel. The price of gold (COMEX) fell to $1,300.50 by early Friday evening, $23.00 lower than the prior week’s price of $1,323.50. The national average retail regular gasoline price decreased to $2.634 per gallon on September 18, 2017, $0.051 less than the prior week’s price and $0.409 more than a year ago.

Market/Index 2016 Close Prior Week As of 9/22 Weekly Change YTD Change
DJIA 19762.60 22268.34 22349.59 0.36% 13.09%
Nasdaq 5383.12 6448.47 6426.92 -0.33% 19.39%
S&P 500 2238.83 2500.23 2502.22 0.08% 11.76%
Russell 2000 1357.13 1431.71 1450.78 1.33% 6.90%
Global Dow 2528.21 2890.56 2907.95 0.60% 15.02%
Fed. Funds target rate 0.50%-0.75% 1.00%-1.25% 1.00%-1.25% 0 bps 50 bps
10-year Treasuries 2.44% 2.20% 2.25% 5 bps -19 bps

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

Last Week’s Economic Headlines

  • Despite strengthening in the labor market and modest economic growth, the Federal Open Market Committee decided to maintain the target range for the federal funds rate at 1.00%-1.25%. In deciding to maintain interest rates at their current level, the Committee noted that inflation has remained below the FOMC’s 2% target and the likelihood that hurricanes Harvey, Irma, and Maria will affect economic activity in the near term. Nevertheless, the Committee indicated that rates could be increased at least one more time before the end of the year.
  • Considering the impact of Hurricane Harvey, new home construction in August was solid. Building permits, a direct indicator of future construction, were up 5.7% in August over July, and 8.3% above August 2016. Privately owned housing starts fell 0.8% (still 1.4% above last year), while housing completions were down 10.2% from July, possibly reflecting the impact of Hurricane Harvey.
  • Sales of existing homes fell in August for the fourth time in the last five months. Existing home sales, which include single-family homes, townhomes, condominiums, and co-ops, retreated 1.7% to a seasonally adjusted annual rate of 5.35 million in August from 5.44 million in July. Last month’s sales pace is 0.2% above August 2016, and is the lowest since then. According to the National Association of Realtors®, while demand for existing homes is steady, there continues to be a lack of inventory, which is driving prices higher. Total housing inventory at the end of August declined 2.1% to 1.88 million existing homes available for sale and is now 6.5% lower than a year ago. The median existing-home price in August was $253,500, up 5.6% from August 2016 ($240,000). August’s price increase marks the 66th straight month of year-over-year gains.
  • Import prices rose 0.6% in August, the first monthly increase since a 0.2% jump in April. This marks the largest advance for import prices since the index rose 0.6% in January. Much of the price increase was due to a 4.2% rise in fuel import prices, which is the first such increase since February and the largest advance since January. Nonfuel prices expanded 0.3% in August, driven by a 3.9% jump in nonfuel industrial supplies and materials import prices. Export prices rose 0.6% in August following a 0.5% increase the previous month. The August advance was the largest monthly rise since the index increased 0.8% in June 2016. Nonagricultural export prices advanced 0.7% in August, which is the largest advance since May 2016. The rise in export prices was driven by expanding export prices for nonagricultural industrial supplies and materials.
  • In the week ended September 16, the advance figure for initial claims for unemployment insurance was 259,000, a decrease of 23,000 from the previous week’s revised level. Hurricanes Harvey and Irma impacted this week’s initial claims. The advance insured unemployment rate remained at 1.4%. The advance number of those receiving unemployment insurance during the week ended September 9 was 1,980,000, an increase of 44,000 from the previous week’s revised level.

Eye on the Week Ahead

September and the third quarter come to an end this week. The final figures for the second-quarter gross domestic product are released this week, as is the August report on consumer income and spending.

 

What I’m Watching This Week – 18 September 2017

The Markets (as of market close September 15, 2017)

Stocks followed the prior week’s plunge by surging to record highs last week. The Dow, S&P 500, and Nasdaq reached new all-time highs during the week, as each of the indexes listed here posted impressive gains. The small caps of the Russell 2000 led the way, gaining over 2.3%, followed by the Dow, S&P 500, Nasdaq, and the Global Dow. For the year, the Nasdaq still remains in the lead as it closes in on 20%.

The price of crude oil (WTI) closed at $49.83 per barrel, up from the prior week’s closing price of $47.56 per barrel. The price of gold (COMEX) fell to $1,323.50 by early Friday evening, $27.50 lower than the prior week’s price of $1,351.00. The national average retail regular gasoline price increased to $2.658 per gallon on September 11, 2017, $0.006 higher than the prior week’s price and $0.483 more than a year ago.

Market/Index 2016 Close Prior Week As of 9/15 Weekly Change YTD Change
DJIA 19762.60 21797.79 22268.34 2.16% 12.68%
Nasdaq 5383.12 6360.19 6448.47 1.39% 19.79%
S&P 500 2238.83 2461.43 2500.23 1.58% 11.68%
Russell 2000 1357.13 1399.43 1431.71 2.31% 5.50%
Global Dow 2528.21 2853.39 2890.56 1.30% 14.33%
Fed. Funds target rate 0.50%-0.75% 1.00%-1.25% 1.00%-1.25% 0 bps 50 bps
10-year Treasuries 2.44% 2.05% 2.20% 15 bps -24 bps

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

Last Week’s Economic Headlines

  • The lack of inflationary price pressure in the economy has persisted throughout the summer months. According to the Consumer Price Index, consumer prices rose 0.4% in August and are up 1.9% over the past 12 months. However, much of the monthly increase is attributable to a spike in energy prices, particularly gasoline, which increased 6.3% in August and has increased 10.4% over the past 12 months. The index less food and energy rose a more modest 0.2% for the month and is up 1.7% over the past 12 months. According to the report, Hurricane Harvey had a very small effect on survey response rates in August.
  • The prices producers received for goods and services increased 0.2% in August compared to July’s 0.1% decrease. For the last 12 months ended in August, producer prices have increased 2.4%. The index for producer prices less foods, energy, and trade services also increased 0.2% in August following no change in July. Over the last 12 months, producer prices less foods, energy, and trade services rose 1.9%.
  • Retail sales to consumers scaled back in August, decreasing 0.2% from the previous month. In-store sales were down 0.3%, while nonstore (online) sales were down 1.1% for the month, but are up 8.4% over the prior 12 months.
  • The federal deficit was $107.7 billion in August, an increase of $65 billion from July. Through 11 months of fiscal 2017, the total deficit sits at $674 billion — up from $619 billion over the same period last year. Compared to last year, total expenditures are up 3.1% while total receipts are ahead 1.9%.
  • Hurricane Harvey impacted industrial production in August, according to the Federal Reserve’s Industrial Production and Capacity Utilization report. Industrial production declined 0.9% in August following six consecutive monthly gains. The index for manufacturing decreased 0.3%. The manufacturing industries with the largest estimated storm-related effects were petroleum refining, organic chemicals, and plastics materials and resins. The output of mining fell 0.8% in August, as Hurricane Harvey temporarily curtailed drilling, servicing, and extraction activity for oil and natural gas. The output of utilities dropped 5.5%, as unseasonably mild temperatures, particularly on the East Coast, reduced the demand for air conditioning.
  • The Job Openings and Labor Turnover Summary for July revealed the number of job openings increased from 6.12 million in June to 6.17 million in July. The number of hires and total separations in July were little changed from the prior month. Some of the areas seeing notable job increases include transportation, warehousing, and utilities and educational services. Job openings decreased in health care and social assistance and state and local government. Over the 12 months ended in July, hires totaled 63.6 million and separations totaled 61.5 million, yielding a net employment gain of 2.1 million.
  • In the week ended September 9, the advance figure for initial claims for unemployment insurance was 284,000, a decrease of 14,000 from the previous week’s unrevised level. Hurricanes Harvey and Irma impacted this week’s initial claims. The advance insured unemployment rate remained at 1.4%. The advance number of those receiving unemployment insurance during the week ended September 2 was 1,944,000, a decrease of 7,000 from the previous week’s revised level.

Eye on the Week Ahead

The Federal Open Market Committee meets this week following a break in August. Committee members will cull a mixed bag of economic information, with job growth steady but little inflationary pressure. The FOMC may opt to leave interest rates as they are for the time being, with a possible increase in October in anticipation of more noticeable economic growth during the fall months.

What I’m Watching This Week – 11 September 2017

The Markets (as of market close September 8, 2017)

Retail gas prices surged as Hurricane Harvey forced refineries to shut down, leading to curtailed petroleum shipments. Higher gas prices cut into investors’ pockets, prompting them to move money from stocks to bonds. Each of the indexes listed here lost value last week, with the exception of the Global Dow, which posted a modest gain. Hurricanes Harvey and Irma, plus continued tensions between the United States and North Korea, didn’t help equities. The yield on 10-year Treasuries fell 11 basis points as prices rose.

The price of crude oil (WTI) closed at $47.56 per barrel, up slightly from the prior week’s closing price of $47.35 per barrel. The price of gold (COMEX) reached $1,351.00 by early Friday evening, $21.10 higher than the prior week’s price of $1,329.90. The national average retail regular gasoline price increased to $2.679 per gallon on September 4, 2017, $0.280 higher than the prior week’s price and $0.456 more than a year ago.

Market/Index
2016 Close
Prior Week
As of 9/8
Weekly Change
YTD Change
DJIA
19762.60
21987.56
21797.79
-0.86%
10.30%
Nasdaq
5383.12
6435.33
6360.19
-1.17%
18.15%
S&P 500
2238.83
2476.55
2461.43
-0.61%
9.94%
Russell 2000
1357.13
1413.57
1399.43
-1.00%
3.12%
Global Dow
2528.21
2852.47
2853.39
0.03%
12.86%
Fed. Funds target rate
0.50%-0.75%
1.00%-1.25%
1.00%-1.25%
0 bps
50 bps
10-year Treasuries
2.44%
2.16%
2.05%
-11 bps
-39 bps

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

Last Week’s Economic Headlines

  • The Bureau of Economic Analysis releases a monthly report on the trade deficit for goods, as well as a more comprehensive report on the deficit for both goods and services. For July, the goods and services deficit was $43.7 billion, up $0.1 billion from June. July exports were $194.4 billion, $0.6 billion less than June exports. July imports were $238.1 billion, $0.4 billion less than June imports. Year-to-date, the goods, and services deficit increased $27.9 billion, or 9.6%, from the same period in 2016. Examining the trade balance provides an indication of a country’s relative standing in the world economy, and affords a comparison of the prices of domestically produced goods and services to those produced in other countries.
  • A survey of the nation’s purchasing and supply executives in the latest Non-Manufacturing ISM® Report On Business® shows economic activity in the non-manufacturing sector expanded in August over July. Business activity, new orders, employment, and prices all increased in August, according to the survey.
  • In the week ended September 2, the advance figure for initial claims for unemployment insurance was 298,000, an increase of 62,000 from the previous week’s revised level. This is the highest level for initial claims since April 18, 2015, when it was also 298,000. The advance insured unemployment rate remained at 1.4%. The advance number of those receiving unemployment insurance during the week ended August 26 was 1,940,000, a decrease of 5,000 from the previous week’s revised level.

Eye on the Week Ahead

Hurricane season is certainly upon us, and the financial effects of both hurricanes Harvey and Irma have been widespread. Inflation has been running cold and is not likely to pick up significantly. The latest inflationary gauges for consumer prices are out next week with reports on the Consumer Price Index, the Producer Price Index, and retail sales for August available.

What I’m Watching This Week – 5 September 2017

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

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

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

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

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

Last Week’s Economic Headlines

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

Eye on the Week Ahead

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