What I’m Watching This Week – 3 September 2019

The Markets (as of market close August 30, 2019)

Stocks rebounded last week after China’s Ministry of Commerce indicated that China had no immediate intention to respond to President Trump’s latest threat of an additional round of tariff increases on imports of Chinese goods and services. The result was a surge in stock prices with each of the benchmark indexes listed here posted notable gains, led by the Dow, which eclipsed 3.0% in week-over-week gains. The Nasdaq, the S&P 500, and the Russell 2000 each increased well over 2.0%. Only the Global Dow failed to reach that mark, but came close at almost 1.9%.

Oil prices climbed last week, closing at $55.16 per barrel by late Friday afternoon, up from the prior week’s price of $53.89. The price of gold (COMEX) fell last week for the first time in several weeks, closing at $1,529.20 by late Friday afternoon, down from the prior week’s price of $1,537.20. The national average retail regular gasoline price was $2.574 per gallon on August 26, 2019, $0.024 lower than the prior week’s price and $0.253 less than a year ago.

Market/Index 2018 Close Prior Week As of 8/30 Weekly Change YTD Change
DJIA 23327.46 25628.90 26403.28 3.02% 13.19%
Nasdaq 6635.28 7751.77 7962.88 2.72% 20.01%
S&P 500 2506.85 2847.11 2926.46 2.79% 16.74%
Russell 2000 1348.56 1459.49 1494.84 2.42% 10.85%
Global Dow 2736.74 2898.73 2953.12 1.88% 7.91%
Fed. Funds target rate 2.25%-2.50% 2.00%-2.25% 2.00%-2.25% 0 bps -25 bps
10-year Treasuries 2.68% 1.52% 1.50% -2 bps -118 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 News

  • The economy grew at a rate of 2.0% in the second quarter, according to the second estimate of the gross domestic product. The first estimate projected a 2.1% growth rate. The economy grew at a 3.1% rate in the first quarter of 2019. Gross domestic income (the sum of incomes earned and costs incurred in the production of GDP) increased 2.1% in the second quarter, compared with an increase of 3.2% in the first quarter. The downward revision in the second estimate is primarily attributable to declining exports and lower corporate investment. Consumer spending increased from an initial estimate of 4.4% to a revised 4.7%. Prices for consumer goods and services increased 2.2% in the second quarter compared to a 0.8% bump in the first quarter. Overall, inflation remains stagnant, while a strong labor market is allowing consumers to spend more, somewhat masking weakness in global growth, exports, and domestic manufacturing.
  • Consumer spending rose last month, while prices remained relatively flat. According to the latest figures from the Bureau of Economic Analysis, personal income increased a scant 0.1% in July, but personal consumption expenditures jumped 0.6%. Prices for consumer goods and services inched up 0.2% in July and are up 1.4% over the last 12 months ended in July (well below the Fed’s 2.0% target inflation rate).
  • In a positive note for the manufacturing sector, new orders for long-lasting durable goods advanced 2.1% in July following a 1.8% gain in June. Transportation equipment drove the July increase, jumping 7.0% in July. Excluding transportation, new orders for durable goods actually decreased 0.4%. Shipments dropped 1.1% in July after two consecutive monthly increases, as transportation shipments fell 2.1%. Unfilled orders reversed a negative trend, advancing 0.1% in July following three consecutive monthly decreases. Inventories continue to increase, up 0.4% in July after jumping 0.3% in June. Another positive note from the report is the 5.0% gain in new orders for nondefense capital goods, or equipment used in private industry for producing consumer goods or services.
  • The international trade deficit was $72.3 billion in July, down $1.8 billion from $74.2 billion in June. Exports of goods for July were $137.3 billion, $0.9 billion more than June exports. Imports of goods for July were $209.7 billion, $0.9 billion less than June imports.
  • For the week ended August 24, there were 215,000 claims for unemployment insurance, an increase of 4,000 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 remained at 1.2% for the week ended August 17. The advance number of those receiving unemployment insurance benefits during the week ended August 17 was 1,698,000, an increase of 22,000 from the prior week’s level, which was revised up by 2,000.

Eye on the Week Ahead

Manufacturing activity has been slow over the summer and is not expected to pick up in August, based on purchasing managers’ sentiments. On the other hand, employment has been steady. August’s employment data is out at the end of the week. While the total number of new jobs added last month is expected to be in line with prior months, wage growth is also likely to show minimal advancement.

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What I’m Watching This Week – 26 August 2019

The Markets (as of market close August 23, 2019)

Stock gains enjoyed earlier last week were lost by week’s end on ramped-up trade war rhetoric from the White House. Stocks surged earlier in the week on favorable earnings reports from some major retailers and a renewed commitment from the Federal Reserve to act accordingly in heading off a possible recession. Following China’s announcement that it would raise tariffs on U.S. imports, including a 25% tax on American-made autos, President Trump fired back, ordering domestic companies to start looking for an alternative to China. By last Friday, each of the benchmark indexes fell notably, led by the Russell 2000, which dropped over 2.25%, and the Nasdaq, which lost almost 2.00%.

Oil prices fell last week, closing at $53.89 per barrel by late Friday afternoon, down from the prior week’s price of $54.94. The price of gold (COMEX) advanced again last week, closing at $1,537.20 by late Friday afternoon, up from the prior week’s price of $1,523.60. The national average retail regular gasoline price was $2.598 per gallon on August 19, 2019, $0.026 lower than the prior week’s price and $0.223 less than a year ago.

Market/Index 2018 Close Prior Week As of 8/23 Weekly Change YTD Change
DJIA 23327.46 25886.01 25628.90 -0.99% 9.87%
Nasdaq 6635.28 7895.99 7751.77 -1.83% 16.83%
S&P 500 2506.85 2888.68 2847.11 -1.44% 13.57%
Russell 2000 1348.56 1493.64 1459.49 -2.29% 8.23%
Global Dow 2736.74 2916.65 2898.73 -0.61% 5.92%
Fed. Funds target rate 2.25%-2.50% 2.00%-2.25% 2.00%-2.25% 0 bps -25 bps
10-year Treasuries 2.68% 1.53% 1.52% -1 bps -1.16 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 News

  • Sales of existing homes rebounded in July, advancing 2.5% from their June total. Overall, sales of existing homes are up 0.6% from a year ago. The median home price was $280,800 in July, up 4.3% from last July but down from June’s record high of $285,700. Total existing housing inventory fell 1.6% from June, representing a 4.2-month supply of unsold inventory at the current sales pace. According to Freddie Mac, the average commitment rate for a 30-year, conventional, fixed-rate mortgage decreased to 3.77% in July, down from 3.80% in June. The average commitment rate across all of 2018 was 4.54%. Sales of single-family homes increased by 2.7% in July over June.
  • Unlike sales of existing homes, new home sales plummeted in July, according to the Census Bureau. Sales of new single-family homes fell 12.8% in July from June’s pace, but are still 4.3% ahead of last year’s totals. The median sales price of new houses sold in July 2019 was $312,800. The average sales price was $388,000. There were 337,000 new houses for sale at the end of July, which represents a supply of 6.4 months at the current sales rate.
  • For the week ended August 17, there were 209,000 claims for unemployment insurance, a decrease of 12,000 from the previous week’s level, which was revised up by 1,000. According to the Department of Labor, the advance rate for insured unemployment claims remained at 1.2% for the week ended August 10. The advance number of those receiving unemployment insurance benefits during the week ended August 10 was 1,674,000, a decrease of 54,000 from the prior week’s level, which was revised up by 2,000.

Eye on the Week Ahead

The updated gross domestic product report for the second quarter is out this week. The initial release showed the economy advanced at a rate of 2.1%. With more economic information available, this latest iteration may show more second-quarter growth than initially reported. The G7 meetings wrap up this week, which could offer insight into the direction of the ongoing trade war between the United States and China.

What I’m Watching This Week – 19 August 2019

The Markets (as of market close August 16, 2019)

Volatility is the best term to describe stocks last week. Despite a Friday surge, each of the benchmark indexes listed here fell for the third consecutive week. Wednesday proved to be the most tumultuous day, as stocks suffered a major pullback. Long-term bond yields plunged below that of the two-year note. This “inversion” has historical precedence as a warning of an impending recession. That, coupled with ramped-up trade war rhetoric between the United States and China, pushed stocks lower during the week. Year-to-date, the major indexes listed here continue to run ahead of their 2018 year-end closing values, but the margin is narrowing. Still, the tech-heavy Nasdaq is almost 20% ahead of last year’s closing value, followed by the S&P 500, the Dow, the Russell 2000, and the Global Dow, which is still over 6.50% ahead of last year’s closing pace.

Oil prices crept ahead last week, closing at $54.94 per barrel by late Friday afternoon, up from the prior week’s price of $54.27. The price of gold (COMEX) advanced again last week, closing at $1,523.60 by late Friday afternoon, up from the prior week’s price of $1,509.10. The national average retail regular gasoline price was $2.624 per gallon on August 12, 2019, $0.064 lower than the prior week’s price and $0.219 less than a year ago.

Market/Index 2018 Close Prior Week As of 8/16 Weekly Change YTD Change
DJIA 23327.46 26287.44 25886.01 -1.53% 10.97%
Nasdaq 6635.28 7959.14 7895.99 -0.79% 19.00%
S&P 500 2506.85 2918.65 2888.68 -1.03% 15.23%
Russell 2000 1348.56 1513.04 1493.64 -1.28% 10.76%
Global Dow 2736.74 2967.60 2916.65 -1.72% 6.57%
Fed. Funds target rate 2.25%-2.50% 2.00%-2.25% 2.00%-2.25% 0 bps -25 bps
10-year Treasuries 2.68% 1.73% 1.53% -20 bps -1.15 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 News

  • Consumer prices rose 0.3% in July after advancing 0.1% the prior month. Over the last 12 months ended in July, consumer prices have increased 1.8%. The index for all items less food and energy rose 2.2% over the last 12 months. In July, energy prices rose 1.3% with gasoline prices jumping 2.5%. Also gaining price momentum last month were apparel (+0.4%), shelter (+0.3%), transportation services (+0.3%), and medical care services (+0.5%). New vehicles fell (-0.2%), as did utility gas service (-1.8%). Overall, accelerating consumer prices may strengthen the argument against further interest rate cuts.
  • The government deficit was $119.7 billion in July — significantly greater than the July 2018 deficit of $76.9 billion. Year-to-date, the deficit sits at $866.8 billion, about 27% higher than the deficit over the comparable period last year.
  • Global inflation remained stagnant in July. Prices for U.S. imports and exports increased 0.2% in July following declines of 1.1% and 0.6%, respectively, in June. Despite July’s price increase, import prices have declined 1.8% over the past 12 months ended in July. Driving the monthly import price increase was a 1.8% jump in fuel prices. Excluding fuel, import prices edged down 0.1% last month. Agricultural exports rebounded in July, advancing 0.4% after falling 2.5% the prior month. Over the past 12 months ended in July, export prices are down 0.9%.
  • Retail sales increased 0.7% in July from the previous month and are 3.4% ahead of last July’s pace. In July, retailers saw sales increase in electronics and appliance stores, food and beverage stores, gasoline stations, and food services and drinking places. Nonstore (online) retail sales jumped 2.8% last month, and are up 16.0% from July 2018.
  • Industrial production declined 0.2% in July. Manufacturing output decreased 0.4% last month and has fallen more than 1.5% since December 2018. Manufacturing of business equipment fell 0.4% with machinery declining 1.1%. Mining output dropped 1.8%, largely because of an interruption in mining in the Gulf of Mexico due to Hurricane Barry. Utilities rose 3.1%. Total industrial production was 0.5% higher in July than it was a year earlier.
  • Building permits and home completions rose in July, advancing 8.4% and 7.2%, respectively. Housing starts lagged in July, falling 4.0% below their June totals. The ramp-up in home completions may explain the drop in housing starts. However, with the increase in building permits, housing starts should rebound in August.
  • For the week ended August 10, there were 220,000 claims for unemployment insurance, an increase of 9,000 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 remained at 1.2% for the week ended August 3. The advance number of those receiving unemployment insurance benefits during the week ended August 3 was 1,726,000, an increase of 39,000 from the prior week’s level, which was revised up by 3,000.

Eye on the Week Ahead

July’s figures on new and existing home sales are out this week. Sales of new homes picked up significantly in June while existing home sales fell.

What I’m Watching This Week – 12 August 2019

The Markets (as of market close August 9, 2019)

Fearful that the ongoing trade war between the United States and China could slow economic growth at home and abroad, investors have pulled money from stocks and adopted a “wait-and-see” approach. Not only has the trade war impacted the market, but further interest rate cuts by the Federal Reserve that were anticipated earlier this summer, now may not be in the offing. While the benchmark indexes are still well ahead of their 2018 year-end values, they’re only marginally up from where they were this time last year. Compared to a year earlier, the Dow is 3.3% ahead, the S&P 500 is up 3.5%, the Nasdaq is up 2.9%, while the Russell 2000 (-9.0%) and the Global Dow (-3.8%) are behind last year’s pace. Money has poured into long-term bonds driving prices higher and yields lower.

Oil prices fell again last week, closing at $54.27 per barrel by late Friday afternoon, down from the prior week’s price of $55.23. The price of gold (COMEX) continued to climb last week, closing at $1,509.10 by late Friday afternoon, up from the prior week’s price of $1,452.70. The national average retail regular gasoline price was $2.688 per gallon on August 5, 2019, $0.027 lower than the prior week’s price and $0.164 less than a year ago.

Market/Index 2018 Close Prior Week As of 8/9 Weekly Change YTD Change
DJIA 23327.46 26485.01 26287.44 -0.75% 12.69%
Nasdaq 6635.28 8004.07 7959.14 -0.56% 19.95%
S&P 500 2506.85 2932.05 2918.65 -0.46% 16.43%
Russell 2000 1348.56 1533.66 1513.04 -1.34% 12.20%
Global Dow 2736.74 3005.80 2967.60 -1.27% 8.44%
Fed. Funds target rate 2.25%-2.50% 2.00%-2.25% 2.00%-2.25% 0 bps -25 bps
10-year Treasuries 2.68% 1.85% 1.73% -12 bps -95 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 News

  • Prices at the producer level were generally soft in July. The Producer Price Index advanced 0.2% in July after inching up 0.1% in both June and May. Producer prices, less foods, energy, and trade services, fell 0.1% in July — the first such decline since October 2015. Over the 12 months ended in July, the PPI rose 1.7%. Prices for goods increased 0.4%, while prices for services fell 0.1% last month. Driving goods prices higher was a 2.3% increase in energy prices, particularly gasoline prices, which spiked 5.2% in July.
  • The services (non-manufacturing) sector slowed in July, according to the latest report from the Institute for Supply Management®. The non-manufacturing index fell 1.4 percentage points to its lowest reading since August 2016. Within the services sector, business activity, new orders, and prices fell in July from the prior month. Only employment increased last month.
  • According to the Job Openings and Labor Turnover report, on the last business day of June, the job openings level was little changed at 7.3 million. The job openings rate was 4.6% (4.7% in May). Job openings increased in real estate and rental and leasing (38,000), as well as state and local government education (20,000). Total hires (5.7 million) and separations (5.5 million) were little changed in June from the prior month. Over the 12 months ended in June, hires totaled 69.4 million and separations totaled 66.9 million, yielding a net employment gain of 2.5 million.
  • For the week ended August 3, there were 209,000 claims for unemployment insurance, a decrease of 8,000 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 remained at 1.2% for the week ended July 27. The advance number of those receiving unemployment insurance benefits during the week ended July 27 was 1,684,000, a decrease of 15,000 from the prior week’s level.

Eye on the Week Ahead

Important economic reports that are out this week include the Treasury budget, the Consumer Price Index, and industrial production. Compared to last year, the government deficit has been running about 23% higher as we near the end of the fiscal year. Inflation has been stagnant for much of the year as evidenced by the CPI, which is up only 1.6% since June 2018. While manufacturing picked up a bit last month, overall, industrial production has been weak, up only 1.3% from June 2018.

What I’m Watching This Week – 5 August 2019

The Markets (as of market close August 2, 2019)

Not even a strong labor report could save stocks from tumbling last week, likely in response to President Trump’s tweet that he intended to raise tariffs on an additional $300 billion worth of Chinese imports beginning next month. Trading volume spiked last week as did volatility, with the Cboe Volatility Index® hitting its highest level since May. Rising trade tensions between the economic giants sent global stocks reeling while bond prices soared, sending yields plummeting. Each of the benchmark indexes listed here lost at least 2.60% last week, with the Nasdaq falling almost 4.00%.

Oil prices fell last week, closing at $55.23 per barrel by late Friday afternoon, down from the prior week’s price of $56.17. The price of gold (COMEX) spiked last week, closing at $1,452.70 by late Friday afternoon, up from the prior week’s price of $1,418.40. The national average retail regular gasoline price was $2.715 per gallon on July 29, 2019, $0.035 lower than the prior week’s price and $0.131 less than a year ago.

Market/Index 2018 Close Prior Week As of 8/2 Weekly Change YTD Change
DJIA 23327.46 27192.45 26485.01 -2.60% 13.54%
Nasdaq 6635.28 8330.21 8004.07 -3.92% 20.63%
S&P 500 2506.85 3025.86 2932.05 -3.10% 16.96%
Russell 2000 1348.56 1578.97 1533.66 -2.87% 13.73%
Global Dow 2736.74 3104.51 3005.80 -3.18% 9.83%
Fed. Funds target rate 2.25%-2.50% 2.25%-2.50% 2.00%-2.25% -25 bps -25 bps
10-year Treasuries 2.68% 2.00% 1.85% -15 bps -83 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 News

  • For the first time since 2008, the Federal Open Market Committee voted to lower interest rates. Following its July 31 meeting, the FOMC decided to lower the target range for the federal funds rate 25 basis points to 2.00%-2.25%. The Committee vote was not unanimous as 2 of the 10 members voted against a rate reduction. In any case, after noting that economic activity has been rising at a moderate rate, job gains have been solid, household spending has picked up, and the unemployment rate has remained low, the Committee noted that growth of business fixed investment has been soft and inflation is running below the Committee’s 2.00% target. Also of note, the Committee specifically referenced for the first time “global developments for the economic outlook” as a reason for lowering the target range for the federal funds rate.
  • Employment rose by 164,000 jobs in July, and the unemployment rate remained at 3.7%. In 2018, employment gains had averaged 223,000 per month. In July, notable job gains occurred in professional and technical services (31,000), health care (30,000), social assistance (20,000), and financial activities (18,000). There were approximately 6.1 million unemployed in July, 88,000 more than in June. In July, the labor force participation rate was 63.0%, and the employment-population ratio was 60.7%. The average workweek decreased by 0.1 hour to 34.3 hours in July. Average hourly earnings rose by $0.08 to $27.98 last month — the same hourly increase as occurred in June. Over the past 12 months ended in July, average hourly earnings have increased by 3.2%.
  • The trade deficit was $55.2 billion in June, down $0.2 billion from May’s revised deficit. Both imports (-$4.6 billion) and exports (-$4.4 billion) fell from their May respective totals. Year-to-date, the goods, and services deficit increased $23.2 billion, or 7.9%, from the same period in 2018. In June, goods trade deficits were noted with China ($30.2 billion), the European Union ($15.9 billion), Mexico ($9.2 billion), and Japan ($6.2 billion). Trade surpluses were with South and Central America ($4.8 billion), Hong Kong ($2.3 billion), Brazil ($1.3 billion), and the United Kingdom ($0.1 billion).
  • Not unexpectedly, June saw prices for consumer products and services remain stable while consumer spending remained solid. According to the latest report from the Bureau of Economic Analysis, the personal consumption expenditures (PCE) price index, which measures changes in prices of consumer goods and services, inched up 0.1% in June over May. Excluding food and energy, consumer prices rose 0.2% in June. Personal income jumped 0.4% as did after-tax, or disposable, personal income. With a boost in income and low prices for goods and services, consumers spent more. PCE increased 0.3% in June. Much of the increase in consumer spending was attributable to nondurable goods and services. Consumers actually spent less on durable goods (expected to last at least three years).
  • According to Markit’s survey, manufacturing firms continued to see a slowdown in July. The purchasing managers’ index last month fell to its lowest level since September 2009 with exports contracting for the second time in the last three months. Survey respondents noted softer demand for goods and muted business growth.
  • The ISM® purchasing managers’ index also fell in July from a month earlier, dropping from 51.7% to 51.2%. Production, employment, and prices fell last month, but new orders, supplier deliveries, and inventories increased, which is a good start for August.
  • For the week ended July 27, there were 215,000 claims for unemployment insurance, an increase of 8,000 from the previous week’s level, which was revised up by 1,000. According to the Department of Labor, the advance rate for insured unemployment claims remained at 1.2% for the week ended July 20. The advance number of those receiving unemployment insurance benefits during the week ended July 20 was 1,699,000, an increase of 22,000 from the prior week’s level, which was revised up by 1,000.

Eye on the Week Ahead

Following last week’s busy schedule of economic reports, this week does not include a lot of market-moving information. The Job Openings and Labor Turnover Survey (JOLTS) is expected to reveal similar job openings in June as existed in May. Another report of note, the Producer Price Index, saw producer prices increase slightly in June. It would not be surprising if prices showed no change in July.

What I’m Watching This Week – 29 July 2019

The Markets (as of market close July 26, 2019)

Strong earnings reports plus a favorable gross domestic product report were enough to boost stocks last week. The S&P 500 notched a new record high last week, as did the Nasdaq. The GDP expanded at an annualized rate of 2.1% in the second quarter as consumer spending (which accounts for about two-thirds of the economy) soared. Several large companies reported strong earnings, although Amazon’s run of record earnings came to an end. The Nasdaq led the way last week, gaining over 2.25%, followed by the Russell 2000, which also increased over 2.0%. The S&P 500 rose 38.25 points and 1.65% over its prior week’s closing value. Both the Dow (0.14%) and the Global Dow (0.61%) lagged behind the other benchmark indexes listed here.

Oil prices stayed relatively steady last week, closing at $56.17 per barrel by late Friday afternoon, up from the prior week’s price of $55.97. The price of gold (COMEX) fell for the first time in several weeks, closing at $1,418.40 by late Friday afternoon, down from the prior week’s price of $1,426.50. The national average retail regular gasoline price was $2.750 per gallon on July 22, 2019, $0.029 lower than the prior week’s price and $0.081 less than a year ago.

Market/Index
2018 Close
Prior Week
As of 7/26
Weekly Change
YTD Change
DJIA
23327.46
27154.20
27192.45
0.14%
16.57%
Nasdaq
6635.28
8146.49
8330.21
2.26%
25.54%
S&P 500
2506.85
2976.61
3025.86
1.65%
20.70%
Russell 2000
1348.56
1547.90
1578.97
2.01%
17.09%
Global Dow
2736.74
3085.57
3104.51
0.61%
13.44%
Fed. Funds target rate
2.25%-2.50%
2.25%-2.50%
2.25%-2.50%
0 bps
0 bps
10-year Treasuries
2.68%
2.00%
2.08%
8 bps
-60 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 News

  • According to the initial, or “advance,” estimate of the gross domestic product, the economy grew at an annualized rate of 2.1% in the second quarter. The first quarter saw the economy expand at an annualized rate of 3.1%. The deceleration in the second quarter is due, in part, to downturns in domestic investment (-5.5%) and exports (-5.2%). Within domestic investment, business investment fell 0.6% in the second quarter. Consumer prices for goods and services increased 2.3% in the second quarter compared with an increase of 0.4% in the first quarter. Disposable (after-tax) personal income increased 4.9% in the second quarter, after growing 4.8% in the prior quarter. Consumers spent more in the second quarter, as the personal consumption expenditures index rose by 4.3%, following a 1.1% advance in the first quarter.
  • Total sales of existing homes dropped 1.7% in June, after falling 2.9% (revised) in May. Existing home sales as a whole are down 2.2% from a year ago. Despite low mortgage rates and robust employment, sales have been slow. Sales of single-family existing homes slid about 1.5% in June from May and are down 1.7% from June 2018. One can only speculate as to the reasons for the weakening home sale market. It could be due to a lack of inventory, particularly in the moderately priced segment, or potential homebuyers may lack confidence in the economy. In any case, existing home prices have continued to climb. The median existing-home price in June reached an all-time high of $285,700, which is 4.3% ahead of last June’s median price. Total housing inventory increased from 1.91 million in May to 1.93 million in June, for a 4.4-month supply at the current sales pace.
  • Unlike the market for existing homes, sales of new single-family homes have been surging. In June, sales of new single-family homes increased by 7.0% over May’s revised total. Sales are 4.5% above the June 2018 estimate. The median sales price of new houses sold in June 2019 was $310,400 ($303,500 in May). The average sales price was $368,600 ($371,200 in May). The availability of homes for sale does not seem to be an issue, as there was a 6.3-month supply of new inventory in June.
  • New orders for manufactured durable goods rebounded in June following two consecutive monthly decreases. New orders increased 2.0% last month after falling 2.3% in May. Excluding transportation, new orders increased 1.2%. Shipments of durable goods increased 1.4% after climbing 0.5% in May. Backlog for new durable goods continued to recede, decreasing 0.7% in June. Inventories, up 11 of the past 12 months, increased 0.3% last month. Capital goods orders jumped 4.8% in June after dropping 4.9% in May.
  • The advance report on international trade in goods (excluding services) for June saw the trade deficit narrow slightly from $75.0 billion in May to $74.2 billion last month. Both goods exports and imports decreased in June, $3.7 billion (-2.7%) and $4.6 billion (-2.2%), respectively.
  • For the week ended July 20, there were 206,000 claims for unemployment insurance, a decrease of 10,000 from the previous week’s level. According to the Department of Labor, the advance rate for insured unemployment claims remained at 1.2% for the week ended July 13. The advance number of those receiving unemployment insurance benefits during the week ended July 13 was 1,676,000, a decrease of 13,000 from the prior week’s level, which was revised up by 3,000.

Eye on the Week Ahead

This is a very busy week with some market-moving economic reports scheduled for release, as well as the FOMC meeting. Personal income and savings have been growing at a steady pace, but consumer prices and spending have been relatively subdued, indicative of weak inflationary trends. Also, manufacturing slipped in June, according to purchasing managers’ surveys. A more positive outlook is expected for July.

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What I’m Watching This Week – 22 July 2019

The Markets (as of market close July 19, 2019)

Each of the benchmark indexes listed here closed last week in the red. Energy stocks dropped as oil prices fell. Stocks in communication services and transportation also declined, impacting the large-cap indexes. Comments from the Fed pointed to signs of economic distress and leaned toward a possible rate cut later this month. The small caps of the Russell 2000 dipped the most last week, followed by the S&P 500 and the Nasdaq, each of which fell more than 1.0%. The Global Dow and the Dow lost less than 1.0%. For the year, the tech stocks of the Nasdaq remain well in front, followed by the S&P 500 and the Dow, which have all gained over 15% from their 2018 closing values.

Oil prices plunged last week, closing at $55.97 per barrel by late Friday afternoon, down from the prior week’s price of $60.32. The price of gold (COMEX) continued to climb, closing at $1,426.50 by late Friday afternoon, up from the prior week’s price of $1,416.30. The national average retail regular gasoline price was $2.779 per gallon on July 15, 2019, $0.036 higher than the prior week’s price but $0.086 less than a year ago.

Market/Index 2018 Close Prior Week As of 7/19 Weekly Change YTD Change
DJIA 23327.46 27332.03 27154.20 -0.65% 16.40%
Nasdaq 6635.28 8244.14 8146.49 -1.18% 22.78%
S&P 500 2506.85 3013.77 2976.61 -1.23% 18.74%
Russell 2000 1348.56 1570.00 1547.90 -1.41% 14.78%
Global Dow 2736.74 3108.53 3085.57 -0.74% 12.75%
Fed. Funds target rate 2.25%-2.50% 2.25%-2.50% 2.25%-2.50% 0 bps 0 bps
10-year Treasuries 2.68% 2.00% 2.04% 4 bps -64 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 News

  • June was a good month for sales at the retail level, as receipts were 0.4% over the previous month. For the last 12 months ended in June, retail sales are up 3.4%. Falling gas prices actually held the cumulative sales figure down last month. Sales, excluding autos and gas, surged 0.7% in June. A closer look at the numbers points to evolving trends. Sales from electronics and appliance stores are down 0.3% for the month and 5.0% since June 2018. Sales at clothing stores edged 0.5% higher for the month, but are down 0.9% for the year. Department store sales fell 1.1% in June and are down 5.2% from a year ago. On the other hand, nonstore (online) retail sales continue to flourish — up 1.7% in June and 13.4% over the past 12 months.
  • Import prices dropped 0.9% in June, pulled down by falling fuel prices (-6.5%). This marks the first monthly decrease in import prices since December 2018. Excluding fuel, import prices decreased 0.3% for June and are off 1.4% for the year. Over the last 12 months ended in June, import prices have plunged 2.0% — the largest 12-month drop since the index fell 2.2% from August 2015 to August 2016. Export prices for domestic goods and services sold to foreign buyers fell 0.7% in June, after decreasing 0.2% in May. The June decline was the largest monthly drop since an 0.8% decrease in November 2018. Exports fell 1.6% for the year ended in June, the largest 12-month decline since the index decreased 2.4% from August 2015 to August 2016. Overall, this report further highlights the lack of inflationary pressures both here and globally.
  • Industrial production was unchanged in June, as increases for both manufacturing (+0.4%) and mining (+0.2%) were offset by a drop in utilities (-3.6%). For the second quarter as a whole, industrial production declined at an annual rate of 1.2%, its second consecutive quarterly decrease. Overall, total industrial production was 1.3% higher in June than it was a year earlier.
  • Judging by the dearth of applications for building permits and new residential construction, it doesn’t look like there will be a glut of new housing units on the market. Housing starts fell again last month, dropping 0.9% from May’s totals. On the plus side, single-family housing starts increased 3.5% in June. Building permits sank 6.1% in June and are down 6.6% from a year earlier. Housing completions also plummeted, decreasing 4.8% for the month and 3.7% below June 2018.
  • For the week ended July 13, there were 216,000 claims for unemployment insurance, an increase of 8,000 from the previous week’s level, which was revised down by 1,000. According to the Department of Labor, the advance rate for insured unemployment claims remained at 1.2% for the week ended July 6. The advance number of those receiving unemployment insurance benefits during the week ended July 6 was 1,686,000, a decrease of 42,000 from the prior week’s level, which was revised up by 5,000.

Eye on the Week Ahead

Quite a bit of economic information is out this week, including June’s housing figures, durable goods orders (which have been lagging), and the first report on the second-quarter gross domestic product. The economy grew at an annualized rate of 3.1% in the first quarter.

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