Tag: earnings results

The Markets

For the third straight week, both large- and small-cap indices surged upward. Once again, the S&P 500 and the Dow industrials set new record highs, while the small caps of the Russell 2000 returned to positive territory for the year. The enthusiasm for equities took a toll on the benchmark 10-year Treasury note, whose yield rose as prices fell.

Market/Index	2013 Close	Prior Week	As of 6/6	Weekly Change	YTD Change
DJIA	16576.66	16717.17	16924.28	1.24%	2.10%
Nasdaq	4176.59	4242.62	4321.40	1.86%	3.47%
S&P 500	1848.36	1923.57	1949.44	1.34%	5.47%
Russell 2000	1163.64	1134.50	1165.21	2.71%	.13%
Global Dow	2484.10	2564.35	2599.33	1.36%	4.64%
Fed. Funds	.25%	.25%	.25%	0 bps	0 bps
10-year Treasuries	3.04%	2.48%	2.60%	12 bps	-44 bps

Last Week’s Headlines

• The U.S. economy has finally regained all of the jobs lost during the recession that officially began in December 2007. The 217,000 jobs created in May put total employment at 138.4 million–higher than the previous peak recorded in January 2008. It was the fourth straight month in which the number of new jobs has exceeded 200,000. However, the Bureau of Labor Statistics said the unemployment rate remained unchanged at 6.3%. Also, including workers who are underemployed would put the unemployment rate at 12.2%, down from a peak of 17.2%.
• Going negative: To encourage lending, the European Central Bank cut the interest rate it pays banks for holding their deposits to -0.1%; rather than paying interest on deposits, it’s essentially charging banks for holding their cash. The ECB also cut its refinancing rate–the rate banks must pay when they borrow from the ECB–from 0.25% to 0.15%. President Mario Draghi said the ECB will offer targeted long-term refinancing operations (TLTROs) in September and December, which will allow banks to borrow up to three times the amount they lend out, and may also buy certain asset-backed securities. Draghi also said the ECB is prepared to do more if these measures don’t do enough to stimulate the economy.
• The Environmental Protection Agency announced a sweeping plan to cut carbon pollution nationwide from existing power plants by 30% below 2005 levels. The plan would give individual states a year in which to identify how they would meet the target between now and 2030, and give the public 120 days to comment on the EPA’s proposal.
• U.S. manufacturing continued to rebound. The Commerce Department said the 0.7% increase in factory orders in April (fueled in part by orders for military equipment) was the third straight monthly increase. Meanwhile, the Institute for Supply Management’s manufacturing index also showed acceleration, rising 0.5% to 55.4% in May. The ISM said the services sector, which represents a larger segment of the economy, saw even stronger gains, rising 1.1% in May to 56.3%.
• Construction spending also was up in April, according to the Commerce Department. The 0.2% increase from March put spending 8.6% above the same time last year. Residential construction was up 0.1% for the month, while commercial construction slid 0.1%. Spending on public projects such as schools and highways rose 0.8%.
• The U.S. trade deficit rose more than 6% in April as imports hit a record high of more than $240 billion and exports slowed for the fourth month out of the last five. According to the Bureau of Economic Analysis, the growth in imports stemmed largely from spending on foreign autos, computers, food, and consumer goods.
• Anecdotal reports from the Federal Reserve’s “beige book” report showed the economy continued to improve along with the weather. All 12 districts reported economic expansion, and upward pressure on wages, which could trigger inflation, remained subdued.

Eye on the Week Ahead

In a week light on economic data that could serve as a catalyst for market movements, trading volumes that also have been light in recent weeks could magnify any volatility. Investors–at least those that aren’t on vacation–will try to assess whether recent upward movement reflects an economy emerging from winter worries or a last surge before summer doldrums set in.

The Markets

Equities took a downward revision to the U.S. GDP figure in stride; the Nasdaq continued to rebound while the S&P 500 and Dow industrials both hit new all-time closing highs. The recent rally in bonds continued as the benchmark 10-year Treasury yield hit its lowest level since last June. And after bouncing around for several weeks on either side of $1,300, the price of gold plummeted almost $50 an ounce last week, leaving it at roughly $1,245 an ounce and down almost 10% since spiking in mid-March.

Market/Index	2013 Close	Prior Week	As of 5/30	Weekly Change	YTD Change
DJIA	16576.66	16606.27	16717.17	.67%	.85%
Nasdaq	4176.59	4185.81	4242.62	1.36%	1.58%
S&P 500	1848.36	1900.53	1923.57	1.21%	4.07%
Russell 2000	1163.64	1126.19	1134.50	.74%	-2.50%
Global Dow	2484.10	2550.46	2564.35	.54%	3.23%
Fed. Funds	.25%	.25%	.25%	0 bps	0 bps
10-year Treasuries	3.04%	2.54%	2.48%	-6 bps	-56 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 Headlines

• Rather than stalling, as previously estimated, the U.S. economy actually contracted at an annualized rate of 1% during 2014’s first quarter. The Bureau of Economic Analysis said businesses’ investment in building up inventories was lower than previously estimated and was a major factor in the downward revision of its GDP estimate, which was widely expected to be disappointing. It was the weakest growth rate in three years. Consumer spending was up 3.1%, but couldn’t offset the cost of higher imports and declines in capital investments and spending by state and local governments.
• Durable goods orders rose 0.8% in April–the third straight monthly increase. The Census Bureau said the 2.3% increase in defense-related spending on transportation equipment was the most significant factor; business spending on capital equipment was down 1% for the month.
• Home prices were up 0.9% in the 20 cities measured by the S&P/Case-Shiller 20-City Composite Index for March.
• After a strong March, consumer spending slid 0.1% in April; the Commerce Department said it was the first monthly decline in a year. However, at least part of the decline was the result of lower heating costs as winter finally wound down. Personal income rose 0.3%, but that was the smallest monthly gain so far in 2014. However, coupled with the decline in spending, that allowed people to save more; the savings rate for individuals was 4% compared to March’s 3.6%.
• The average rate for a 30-year fixed-rate mortgage fell to 4.12% last week. Mortgage giant Freddie Mac said that’s the lowest it’s been since last October; however, it’s still higher than last May’s 3.81%. Mortgage rates have been cited as one reason for recent sluggishness in the housing market’s recovery.

Eye on the Week Ahead

As always, unemployment numbers will be of interest, as will Institute for Supply Management reports on both the manufacturing and services sectors. Investors also will watch to see whether the European Central Bank follows through on hints it might adopt measures to stimulate the economy there.

The Markets

“Sell in May, go away” wasn’t a winning strategy last month. Investors regained interest in Nasdaq stocks, giving the index its strongest gains since February. The Russell 2000, which along with the Nasdaq had been pummeled in April, also managed to eke out a positive performance in May. Meanwhile, by the end of the month, both the S&P 500 and the Dow had set new record closing highs, even shrugging off a disappointing Q1 GDP report. And renewed confidence in emerging markets helped power gains in the Global Dow; for the second straight month, it had the second-best year-to-date performance of the five indices in the table below.

Bonds continued to rally, sending the benchmark 10-year Treasury yield to its lowest level since last June. After bouncing around on either side of $1,300 an ounce, gold resumed the downward path it’s been on since mid-March; a nearly $50-an-ounce loss in May’s final week took it to roughly $1,245. Meanwhile, oil prices rose solidly above $103 a barrel and settled there for much of the month.

Market/Index	2013 Close	Prior Month	As of 5/30	Month Change	YTD Change
DJIA	16576.66	16580.84	16717.17	.82%	.85%
Nasdaq	4176.59	4114.56	4242.62	3.11%	1.58%
S&P 500	1848.36	1883.95	1923.57	2.10%	4.07%
Russell 2000	1163.64	1126.86	1134.50	.68%	-2.50%
Global Dow	2484.10	2523.14	2564.35	1.63%	3.23%
Fed. Funds	.25%	.25%	.25%	0 bps	0 bps
10-year Treasuries	3.04%	2.67%	2.48%	-19 bps	-56 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.

The Month in Review

• The U.S. economy contracted at an annualized rate of 1% during Q1 2014; the Bureau of Economic Analysis said it was the weakest growth rate in three years. Consumer spending was up 3.1% during the quarter, but couldn’t offset the impact of higher imports and declines in capital investments and spending by state and local governments.
• The unemployment rate saw its biggest drop since December 2010, falling from 6.7% to 6.3%; that’s the lowest it’s been since September 2008. Also, the Bureau of Labor Statistics said the number of new jobs created–288,000–was far greater than the last 12 months’ 190,000 monthly average and represented the strongest job creation in more than two years. However, the report wasn’t all good news; the drop in the unemployment rate also resulted partly from 806,000 people leaving the labor force.
• Warmer weather helped cut heating costs, which the Commerce Department said was a key reason for the first monthly decline in consumer spending in a year. The Commerce Department’s May report also showed retail sales flattening out despite a 0.3% increase in consumer prices that put the consumer inflation rate for the last 12 months at 2%. The Bureau of Labor Statistics said wholesale prices also rose at a rapid pace; the 0.6% increase was the biggest monthly gain since September 2012.
• Manufacturing data was mixed. Durable goods orders saw their third straight monthly increase, with defense-related spending on transportation the most significant factor. However, business spending on capital equipment was down 1% for the month. And after two straight months of increases, the Federal Reserve’s measure of industrial production fell 0.6%. However, the Institute for Supply Management’s manufacturing survey showed expansion accelerating.
• As more homeowners put their houses on the market in April, the National Association of Realtors^® said sales of existing homes saw their first monthly increase of the year, rising 1.3%. The Commerce Department’s measure of new home sales also jumped 6.4%. However, both numbers were lower than a year earlier. Meanwhile, prices in the 20 cities tracked by the S&P/Case-Shiller 20-City Composite Index were up 0.9% and housing starts rose 13.2%, with a nearly 43% increase in apartment construction leading the way. Meanwhile, the average rate for a 30-year fixed-rate mortgage fell to 4.12%. Mortgage giant Freddie Mac said that’s the lowest it’s been since last October, though it’s still higher than last May’s 3.81% (an increase that has been cited as one reason for recent sluggishness in the housing market).
• A Pennsylvania federal grand jury charged five members of a Chinese military unit with stealing industrial secrets by hacking computers at six U.S. enterprises in the nuclear, solar, and metals industries. The indictment is said to be the first involving a governmental body rather than an individual corporation.
• The eurozone economy grew 0.2% during Q1, roughly the same pace as the previous quarter, while the 0.3% growth in the 28-member European Union was slightly less than in Q4 2013. The inflation rate in both areas rose slightly to 0.7% in the eurozone and 0.8% for the EU, allowing the European Central Bank to leave its key interest rate unchanged at 0.25%.

Eye on the Month Ahead

As summer gets under way, investors will watch to see whether signs of revived economic momentum can be sustained. Housing data will be key to the Fed’s continued winding down of its bond purchases.

The Markets

After spending weeks bouncing around just under 1,900, the S&P 500 finally managed to top it on Friday, setting a new record closing high in the process. And after a lot of back and forth at the beginning of the week, the Nasdaq and the Russell 2000 small caps rebounded strongly from their travails of recent weeks, though the small caps are still down for the year.

Market/Index	2013 Close	Prior Week	As of 5/23	Weekly Change	YTD Change
DJIA	16576.66	16491.31	16606.27	.70%	.18%
Nasdaq	4176.59	4090.59	4185.81	2.33%	.22%
S&P 500	1848.36	1877.86	1900.53	1.21%	2.82%
Russell 2000	1163.64	1102.91	1126.19	2.11%	-3.22%
Global Dow	2484.10	2533.44	2550.46	.67%	2.67%
Fed. Funds	.25%	.25%	.25%	0 bps	0 bps
10-year Treasuries	3.04%	2.52%	2.54%	2 bps	-50 bps

Last Week’s Headlines

• Discussion among members of the Federal Reserve’s monetary policy committee has begun to turn to how best to manage the impact of the end of supportive economic measures, whenever that seems appropriate. According to minutes of the committee’s most recent meeting, the state of the labor market was a major point of debate and will continue to play a major role in Fed policy.
• As more homeowners put their houses on the market in April, sales of existing homes rose 1.3% over the course of the month. It was the first monthly increase this year, but the National Association of Realtors® said that still left home resales 6.8% lower than the previous April.
• New home sales also jumped in April; the Commerce Department said they were up 6.4% for the month, though that was 4.2% below April 2013.
• Parties campaigning on anti-European Union themes gained ground in the EU’s parliamentary elections over the weekend. However, a majority of seats are still held by mainstream parties, so financial assistance programs for weaker members shouldn’t see any immediate disruption.
• Credit Suisse agreed to pay $2.5 billion to settle federal charges that for decades it had helped Americans avoid taxes by concealing assets in undeclared bank accounts. The Swiss bank also pleaded guilty to a criminal charge of conspiracy.
• China’s manufacturing sector was on the brink of expansion in May, according to the Markit Purchasing Managers Index. The reading on the monthly survey hit a four-month high of 49.7% (a reading of 50% indicates expansion). China also gave Russia some relief from Western economic sanctions by signing a $400 billion agreement to purchase gas from Russia’s leading supplier.
• A Pennsylvania federal grand jury charged five members of a Chinese military unit with stealing industrial secrets by hacking computers at six U.S. enterprises in the nuclear, solar, and metals industries. The indictment is said to be the first involving a governmental body rather than an individual corporation.

Eye on the Week Ahead

During the holiday-shortened week, investors will assess the results of the EU elections. They also will get a second look at Q1 economic growth and a smattering of manufacturing, housing, and consumer data.

The Markets

Equities were very much a mixed bag last week. After the Dow and S&P 500 set fresh all-time closing records early in the week, a strong downdraft on Thursday flattened out the S&P for the week and took the Dow back into negative territory year-to-date. The Nasdaq, which has suffered in recent months, saw a positive week, while the small-cap Russell 2000 ended the week down almost 9% from its March high. The pain in domestic equities left the Global Dow the year-to-date leader. Meanwhile, a rally in the 10-year Treasury sent the yield to its lowest level since last October.

Last Week’s Headlines

• After a strong surge in March, retail sales flattened out in April, rising just 0.1%. The Commerce Department said online sales, sales of electronics/appliances, and those at restaurants and bars all declined, while clothing, auto, and department store sales saw gains.
• Wholesale prices saw a sharp increase last month, rising at their fastest pace since September 2012. The Bureau of Labor Statistics said April’s 0.6% increase followed a 0.5% jump in March, and was evenly distributed between goods and services. April’s increase put wholesale inflation for the last 12 months at 2.1%.
• Consumer prices also increased in April at a rapid pace; the 0.3% increase was the biggest monthly jump since last June. A 2.3% increase in the cost of gas and a 0.4% increase in food (beef alone was 2.9% higher) were key. April’s increase put the consumer inflation rate for the last 12 months at 2%, which is the level the Federal Reserve has informally targeted as appropriate.
• The Federal Reserve’s manufacturing indexes were both positive in May. The reading on the Empire State index rebounded 18 points from a weak March, while the Philly Fed reading declined slightly but had its third consecutive positive month.
• U.S. industrial production fell 0.6% in April after a 1% gain in both February and March. The Federal Reserve said milder weather cut the need for heat, which led to a 5.3% decline in utilities output, while mining production rose 1.4%. Use of total capacity at the nation’s factories slid 0.7% and was 1.5% below its average over the last 40 years.
• Housing starts rose strongly in April, with a nearly 43% increase in apartment construction responsible for most of the gain. The Commerce Department said new starts were up 13.2% for the month, and were more than 26% higher than in April 2013. Building permits–an indicator of future activity–were up 8% from March and were almost 4% higher than a year earlier.
• The eurozone economy grew 0.2% during Q1, roughly the same pace as the previous quarter, while the 0.3% growth in the 28-member European Union was slightly less than the 0.4% of Q4 2013. The strongest growth was in Germany, Hungary, Poland, and the United Kingdom. The Q1 figure meant that the eurozone grew 0.9% (1.4% for the EU) compared to the same quarter a year earlier. Meanwhile, the official EU statistical office said the inflation rate rose slightly in both areas, to 0.7% in the eurozone and 0.8% for the EU. Though both inflation rates were an improvement, they were still far below those of the previous year, and the annualized rate for seven countries was negative.

Eye on the Week Ahead

In a week that’s light on economic data, minutes of the most recent Fed meeting, a report on Chinese manufacturing, and housing market statistics could receive more-than-usual interest.

The Markets

A fresh closing high on the Dow on Friday finally enabled it to edge back into positive territory for the year, while the S&P 500 ended the week basically flat. However, after the prior week’s respite from selling pressure, the Nasdaq and the small caps of the Russell 2000 returned to their recent losing ways.

Last Week’s Headlines 

• Growth in the U.S. services sector accelerated in April. The Institute for Supply Management’s gauge rose 2.1% to 55.2%. It was the 51st straight month of growth.
• Greater demand overseas for U.S. exports of natural gas and oil as well as aircraft helped cut the U.S. trade deficit by 3.6% in March, according to the Commerce Department. Exports were up 2.2%, while imports also rose 1.7% to their highest level in two years.
• Federal Reserve Chair Janet Yellen told a congressional committee that the Fed sees a rebound in the economy from winter’s weather-induced slump, but that low inflation and slack in the housing and labor markets will most likely continue to permit interest rates to remain near zero for some time.
• Yet another data point from the Federal Reserve confirmed winter’s impact on the economy during Q1. Business productivity slumped at an annualized rate of 1.7%, a far cry from the previous quarter’s 2.3% increase. However, productivity was 1.4% ahead of Q1 2013. Even though workers put in more hours during the quarter, reduced output helped push unit labor costs up 4.2% for the quarter.
• The European Central Bank once again left its key interest rate unchanged at 0.25% and said that ongoing low inflation might lead to stimulus measures next month, especially if the situation in Ukraine worsens.

Eye on the Week Ahead

With the bulk of Q1 earnings reports now in the rear-view mirror, investors will have to look to manufacturing and retail reports in both the United States and China for guidance. Inflation at both the consumer and wholesale levels is expected to remain subdued, while housing starts could show whether the housing market is emerging from its winter doldrums.

The Markets

Generally encouraging data that suggested winter’s economic deep freeze might be thawing led to broad-based gains for equities despite some slippage at week’s end. The Dow finally managed to surpass briefly the record closing high it hadn’t seen since New Year’s Eve. However, of the four domestic indices, the S&P 500 remained the only one still in positive territory year-to-date. Meanwhile, the Fed’s steady-as-she-goes approach to tapering helped boost demand for the benchmark 10-year Treasury, whose yield fell to its lowest level so far this year.

Last Week’s Headlines

• As expected, economic growth stalled during the first quarter, falling from 2.9% in Q4 2013 to the current 0.1% (though that figure will be subject to two revisions over the next two months). The Bureau of Economic Analysis said lower exports, less spending by businesses on fixed investments and inventory, and reduced spending by local and state governments were key to the decline.
• The unemployment rate saw its biggest drop since December 2010, falling from 6.7% to 6.3% in April; that’s the lowest it’s been since September 2008. Also, the Bureau of Labor Statistics said the number of new jobs created–288,000–was far greater than the last 12 months’ 190,000 monthly average and represented the strongest job creation in more than two years. Gains were broadly distributed, led by employment in business and professional services, retail, restaurants/bars, and construction. However, the report wasn’t all good news; the drop in the unemployment rate resulted partly from 806,000 people leaving the labor force.
• Consumer spending rebounded from the previous two months’ deep freeze, rising an inflation-adjusted 0.7% in March. Even better, the Commerce Department said the spending was widespread, with the biggest gains in durable goods, which rose 2.7% (about half of which was purchases of cars and car parts). The bad news? Spending on durable goods was down 2.2% from the previous March, and one reason for March’s higher sales was a 0.5% jump in the cost of food. Nondurable goods were up 0.9% for the month, while spending on services rose 0.4% and personal income was up 0.5%.
• Business for U.S. manufacturers also accelerated coming out of the frigid winter. The April reading on the most recent Institute for Supply Management survey rose to 54.9%, its highest level since December, and all but one of the 18 industries reporting saw gains. In addition, the Commerce Department said orders at U.S. factories were up 1.1% in March; a 3.5% jump in business spending on capital equipment (not including the volatile aircraft sector) was the biggest increase in that figure since January 2013.
• Home prices in the cities tracked by the S&P/Case-Shiller 20-City Composite Index were relatively flat for the month, rising only 0.2% as 13 of the 20 cities showed declines. Also, the 12.9% year-over-year gain was slightly lower than the previous 12 months’ 13.2% increase.
• As expected, the Federal Reserve’s monetary policy committee once again cut its monthly bond purchases by $10 billion, leaving them at $45 billion a month. The committee also reiterated its belief that its target interest rate will remain at its current level well after bond purchases end.

Eye on the Week Ahead

With few economic reports on tap this week, investors’ focus could be overseas. Heightened tensions over Ukraine could counterbalance any data-induced optimism, as they did last Friday. Also, the European Central Bank will meet Thursday, when additional economic stimulus measures could be on the table.

The Markets

The rotation out of momentum stocks that began in early March continued in April, hitting many of the tech and biotech high-fliers that had soared earlier in the year. That cost the Nasdaq and Russell 2000 dearly, leaving both with negative year-to-date returns. The Russell ended the month down 6.7% from its early March year-to-date high, while the Nasdaq slumped 5.6% over the same period. However, valuation concerns didn’t affect equities across the board. After setting a fresh closing high early in the month, the S&P 500 managed to hang on to its gains, emerging from April the clear year-to-date leader. Meanwhile, the Dow managed to squeak into positive territory for 2014 on the month’s final trading day by surpassing the all-time high it had not seen since New Year’s Eve. The Global Dow survived April’s volatility relatively well, especially considering geopolitical tensions over Ukraine.

Meanwhile, the rotation in equities, a steady hand at the Fed, and little inflation in sight helped keep the benchmark 10-year Treasury yield low. The price of gold backed off after a $43-an-ounce mid-month spike to end April just below $1,300 an ounce, while the price of oil hovered within a dollar or two on either side of $100 a barrel.

The Month in Review

• Economic growth stalled during the first quarter, falling from 2.9% in Q4 2013 to the current 0.1%. The initial estimate will be subject to two revisions over the next two months. The Bureau of Economic Analysis attributed much of the decline to lower exports, less spending by businesses on fixed investments and inventory, and reduced spending by local and state governments.
• The U.S. economy created 192,000 new jobs in March, and the Bureau of Labor Statistics revised its previous estimates for January and February upward. However, that did little to help the unemployment rate; because more people sought work, the unemployment rate remained stuck at 6.7%.
• Consumers emerged from hibernation, sending retail sales up 1.1% during the month. However, a 0.2% increase in the consumer inflation rate could have been responsible for a portion of the higher spending (retail sales aren’t adjusted for price increases). The Bureau of Labor Statistics said higher costs for food and shelter were responsible for much of the month’s increase in the Consumer Price Index, which put the inflation rate for the last 12 months at 1.5%. Meanwhile, wholesale prices, especially those for services, jumped 0.5% during the month.
• Manufacturing data was generally positive. Orders for big-ticket items were up 2.6%, and according to the Commerce Department, some of the biggest increases were in computers, electronics, and communications equipment. Industrial production also rose 0.7%, particularly in the mining and utilities sectors.
• Spring brought few signs of improvement in the housing market. The Commerce Department’s April release said new home sales plunged 14.5%, while the National Association of Realtors^® said sales of existing homes were down by only 0.2%. Housing starts were up almost 3% from February, but down 6% from a year earlier. Home prices in the 20 cities tracked by the S&P/Case-Shiller 20-City Composite Index were basically flat for the month, and year-over-year gains were less robust than in previous months.
• As expected, the Federal Reserve’s monetary policy committee once again cut its monthly bond purchases by $10 billion, leaving them at $45 billion a month. The Fed also reiterated its intention to keep its target interest rate at its current level well after bond purchases end.
• The Chinese economy showed signs of slowing; the country’s National Bureau of Statistics said the 7.4% growth over the last 12 months was slightly less than the previous quarter’s 7.7%, and below the official 7.5% target rate. Also, exports were down 6.6% in March, while imports fell more than 11%.
• The European Central Bank kept its key interest rate unchanged at 0.25% despite a 0.5% inflation rate that raised concerns about the possibility of deflation there.

Eye on the Month Ahead

Investors will have to assess whether the recent slump in equities is a case of “sell in May, go away” coming early and whether recent selling has worked off concerns about overvaluation. European Union parliamentary elections on May 22-25 will be watched for signs of increasing anti-EU sentiment that could jeopardize support for the financial system there. The Fed’s monetary policy committee will take a break in May, leaving investors to focus on economic data, earnings, and geopolitical considerations.

The Markets

After a mostly positive week, investors went into Friday seemingly determined to take some money off the table over a weekend when the Ukrainian conflict seemed to promise fresh sanctions against Russia. The small caps of the Russell 2000 took the brunt of the selling with a 1.9% losson Friday alone, while the S&P 500 was left essentially flat.

Last Week’s Headlines

• New home sales plummeted 14.5% in March; according to the Commerce Department, that’s the lowest level since July and more than 13% below March 2013. It’s the first time since September 2011 that year-over-year sales have dropped. The figures raised questions about how much of the recent slump was attributable to winter weather. However, the $290,000 median sales price was 12.6% higher than a year earlier.
• Sales of existing homes also slipped in March, but by only 0.2%, according to the National Association of Realtors®. That left them 7.5% below March 2013. Tight inventories continued to help push prices up; the NAR said the $198,500 median sales price was nearly 8% higher than in March 2013.
• Orders for big-ticket items such as aircraft and electronics surged 2.6% in March, following a 2.1% increase in February. The Commerce Department said the volatile transportation sector was up 4%, while non-transportation items also rose 2%, led by a 5.7% jump in computers and electronics and a nearly 8% increase in orders for communications equipment. Business orders for capital goods rose more than 7%.
• In the wake of an appeals court ruling that struck down so-called “net neutrality” regulations, the Federal Communications Commission proposed new rules that would allow broadband Internet service providers to charge content providers higher fees for speedier Internet connections as long as they did so in a “commercially reasonable” manner. The rules will be subject to public comment before going before the full commission for a vote, possibly later in the year.

Eye on the Week Ahead

Markets will have no shortage of potential influences next week. In addition to tension over Ukraine, the Federal Reserve will meet, though little change in its current tapering is expected. April unemployment figures and the first estimate of Q1 gross domestic product will be released, as will consumer spending and manufacturing data.

The Markets

Despite the holiday-shortened trading week, domestic equities managed to recapture virtually all of the ground lost the week before–and more important, the gains were across the board. Even the tech and biotech sectors that have suffered recently showed signs of stabilization, while the S&P 500 managed to return to positive territory for the year.

Last Week’s Headlines

• Springtime for retail: Shoppers emerged from hibernation and returned to stores again in March, according to the Commerce Department. Retail sales rose 1.1% from February, and were 3.8% higher than in March 2013. Auto sales were up 3.4% for the month and up 9.5% from March 2013. The figures were hailed as confirmation that frigid winter weather was a major factor in previous months’ sluggish sales.
• China’s economy grew 7.4% over the last year, according to the country’s National Bureau of Statistics. That represents a slowing from the previous quarter’s annualized 7.7% rate, and is slightly below the targeted 7.5% growth for all of 2014. It also represents the nation’s slowest quarterly growth in 18 months. Chinese officials said weaker winter demand from the United States for exports and a sluggish housing market were major factors in the decline.
• Consumer prices rose 0.2% in March, helping to cut the inflation rate for the last 12 months slightly to 1.5%. The Bureau of Labor Statistics said the biggest increases were seen in the costs of food and shelter. Grocery prices overall were up .5% for the month and 1.7% for the year, while restaurant prices are up 2.3% since March 2013. The 2.7% increase in the cost of shelter since last March in part reflects rising home prices. Meanwhile, energy costs declined 0.1% in March, led by a 1.7% drop in gas prices.
• Housing starts improved in March, rising 2.8%, but were nevertheless almost 6% lower than March 2013. The Commerce Department said building permits–an indicator of future activity–fell 2.4% for the month but were more than 11% higher than the previous March.

• U.S. industrial production grew 0.7% in March, driven largely by mining and the utilities sector. Also, the Federal Reserve revised February’s 0.7% gain upward to 1.2%; it was the highest monthly growth rate in almost four years. The increases represent an annualized 4.4% growth rate in Q1. Meanwhile, the Fed’s April Empire State manufacturing survey slipped 4 points to 1.3, but the Philly Fed’s survey for the month rose from 9.0 to 16.6, its highest reading since last September and the second consecutive month of gains.
• The nonpartisan Congressional Budget Office said the federal government’s cost of expanding health-care coverage under the Affordable Care Act (primarily from providing insurance premium subsidies) will be $36 billion in 2014–roughly 12% less than the amount predicted in February–and almost 7% ($100 billion) less than the $1,487 billion previously estimated for the next 10 years.
• The weekly earnings of full-time American workers during the first quarter were 3% higher than a year earlier; according to the Bureau of Labor Statistics, that’s the fastest annual growth since 2008 and was more than double the 1.4% increase in the Consumer Price Index over the last 12 months. The report said the increase put inflation-adjusted median weekly earnings at $796, their highest level since Q2 2012.

Eye on the Week Ahead

Data on home sales and manufacturing could suggest whether a spring rebound is in store. Many of the major Nasdaq tech companies will release Q1 earnings, which could influence whether last week’s rally shows some ongoing strength.