What I’m Watching This Week – 13 May 2019

The Markets (as of market close May 10, 2019)

Only a late rally last Friday saved the benchmark indexes from their worst week of the year. As it was, each of the indexes listed here fell at least 2.12%, with the Global Dow and the Nasdaq falling more than 3.0%. During the week, the small-cap Russell 2000 temporarily sank into correction territory as it drifted more than 10% below its August 2018 high. Once again it appears trade fears stoked investor concerns following President Trump’s 25% tariff rate hike on some Chinese imports. Not surprisingly, bond yields fell as prices rose following increased investor demand. Also notable last week was the initial public offering of Uber, which raised more than $8.1 billion, making it the largest IPO since Alibaba Group’s 2014 public launching.

Oil prices inched lower last week, closing at $61.73 per barrel by late Friday, down from the prior week’s closing price of $61.87 per barrel. The price of gold (COMEX) dropped last week, closing at $1,286.50 by Friday evening, down from the prior week’s price of $1,288.40. The national average retail regular gasoline price was $2.897 per gallon on May 6, 2019, $0.010 higher than the prior week’s price and $0.052 more than a year ago.

Market/Index 2018 Close Prior Week As of 5/10 Weekly Change YTD Change
DJIA 23327.46 26504.95 25942.37 -2.12% 11.21%
Nasdaq 6635.28 8164.00 7916.94 -3.03% 19.32%
S&P 500 2506.85 2945.64 2881.40 -2.18% 14.94%
Russell 2000 1348.56 1614.02 1572.99 -2.54% 16.64%
Global Dow 2736.74 3097.28 2998.45 -3.19% 9.56%
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% 2.52% 2.46% -6 bps -22 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 trade deficit was $50.0 billion in March, up $0.7 billion from February’s revised total. March exports were $2.1 billion more than February exports. Imports in March were $2.8 billion more than February imports. Year-to-date, the goods and services deficit decreased $5.8 billion, or 3.7%, from the same period in 2018. Exports increased $14.0 billion, or 2.3%. Imports increased $8.2 billion, or 1.1%.
  • Consumer prices continued to surge in April. The CPI increased 0.3% for the month following a 0.4% jump in March. Over the last 12 months, the CPI has increased 2.0% — right at the target inflation rate set by the Federal Reserve. As in March, the primary driver of the price increase was attributable to gasoline prices, which rose 5.7% in April, accounting for over two-thirds of the monthly price increase. Consumer prices less food and energy rose a more modest 0.1% for the third consecutive month.
  • The Producer Price Index rose 0.2% in April, according to the Bureau of Labor Statistics. Producer prices rose 0.6% in March and 0.1% in February. For the 12 months ended in April, producer prices have risen 2.2%. Producer prices less foods, energy, and trade services moved up 0.4% in April — the largest increase since rising 0.5% in January 2018. Most of the April price increase is attributed to prices for gasoline, which increased 5.9%. Prices for services inched up 0.1% in April after climbing 0.3% in March.
  • The federal government deficit increased to $160,305 billion in April after reaching $146,945 billion in March. Through the first seven months of the fiscal year the deficit sits at $530,870 billion, up from the $385,445 billion deficit over the same period last year.
  • According to the latest Job Openings and Labor Turnover (JOLTS) report, the number of job openings increased by 346,000 in March. Job openings increased in a number of industries, with the largest increases in transportation, warehousing, and utilities (87,000), construction (73,000), and real estate and rental and leasing (57,000). Job openings decreased in federal government (15,000). Over the 12 months ended in March, hires totaled 69.3 million and separations totaled 66.6 million, yielding a net employment gain of 2.7 million.
  • According to the Department of Labor, there were 228,000 claims for unemployment insurance for the week ended May 4, a decrease of 2,000 from the previous week’s level. The advance rate for insured unemployment claims remained at 1.2% for the week ended April 27. The advance number of those receiving unemployment insurance benefits during the week ended April 27 was 1,684,000, an increase of 13,000 from the prior week’s level.

Eye on the Week Ahead

Retail sales, which got a boost in March, may see sales pull back a bit in April. The April report on industrial production is out this week. The manufacturing sector has been lagging despite a relatively strong economy over the past few months. Finally, the April report on import and export prices is likely to follow the trend of revealing export prices rising at a faster rate than import prices. The number of hires and separations in March remained relatively the same as in the prior month.

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What I’m Watching This Week – 6 May 2019

The Markets (as of market close May 3, 2019)

Stocks “labored” for much of last week only to rally following a strong employment report. That report, coupled with the Fed holding interest rates steady, gave investors the confidence to stay in the “game” a little longer. Other than the Dow, each of the benchmark indexes listed here posted moderate gains by week’s end, led by the Russell 2000. While the Nasdaq bumped up a little less than a quarter of a point last week, it was enough to push that index to another record high. Equally impressive is the year-to-date performance of the stock market. The Nasdaq is more than 23.0% above its 2018 closing value, while the Russell 2000 is close to 20.0% higher.

Oil prices fell slightly last week, closing at $61.87 per barrel by late Friday, down from the prior week’s closing price of $62.80 per barrel. The price of gold (COMEX) fell last week, closing at $1,280.10 by Friday evening, down from the prior week’s price of $1,288.40. The national average retail regular gasoline price was $2.887 per gallon on April 29, 2019, $0.046 higher than the prior week’s price and $0.041 more than a year ago.

Market/Index 2018 Close Prior Week As of 5/3 Weekly Change YTD Change
DJIA 23327.46 26543.33 26504.95 -0.14% 13.62%
Nasdaq 6635.28 8146.40 8164.00 0.22% 23.04%
S&P 500 2506.85 2939.88 2945.64 0.20% 17.50%
Russell 2000 1348.56 1591.82 1614.02 1.39% 19.68%
Global Dow 2736.74 3084.44 3097.28 0.42% 13.17%
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% 2.49% 2.52% 3 bps -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 Headlines

  • As expected, the Federal Open Market Committee maintained interest rates at their present level. The Committee noted that the labor market remains strong and that economic activity rose at a solid rate. However, growth of household spending and business fixed investment slowed in the first quarter. As to the prospect of future rate increases, the FOMC determined that it would be patient in light of global economic and financial developments and inflation running below its 2% objective.
  • April saw a whopping 263,000 new jobs added, and the unemployment rate dropped 0.2 percentage point to 3.6% — the lowest rate since December 1969. The April tally far exceeded the average monthly gain over the prior 12 months of 213,000. Notable job gains occurred in professional and business services (76,000), construction (33,000), health care (27,000), and social assistance (26,000). Employment in manufacturing changed little for the third month in a row, evidencing a stagnant manufacturing sector. The number of unemployed persons decreased by 387,000 to 5.8 million. The labor force participation rate declined by 0.2 percentage point to 62.8% in April but was unchanged from a year earlier. The employment-population ratio was unchanged at 60.6% in April and has been either 60.6% or 60.7% since October 2018. In April, average hourly earnings rose by $0.06 to $27.77. Over the year, average hourly earnings have increased by 3.2%. The average workweek decreased by 0.1 hour to 34.4 hours in April.
  • Personal income grew marginally in March, increasing 0.1% over February, according to the latest figures from the Bureau of Economic Analysis. Disposable (after-tax) income was effectively unchanged in March. On the income side of the report, wages and salaries grew 0.4%, and rental income increased 1.0%. Consumer costs for goods and services rose 0.2% in March. However, excluding food and energy, prices increased less than 0.1%. Consumer spending, as measured by personal consumption expenditures, increased 0.9% in March following a 0.1% bump in February. Of all the household expenditures for March, consumer spending on goods rose 1.7%, while spending on services increased 0.5%.
  • The international trade in goods (not including services) deficit for March was $71.3 billion, up $0.5 billion from February. Exports of goods in March were $1.4 billion more than February exports. Imports of goods were $2.0 billion more than February imports.
  • The IHS Markit U.S. Manufacturing Purchasing Managers’ Index™ (PMI™) posted 52.6, up slightly from March’s recent low of 52.4. Manufacturing increased moderately in April as new orders increased from March’s dreary totals. Although new business grew at a faster pace, the rate of job creation eased in April.
  • The Institute for Supply Management® also conducts a survey of purchasing managers. According to the report, survey respondents were not bullish on their assessment of the manufacturing sector in April. The PMI® fell 2.5 percentage points from its March reading. New orders, production expansion, prices, and employment all fell behind their March ratings. Only supplier deliveries and inventories advanced in April.
  • In the services sector, purchasing and supply executives indicated that business activity increased in April. However, new orders, employment, and prices fell off from the prior month.
  • For the week ended April 27, there were 230,000 claims for unemployment insurance, unchanged 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 April 20. The advance number of those receiving unemployment insurance benefits during the week ended April 20 was 1,671,000, an increase of 17,000 from the prior week’s level, which was revised down by 1,000.

Eye on the Week Ahead

The trade deficit has been shrinking through February. Out this week is the international trade report for March. A further narrowing of the trade deficit would be good news for investors.

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Monthly Market Review – April 2019

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

As April came to a close, each of the benchmark indexes listed here posted strong monthly returns. In fact, for several of the indexes, April brought to a close the best four-month stretch in many years. Both the Nasdaq and S&P 500 reached new highs during the month, as investors were encouraged by a shrinking trade deficit, favorable economic projections, low inflation, and stable interest rates. The Nasdaq led the way, nearing a monthly gain of almost 5.0%, followed by the large caps of the S&P 500, the small caps of the Russell 2000, the Global Dow, and the Dow, which gained over 2.5% for the month. During April, consumers saw gas prices climb as oil prices continued to soar.

By the close of trading on April 30, the price of crude oil (WTI) was $63.42 per barrel, up from the March 29 price of $60.19 per barrel. The national average retail regular gasoline price was $2.887 per gallon on April 29, up from the March 25 selling price of $2.623, and $0.041 more than a year ago. The price of gold dipped by the end of April, falling to $1,285.10 by close of business on the 30th, down from $1,325.70 at the end of March.

Market/Index 2018 Close Prior Month As of April 30 Month Change YTD Change
DJIA 23327.46 25928.68 26592.91 2.56% 14.00%
NASDAQ 6635.28 7729.32 8095.39 4.74% 22.01%
S&P 500 2506.85 2834.40 2945.83 3.93% 17.51%
Russell 2000 1348.56 1539.74 1591.21 3.34% 17.99%
Global Dow 2736.74 3000.81 3099.65 3.29% 13.26%
Fed. Funds 2.25%-2.50% 2.25%-2.50% 2.25%-2.50% 0 bps 0 bps
10-year Treasuries 2.68% 2.40% 2.50% 10 bps -18 bps

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

Latest Economic Reports

  • Employment: Total employment rose by 196,000 in March after adding only 33,000 (revised) in February. The average monthly job gain in the first quarter of 2019 was 180,000 per month (223,000 in 2018). Notable employment increases for March occurred in health care (49,000), professional and technical services (34,000), and food services and drinking places (27,000). The unemployment rate remained at 3.8% in March, and the number of unemployed persons also was effectively unchanged at approximately 6.2 million. The labor participation rate dropped 0.2 percentage point to 63.0% in March, while the employment-population ratio fell 0.1 percentage point to 60.6%. The average workweek increased by 0.1 hour to 34.5 hours for March. Average hourly earnings increased by $0.04 to $27.70. Over the last 12 months ended in March, average hourly earnings have risen 3.2%.
  • FOMC/interest rates: The Federal Open Market Committee meets at the end of April, with its report issued on May 1. The results of that meeting will be covered in the next monthly report. However, based on prior statements from the FOMC, rates are not expected to increase at this time.
  • GDP/budget: The initial estimate of the first-quarter gross domestic product showed the economy grew at an annualized rate of 3.2%. The GDP expanded at a rate of 2.2% for the fourth quarter of 2018. Driving the growth rate increase was a surge in business investment, growth in exports, and a decrease in imports. On the other hand, consumer spending, as measured by personal consumption expenditures, rose 1.2% — notably down from the fourth-quarter rate of 2.5%. Also of note, business investment increased 2.7% and government purchases were a strong 2.4%. The federal budget deficit was $147 billion in March ($234 billion in February), and sits at $691 billion through the first six months of the fiscal year. Over the same period for fiscal year 2018, the deficit was $600 billion.
  • Inflation/consumer spending: The report on personal income and outlays is one that is favored by the Federal Reserve as an inflation indicator. The prices consumers paid for goods and services climbed 0.2% in March following a 0.1% gain in February. Excluding food and energy, consumer prices were unchanged in March after nudging up 0.1% the prior month. In March, consumer spending rose 0.9% (0.1% in February). Personal income inched up 0.1% in March after increasing 0.2% in February. Disposable (after-tax) income did not change in March after climbing 0.1% in February.
  • The Consumer Price Index increased 0.4% in March after rising 0.2% in February. Over the previous 12 months ended in March, the CPI rose 1.9%. The energy index increased 3.5% in March, accounting for about 60% of the overall monthly increase. Core prices, which exclude food and energy, climbed 0.1% in March, the same increase as in February. Core prices were up 2.0% over the previous 12 months ended in March.
  • According to the Producer Price Index, the prices companies received for goods and services rose 0.6% in March after climbing 0.1% in February. The index increased 2.2% for the 12 months ended in March, the largest 12-month rise since a 2.5% advance in December 2018. Once again, soaring energy prices drove the PPI. Excluding food, energy, and trade services, producer prices were unchanged in March from February.
  • Housing: While new home sales have expanded, the market has been slower for existing home sales, which fell 4.9% in March after climbing 11.8% in February. Year-over-year, existing home sales remain down 5.4%. The March median price for existing homes was $259,400, up from $249,500 the prior month. Existing home prices were up 3.8% from March 2018. Total housing inventory for existing homes for sale in March increased to 1.68 million (3.9-month supply), up from 1.63 million existing homes available for sale in February. Sales of new homes continued to expand in March following a robust February. Sales of new single-family houses in March were 4.5% higher than in February, and 3.0% above the March 2018 estimate. Falling prices and a few more houses on the market have helped drive sales activity. The median sales price of new houses sold in March was $302,700 ($315,200 in February). The average sales price was $376,000 ($385,300 in February). Inventory was at a supply of 6.0 months in March (6.1 months in February).
  • Manufacturing: The manufacturing sector continues to sputter in March, as industrial production edged down 0.1% after inching up 0.1% in February. Manufacturing production was unchanged in March after declining in both January and February. Total industrial production was 2.8% higher in March than it was a year earlier. On a more positive note, durable goods orders increased 2.7% in March after falling 1.1% (revised) in February. Soaring commercial aircraft and motor vehicle orders drove much of the March gain. New orders for durable goods excluding transportation increased 0.4% in March.
  • Imports and exports: The latest information on international trade in goods and services, out April 17, is for February and shows that the trade deficit continues to shrink. For February, the goods and services deficit was $49.4 billion, down $1.8 billion from January’s figures, which were $8.8 billion lower than the prior month. February exports were up 1.1%, while imports rose only 0.2%.
  • International markets: Canada’s GDP fell 0.1% in February from the previous month, and is up 1.1% since February 2018. In light of this news, it is expected that the Bank of Canada will keep interest rates at their current level for what could be an extended period of time. Business surveys in China were not as positive as hoped for last month. Despite Beijing’s efforts to stimulate economic growth, manufacturing growth has been slower than anticipated. Eurozone inflation has been subdued for quite some time. However, Germany’s annual inflation rate, which grew to 2.1% in April, exceeded the European Central Bank’s target level. British Prime Minister Theresa May’s attempts to negotiate a Brexit deal with the Labour Party has not been fruitful so far. Presuming a stalemate with no internal agreement in place, Britain is likely to take part in next month’s European elections.
  • Consumer confidence: The Conference Board Consumer Confidence Index® jumped from 124.2 in March to 129.2 in April. Consumers’ opinion of current economic conditions improved in April, as did their short-term outlook. Overall, consumers expect the economy to continue to grow at a solid pace into the summer months.

Eye on the Month Ahead

The economy grew at a rate exceeding 3.0% in the first quarter, according to the initial estimate of the GDP. May’s GDP report will have more complete information and may show that growth wasn’t quite so robust, as consumer spending appears to be slowing. Nevertheless, the stock market could get a boost if exports continue to outpace imports and progress is made toward a trade resolution with China. Looking ahead, investors may see the Fed hike interest rates if the economy picks up steam.

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What I’m Watching This Week – 29 April 2019

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

The S&P 500 and Nasdaq reached record highs last week on the heels of an unexpectedly strong GDP report. Tech shares got a boost from strong quarterly earnings reports from a major player in that sector. Of the benchmark indexes listed here, only the Dow and the Global Dow failed to post gains by the end of the week. The small caps of the Russell 2000 rebounded by gaining over 1.50%, while the S&P 500 closed the week up 1.20%. For the year, each of the indexes listed here are well ahead of their 2018 year-end closing values, led by the Nasdaq and the Russell 2000.

Oil prices dipped for the first time in several weeks, closing at $62.80 per barrel by late Friday, down from the prior week’s closing price of $64.00 per barrel. The price of gold (COMEX) increased last week, closing at $1,288.40 by Friday evening, up from the prior week’s price of $1,277.90. The national average retail regular gasoline price was $2.841 per gallon on April 22, 2019, $0.013 higher than the prior week’s price and $0.043 more than a year ago.

Market/Index 2018 Close Prior Week As of 4/26 Weekly Change YTD Change
DJIA 23327.46 26559.54 26543.33 -0.06% 13.79%
Nasdaq 6635.28 7998.06 8146.40 1.85% 22.77%
S&P 500 2506.85 2905.03 2939.88 1.20% 17.27%
Russell 2000 1348.56 1565.75 1591.82 1.67% 18.04%
Global Dow 2736.74 3094.67 3084.44 -0.33% 12.70%
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% 2.56% 2.49% -7 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

  • The nation’s economy grew at an annualized rate of 3.2% in the first quarter of 2019, according to the initial, or “advance,” estimate of the gross domestic product from the Bureau of Economic Analysis. In the fourth quarter, the GDP expanded at an annualized rate of 2.2%. Increases in government spending, private inventory investment, and exports helped drive the growth in the first quarter. On the downside, first-quarter figures showed that residential investment slowed, as did consumer spending and business fixed investment (e.g., machinery used in production, such as computers, software, heavy equipment, etc.) compared to the prior quarter. A couple of points to note from this report are that consumers spent less, particularly on big-ticket items such as motor vehicles, and net exports (i.e., the trade deficit) increased as exports accelerated while purchases of imports slowed.
  • New orders for manufactured durable goods in March increased $6.8 billion, or 2.7%, according to the Census Bureau. This increase, up four of the last five months, followed a 1.1% February decrease. Excluding transportation, new orders increased 0.4%. Excluding defense, new orders increased 2.3%. Transportation equipment, also up four of the last five months, led the March increase, up 7.0% over February’s figures. Shipments of durable goods increased 0.3% following a similar jump in February. Unfilled orders (0.3%) and inventories (0.3%) increased, while new orders for capital goods, used by businesses to produce goods or services, surged 6.5% in March over February.
  • Sales of existing homes pulled back in March after posting robust sales figures in February. Existing home sales fell 4.9% last month and are down 5.4% from a year ago. The median price for existing homes for sale in March was $259,400 ($249,500 in February), 3.8% ahead of the price last March. Total inventory is at a 3.9-month supply — slightly ahead of the 3.6-month supply in February.
  • New home sales increased 4.5% in March over the previous month as housing prices fell. The median sales price of new houses sold in March was $302,700 ($315,200 in February). The average sales price was $376,000 ($385,300 in February). The estimate of new houses for sale at the end of March was 344,000. This represents a supply of 6.0 months at the current sales rate.
  • For the week ended April 20, there were 230,000 claims for unemployment insurance, an increase of 37,000 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 April 13. The advance number of those receiving unemployment insurance benefits during the week ended April 13 was 1,655,000, an increase of 1,000 from the prior week’s level, which was revised up by 1,000.

Eye on the Week Ahead

Several important economic- and market-moving reports are out this week. Information on consumer income and spending for March is out on Monday. Consumer income rose only 0.2% in February. The employment figures for March are out at the end of the week. The unemployment rate has remained 3.8% for quite some time, while hourly earnings nudged up 0.1% in February. The Federal Open Market Committee meets next week. It is not expected that the Committee will increase interest rates, however its statement on economic conditions will be closely watched.

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What I’m Watching This Week – 22 April 2019

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

Stocks moved very little during the holiday-shortened week (markets were closed in observance of Good Friday). The large caps of the Dow inched up a little over 0.5%, while the S&P 500 dropped less than 0.1%. With light trading, the Cboe Volatility Index® fell to an eight-month low last week. Favorable earnings reports helped push industrial shares higher, offset by dipping health-care stocks. The yield on 10-year Treasuries stayed stagnant last week. Year-to-date, each of the benchmark indexes listed here are comfortably ahead of their respective 2018 closing values, led by the Nasdaq, followed by the Russell 2000, the S&P 500, the Dow, and the Global Dow.

Oil prices rose again last week, closing at $64.00 per barrel by late Friday, up from the prior week’s closing price of $63.77 per barrel. The price of gold (COMEX) fell again last week, closing at $1,277.90 by Friday evening, down from the prior week’s price of $1,293.70. The national average retail regular gasoline price was $2.828 per gallon on April 15, 2019, $0.083 higher than the prior week’s price and $0.081 more than a year ago.

Market/Index 2018 Close Prior Week As of 4/19 Weekly Change YTD Change
DJIA 23327.46 26412.30 26559.54 0.56% 13.86%
Nasdaq 6635.28 7984.16 7998.06 0.17% 20.54%
S&P 500 2506.85 2907.41 2905.03 -0.08% 15.88%
Russell 2000 1348.56 1584.80 1565.75 -1.20% 16.11%
Global Dow 2736.74 3079.86 3094.67 0.48% 13.08%
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% 2.56% 2.56% 0 bps -12 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

  • What is hopefully a sign of a strengthening economy, retail sales increased 1.6% in March and are up 3.6% over March 2018. This is the largest monthly increase since September 2017. Excluding motor vehicles and gas station sales, retail sales advanced 0.9% last month. Certain retailers enjoyed a boost in sales, including motor vehicle and parts dealers (3.1%), furniture and home furnishing stores (1.7%), clothing stores (2.0%), and gas stations (3.5%). Online retail sales increased 1.2% in March and are up 11.6% over the past 12 months.
  • Industrial production continues to stagnate, according to the latest report from the Federal Reserve. In March, industrial production edged down 0.1% after inching up 0.1% in February. For the first three months of the year, industrial production has fallen 0.3%. Manufacturing was unchanged in March after receding in both January and February. Motor vehicles and parts production fell 2.5% for the month and 4.5% for the last 12 months. Utilities production rose 0.2% in March, while mining output fell 0.8%. Capacity utilization for the industrial sector decreased 0.2 percentage point in March to 78.8%, a rate that is 1.0 percentage point below its long-run average.
  • The goods and services deficit was $49.4 billion in February, down $1.8 billion from January. February exports increased 1.1% for the month, while imports inched up 0.2%. For the first two months of 2019, the trade deficit sits at $100.5 billion, down roughly $8.3 billion from the deficit over the same period in 2018.
  • Just when it appeared the housing sector was picking up steam, the figures for housing starts for March pointed in the opposite direction. Housing starts fell 0.3% in March from the previous month, according to the latest report from the Census Bureau. Building permits dropped 1.7% and home completions decreased 1.9% in March. Compared to last March, starts are down 14.2% and building permits are off 7.8%, but completions are 6.8% above last year’s rate.
  • For the week ended April 13, there were 192,000 new claims for unemployment insurance, a decrease of 5,000 from the previous week’s level, which was revised up by 1,000. This is the lowest level for initial claims since September 6, 1969, when it was 182,000. According to the Department of Labor, the advance rate for insured unemployment claims remained at 1.2% for the week ended April 6. The advance number of those receiving unemployment insurance benefits during the week ended April 6 was 1,653,000, a decrease of 63,000 from the prior week’s level, which was revised up by 3,000.

Eye on the Week Ahead

The initial, or preliminary, release of the first-quarter gross domestic product is out this Friday. The GDP increased 2.2% in the fourth quarter, and 2.9% for 2018. However, economic growth slowed further into last year, as consumer spending and business investment decreased. Neither sector has picked up much steam during the first quarter of 2019, which could continue to hold down the economy.

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What I’m Watching This Week – 15 April 2019

The Markets (as of market close April 12, 2019)

Trading was fairly light last week as investors await the start of quarterly corporate earnings reports. With several large corporations reporting lower-than-expected profits, investors may be leery of this round of earnings results. However, better-than-expected earnings were reported by a few banking giants last Friday, which should help the market kick off the week on a positive note. While investors watch for more earnings reports, they are also keeping a watchful eye on the world economy. According to European Central Bank President Mario Draghi, Europe’s economic slowdown could continue for a while. For the week, each of the benchmark indexes listed here posted moderate gains, except for the Dow, which essentially broke even. The S&P 500 gained about 0.5%, and the Nasdaq closed near 0.6%.

Oil prices continue to climb, closing at $63.77 per barrel by late Friday, up from the prior week’s closing price of $63.26 per barrel. The price of gold (COMEX) fell again last week, closing at $1,293.70 by Friday evening, down from the prior week’s price of $1,295.90. The national average retail regular gasoline price was $2.745 per gallon on April 8, 2019, $0.054 higher than the prior week’s price and $0.051 more than a year ago.

Market/Index 2018 Close Prior Week As of 4/12 Weekly Change YTD Change
DJIA 23327.46 26424.99 26412.30 -0.05% 13.22%
Nasdaq 6635.28 7938.69 7984.16 0.57% 20.33%
S&P 500 2506.85 2892.74 2907.41 0.51% 15.98%
Russell 2000 1348.56 1582.56 1584.80 0.14% 17.52%
Global Dow 2736.74 3072.23 3079.86 0.25% 12.54%
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% 2.49% 2.56% 7 bps -12 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 pressures remained weak in March. Consumer prices climbed 0.4% in March after rising 0.2% in February. For the 12 months ended in March, the CPI increased 1.9%. However, driving much of the price increase last month was a 3.5% increase in energy prices (gas prices jumped 6.5%). The CPI less food and energy inched up only 0.1% for the month, and has increased 2.0% over the last 12 months.
  • Surging energy prices also pushed producer prices higher in March. According to the latest report from the Bureau of Labor Statistics, the Producer Price Index rose 0.6% last month, ahead of the 0.1% February increase. Gasoline prices zoomed 16% higher in March. Prices excluding foods, energy, and trade services were unchanged in March following a 0.1% advance in February.
  • The price of imports rose by 0.6% in March following a 1.0% jump in February. Soaring energy prices drove import costs higher. For the first quarter of the year, import prices have risen 1.7% — the largest three-month rise since prices surged 1.9% for the October 2017 through December 2018 stretch. Exports advanced 0.7% last month, the same increase as in February.
  • According to the Federal Reserve, the government deficit in March was $146.9 billion ($208.7 billion in March 2018). For the fiscal year, the deficit sits at $691.2 billion — over 15% greater than the deficit over the same period last year. Big-ticket expenditures last month included Social Security ($87 billion), national defense ($58 billion), income security ($57 billion), and Medicare ($53 billion).
  • The number of job openings fell to 7.1 million (-538,000) on the last business day of February from January’s total, according to the Job Openings and Labor Turnover report. Job openings decreased in a number of industries, with the largest decreases in accommodation and food services (-103,000), real estate and rental and leasing (-72,000), and transportation, warehousing, and utilities (-66,000). The number of job openings fell in the Northeast, South, and Midwest regions. Over the 12 months ended in February, hires totaled 69.3 million and separations totaled 66.6 million, yielding a net employment gain of 2.7 million.
  • For the week ended April 6, there were 196,000 new claims for unemployment insurance, a decrease of 8,000 from the previous week’s level, which was revised up by 2,000. This is the lowest level for initial claims since October 4, 1969, when it was 193,000. According to the Department of Labor, the advance rate for insured unemployment claims remained at 1.2% for the week ended March 30. The advance number of those receiving unemployment insurance benefits during the week ended March 30 was 1,713,000, a decrease of 13,000 from the prior week’s level, which was revised up by 9,000.

Eye on the Week Ahead

Economic indicators have shown that industrial production has slowed during the first quarter of 2019. The Federal Reserve’s March report is out this week, which may (hopefully) show some acceleration in manufacturing. Also, this week, the February figures on the international trade deficit are available. The January trade deficit was over $51 billion, down from December’s nearly $60 billion figure.

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What I’m Watching This Week – 8 April 2019

The Markets (as of market close April 5, 2019)

Stocks marked a second consecutive week of solid gains, led by the small caps of the Russell 2000 and the tech-heavy Nasdaq. The S&P 500 recorded seven consecutive days of gains through last Friday — the longest such streak since 2017. Once again, investors heard positive rhetoric relative to a trade deal with China. This time, President Trump announced that an “epic” deal could be in the not-too-distant future. Long-term bond prices slipped, evidenced by the rise in the yield of 10-year Treasuries (bond prices move in the opposite direction of bond yields). Following the last two weeks of trading, each of the benchmark indexes listed here have reached year-to-date gains comfortably exceeding their 2018 closing values.

Oil prices continue to surge, closing at $63.26 per barrel by late Friday, up from the prior week’s closing price of $60.19 per barrel. The price of gold (COMEX) fell again last week, closing at $1,295.90 by Friday evening, down from the prior week’s price of $1,297.00. The national average retail regular gasoline price was $2.691 per gallon on April 1, 2019, $0.068 higher than the prior week’s price but $0.009 less than a year ago.

Market/Index 2018 Close Prior Week As of 4/5 Weekly Change YTD Change
DJIA 23327.46 25928.68 26424.99 1.91% 13.28%
Nasdaq 6635.28 7729.32 7938.69 2.71% 19.64%
S&P 500 2506.85 2834.40 2892.74 2.06% 15.39%
Russell 2000 1348.56 1539.74 1582.56 2.78% 17.35%
Global Dow 2736.74 3000.81 3072.23 2.38% 12.26%
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% 2.40% 2.49% 9 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

  • March saw 196,000 new jobs added, according to the latest information from the Bureau of Labor Statistics. Employment growth averaged 180,000 per month in the first quarter of 2019, compared with 223,000 per month in 2018. The unemployment rate remained at 3.8%. Notable job gains occurred in health care (49,000), professional and technical services (34,000), food services and drinking places (27,000), and construction (16,000). There were approximately 6.2 million unemployed in March, roughly the same total as February. The labor force participation rate was 63.0% in March (63.2% in February), and has changed very little over the prior 12 months. The employment-population ratio was 60.6% in March and has been either 60.6% or 60.7% since October 2018. The average workweek for all employees increased by 0.1 hour to 34.5 hours in March, offsetting a decline of 0.1 hour in February. In March, average hourly earnings for all employees rose by $0.04 to $27.70, following a $0.10 gain in February. Over the past 12 months, average hourly earnings have increased by 3.2%.
  • In February, consumers tightened their wallets, possibly due to rising gas prices at the pumps. After climbing 0.7% in January, retail sales fell 0.2% in February, according to the latest report from the Census Bureau. Sales are up 2.2% from February 2018. Keeping overall sales afloat were strength in auto sales (0.7%) and gas stations (1.0%). Retail sales excluding auto and gas stations fell 0.6% in February.
  • February was not a banner month for manufacturing. According to the latest report from the Census Bureau, durable goods orders decreased 1.6% for the month after three consecutive monthly increases. Transportation equipment, particularly aircraft orders, drove the decrease, falling 4.8% in February. Excluding transportation, durable goods orders inched up 0.1%. Shipments of manufactured durable goods, up three of the last four months, increased 0.2%, as did inventories, which increased 0.3%. Nondefense new orders for capital goods plummeted in February, dropping 6.3%.
  • Purchasing managers reported marginal growth in the manufacturing sector, according to the Manufacturing ISM® Report On Business® for March. The PMI registered 55.3%, an increase of 1.1 percentage points over February’s reading. New orders, production, employment, and prices all increased in March. Deliveries and inventories decreased.
  • The IHS Markit US Manufacturing PMI™ fell in March to its lowest level since June 2017. The PMI™ posted 52.4 in March, down 0.6 percentage point from February’s rate. According to survey respondents, slower output kept manufacturing growth down. Total new orders expanded at a modest pace that was the slowest since June 2017. On the price front, input price inflation softened further to the slowest since August 2017.
  • Economic activity in the non-manufacturing (services) sector slowed in March, according to the latest report from the Institute for Supply Management®. Survey respondents indicated that growth in business activity and new orders slowed in March. On the other hand, employment and prices increased last month.
  • For the week ended March 30, there were 202,000 new claims for unemployment insurance, a decrease of 10,000 from the previous week’s level, which was revised up by 1,000. This is the lowest level for initial claims since December 6, 1969, when it was 202,000. According to the Department of Labor, the advance rate for insured unemployment claims remained at 1.2% for the week ended March 23. The advance number of those receiving unemployment insurance benefits during the week ended March 23 was 1,717,000, a decrease of 38,000 from the prior week’s level, which was revised down by 1,000.

Eye on the Week Ahead

The latest information on inflationary trends is out this week with the release of the March reports on the Consumer Price Index and Producer Price Index. The CPI advanced 0.2% in February, while producer prices rose a mere 0.1%. Neither index is expected to advance significantly as inflationary pressures remain lukewarm through the first quarter of 2019.

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