Quarterly Market Review: April-June 2022

The Markets (second quarter through June 30, 2022)

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

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

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

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

Stock Market Indexes

Market/Index2021 CloseAs of June 30Monthly ChangeQuarterly ChangeYTD Change
DJIA36,338.3030,775.43-6.71%-11.25%-15.31%
Nasdaq15,644.9711,028.74-8.71%-22.44%-29.51%
S&P 5004,766.183,785.38-8.39%-16.45%-20.58%
Russell 20002,245.311,707.99-8.79-17.49%-23.93%
Global Dow4,137.633,507.37-10.11%-14.43%-15.23%
Fed. Funds0.00%-0.25%1.50%-1.75%75 bps125 bps150 bps
10-year Treasuries1.51%2.97%13 bps65 bps146 bps
US Dollar-DXY95.64104.702.85%6.46%9.47%
Crude Oil-CL=F$75.44$105.82-7.90%4.83%40.27%
Gold-GC=F$1,830.30$1,808.00-1.71%-6.88%-1.22%

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

Latest Economic Reports

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

Eye on the Month Ahead

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

What I’m Watching This Week – 27 June 2022

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

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

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

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

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

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

Stock Market Indexes

Market/Index2021 ClosePrior WeekAs of 6/24Weekly ChangeYTD Change
DJIA36,338.3029,888.7831,500.685.39%-13.31%
Nasdaq15,644.9710,798.3511607.627.49%-25.81%
S&P 5004,766.183,674.843911.746.45%-17.93%
Russell 20002,245.311,665.691765.746.01%-21.36%
Global Dow4,137.633,487.213576.142.55%-13.57%
Fed. Funds target rate0.00%-0.25%1.50%-1.75%1.50%-1.75%0 bps150 bps
10-year Treasuries1.51%3.23%3.13%-10 bps162 bps
US Dollar-DXY95.64104.61104.14-0.45%%8.89%
Crude Oil-CL=F$75.44$109.95$104.03-5.38%37.90%
Gold-GC=F$1,830.30$1,842.00$1,824.00-0.98%-0.34%

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

Last Week’s Economic News

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

Eye on the Week Ahead

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

What I’m Watching This Week – 21 June 2022

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

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

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

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

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

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

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

Stock Market Indexes

Market/Index2021 ClosePrior WeekAs of 6/17Weekly ChangeYTD Change
DJIA36,338.3031,392.7929,888.78-4.79%-17.75%
Nasdaq15,644.9711,340.0210,798.35-4.78%-30.98%
S&P 5004,766.183,900.863,674.84-5.79%-22.90%
Russell 20002,245.311,800.281,665.69-7.48%-25.81%
Global Dow4,137.633,700.333,487.21-5.76%-15.72%
Fed. Funds target rate0.00%-0.25%0.75%-1.00%1.50%-1.75%75 bps150 bps
10-year Treasuries1.51%3.15%3.23%8 bps172 bps
US Dollar-DXY95.64104.18104.610.41%9.38%
Crude Oil-CL=F$75.44$120.49$109.95-8.75%45.74%
Gold-GC=F$1,830.30$1,875.60$1,842.00-1.79%0.64%

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

Last Week’s Economic News

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

Eye on the Week Ahead

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

What I’m Watching This Week – 13 June 2022

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

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

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

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

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

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

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

Stock Market Indexes

Market/Index2021 ClosePrior WeekAs of 6/10Weekly ChangeYTD Change
DJIA36,338.3032,899.7031,392.79-4.58%-13.61%
Nasdaq15,644.9712,012.7311,340.02-5.60%-27.52%
S&P 5004,766.184,108.543,900.86-5.05%-18.16%
Russell 20002,245.311,883.051,800.28-4.40%-19.82%
Global Dow4,137.633,881.923,700.33-4.68%-10.57%
Fed. Funds target rate0.00%-0.25%0.75%-1.00%0.75%-1.00%0 bps75 bps
10-year Treasuries1.51%2.95%3.15%20 bps164 bps
US Dollar-DXY95.64102.17104.181.97%8.93%
Crude Oil-CL=F$75.44$120.26$120.490.19%59.72%
Gold-GC=F$1,830.30$1,853.90$1,875.601.17%2.48%

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

Last Week’s Economic News

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

Eye on the Week Ahead

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

What I’m Watching This Week – 6 June 2022

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

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

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

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

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

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

Stock Market Indexes

Market/Index2021 ClosePrior WeekAs of 6/3Weekly ChangeYTD Change
DJIA36,338.3033,212.9632,899.70-0.94%-9.46%
Nasdaq15,644.9712,131.1312,012.73-0.98%-23.22%
S&P 5004,766.184,158.244,108.54-1.20%-13.80%
Russell 20002,245.311,887.861,883.05-0.25%-16.13%
Global Dow4,137.633,913.193,881.92-0.80%-6.18%
Fed. Funds target rate0.00%-0.25%0.75%-1.00%0.75%-1.00%0 bps75 bps
10-year Treasuries1.51%2.74%2.95%21 bps144 bps
US Dollar-DXY95.64101.68102.170.48%6.83%
Crude Oil-CL=F$75.44$115.12$120.264.46%59.41%
Gold-GC=F$1,830.30$1,857.20$1,853.90-0.18%1.29%

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

Last Week’s Economic News

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

Eye on the Week Ahead

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

Monthly Market Review – May 2022

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

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

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

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

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

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

Stock Market Indexes

Market/Index2021 ClosePrior MonthAs of May 31Monthly ChangeYTD Change
DJIA36,338.3032,977.2132,990.120.04%-9.21%
Nasdaq15,644.9712,334.6412,081.39-2.05%-22.78%
S&P 5004,766.184,131.934,132.150.01%-13.30%
Russell 20002,245.311,862.161,872.550.56%-16.60%
Global Dow4,137.633,815.073,901.992.28%-5.70%
Fed. Funds target rate0.00%-0.25%0.25%-0.50%0.75%-1.00%50 bps75 bps
10-year Treasuries1.51%2.88%2.84%-4 bps133 bps
US Dollar-DXY95.64103.17101.80-1.33%6.44%
Crude Oil-CL=F$75.44$104.07$114.9010.41%52.31%
Gold-GC=F$1,830.30$1,897.90$1,839.40-3.08%0.50%

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

Latest Economic Reports

  • Employment: Employment rose by 428,000 in April, about the same increase as in March. Notable job gains occurred in leisure and hospitality, in manufacturing, and in transportation and warehousing. However, employment is down by 1.2 million, or 0.8%, from its pre-pandemic level in February 2020. In April, the unemployment rate remained at 3.6%. The number of unemployed persons remained relatively unchanged at 5.9 million. These measures are little different from their pre-pandemic values in February 2020 (3.5% and 5.7 million, respectively). Among the unemployed, the number of workers who permanently lost their jobs remained at 1.4 million in April. Also in April, the number of persons who were unable to work because their employer closed or lost business due to the pandemic fell to 1.7 million — down from 2.5 million in the previous month. The labor-force participation rate decreased 0.2 percentage point to 62.2% in April. The employment-population ratio fell by 0.1 percentage point to 60.0%. In April, average hourly earnings rose by $0.10, or 0.3%, to $31.85. Over the last 12 months, average hourly earnings rose by 5.5%. The average work week was unchanged at 34.6 hours in April.
  • There were 210,000 initial claims for unemployment insurance for the week ended May 21, up from a month earlier when there were approximately 180,000 new claims filed. As of May 14, there were 1,346,000 total claims for unemployment benefits. A year ago, there were 3,618,000 total claims for unemployment insurance benefits.
  • FOMC/interest rates: The Federal Open Market Committee met at the beginning of May, and in a move specifically directed at tempering rising inflationary pressures, the Committee increased the federal funds target range by 50 basis points. The FOMC also decided to begin reducing its balance sheet starting June 1 until the size can “maintain securities holdings in amounts needed to implement monetary policy efficiently and effectively in its ample reserves regime.”
  • GDP/budget: Gross domestic product contracted at an annualized rate of -1.5% in the first quarter of 2022 compared with a 6.9% advance in the fourth quarter of 2021. The decrease in GDP primarily reflected decreases in private inventory investment, exports, federal government spending, and state and local government spending; while imports, which are a subtraction in the calculation of GDP, increased. Personal consumption expenditures (3.1%), nonresidential fixed investment (9.2%), and residential fixed investment (0.4%) increased. Spending on goods was unchanged, while spending on services climbed 4.8%. The personal consumption price index, a measure of inflation, increased 7.0% in the first quarter after advancing 6.4% in the fourth quarter. Imports increased 18.3% in the first quarter, while exports fell 5.4%.
  • There was a surplus of $308.2 billion in the April Treasury budget deficit, in sharp contrast to the $225.6 billion deficit in April 2021. Through the first seven months of fiscal year 2022, the deficit sits at $360.0 billion, 81.0% lower than the deficit over the same period in fiscal year 2021. So far in this fiscal year, government expenditures are down 18.0%, while receipts are up 39.0%. Individual income tax receipts have risen 69.0% and corporate income tax receipts have increased 22.0% compared to April 2021.
  • Inflation/consumer spending: According to the latest Personal Income and Outlays report for April, personal income increased 0.4% and disposable personal income rose 0.3% after rising 0.5% and 0.4%, respectively, in March. Consumer spending increased 0.9% following a 1.4% jump in March. Consumer prices rose 0.2% in April after advancing 0.9% the previous month. Consumer prices have risen 6.3% since April 2021. Year over year, energy prices vaulted 30.4%, while food prices increased 10.0%.
  • The Consumer Price Index increased 0.3% in April after climbing 1.2% the previous month. Increases in the indexes for shelter, food, airline fares, and new vehicles were the largest contributors to the April CPI increase. Food prices rose 0.9% in April after advancing 1.0% in March, for a 12-month increase of 9.4%, the largest year-over-year gain since April 1981. The gasoline index fell 6.1% in April but is up 43.6% since April 2021. The CPI has risen 8.3% over the last 12 months, a slight decrease from the 8.5% March figure.
  • Prices that producers receive for goods and services jumped 0.5% in April following a 1.6% increase in March. Producer prices have increased 11.0% since April 2021. Prices less foods, energy, and trade services increased 0.6% in April after climbing 0.9% the previous month. For the year, prices less foods, energy, and trade services moved up 6.9%. In April, prices for goods jumped 1.3%, while prices for services were unchanged after increasing 1.2% in March. In April, producer prices for foods rose 1.5% and energy prices increased 1.7%.
  • Housing: Sales of existing homes declined for the third consecutive month, falling 2.4% in April after dropping 2.7% in March. Year over year, existing home sales were 5.9% under the April 2021 estimate. According to the latest survey from the National Association of Realtors®, home shoppers are feeling the effects of rising mortgage rates and higher home prices. The median existing-home price was $391,200 in April, up from $374,800 in March and 14.8% more than April 2021 ($347,100). Unsold inventory of existing homes represents a 2.2-month supply at the current sales pace. Sales of existing single-family homes also fell in April, down 2.5% after dropping 2.7% in March. Since April 2021, sales of existing single-family homes have fallen 4.8%. The median existing single-family home price was $397,600 in April, up from $381,300 in March.
  • Sales of new single-family homes fell 16.6% in April after decreasing 11.7% (revised) in March. The median sales price of new single-family houses sold in April was $450,600 ($435,000 in March). The April average sales price was $570,300 ($522,500 in March). The inventory of new single-family homes for sale in April represented a supply of 8.3 months at the current sales pace, up from March’s 5.9-month supply. Sales of new single-family homes in April were 26.9% below the April 2021 estimate.
  • Manufacturing: Industrial production increased 1.1% in April following a 0.9% jump in March. The April increase marks the fourth consecutive month of gains of at least 0.8%. All three major industry groups advanced in April. Manufacturing rose 0.8%, mining increased 1.6%, and utilities climbed 2.4%. Total industrial production in April was 6.4% higher than it was a year earlier. Since April 2021, manufacturing has risen 5.8%, mining has jumped 8.6%, and utilities increased 7.5%.
  • April saw new orders for durable goods increase 0.4% following a 0.6% March increase. A 0.6% increase in transportation equipment led the April increase in new orders. Excluding transportation, new orders rose 0.3% in April. Excluding defense, new orders increased 0.3%. In addition to the increase in transportation equipment, areas that contributed to the overall April increase in new durable goods orders included primary metals (0.6%), machinery (1.0%), and nondefense aircraft and parts (4.3%). New orders for nondefense capital goods increased 0.4% in April, while new orders for defense capital goods rose 2.5%. Since April 2021, new orders for durable goods have increased 10.5%.
  • Imports and exports: Both import and export price inflation slowed in April. Import prices were unchanged in April after increasing 2.9% in March, according to the U.S. Bureau of Labor Statistics. Import prices have advanced 12.0% since April 2021. Import fuel prices declined 2.4% in April, the first monthly decrease since December 2021. Prices for nonfuel imports increased 0.4% in April and have not recorded a monthly decrease since November 2020. Prices for exports advanced 0.6% in April following a 4.1% increase the previous month. Export prices rose 18.0% over the past year.
  • The international trade in goods deficit was $105.9 billion in April, down $20.0 billion, or 15.9%, from March. Exports of goods for April were $173.9 billion, $5.2 billion more than March exports. Imports of goods for April were $279.9 billion, $14.8 billion less than March imports. The decrease in imports was largely driven by a drop in industrial supplies, capital goods, consumer goods, and other goods, while the increase in exports was tied to a 13.3% increase in foods, feeds, and beverages.
  • The latest information on international trade in goods and services, released May 4, is for March and shows that the goods and services trade deficit increased $20.0 billion, or 22.3%, from $89.8 billion the previous month. March exports were $241.7 billion, 5.6% above the February estimate. March imports were $351.5 billion, 10.3% more than February imports. Year over year, the goods and services deficit increased $84.8 billion, or 41.5%, from the same period in 2021. Exports increased 17.7%. Imports increased 23.8%.
  • International markets: Several European Union leaders pledged to cut oil purchases from Russia, which sent crude oil prices higher. Eurozone inflation reached an annualized rate of 8.1% in May, impacted by the Russia/Ukraine war and corresponding sanctions imposed by European governments. The potential of an economic slowdown in China and supply-chain disruptions due to the pandemic and the aforementioned war weighed on investors. China’s economy declined for the third consecutive month in May, although at a slower pace than in April, as COVID restrictions began to ease. Overall, for the markets in May, the STOXX Europe 600 Index dipped 0.4%. The United Kingdom’s FTSE rose 0.8%. Japan’s Nikkei 225 Index climbed 1.7%, while China’s Shanghai Composite Index increased 4.6%.
  • Consumer confidence: The Conference Board Consumer Confidence Index® decreased slightly in May. The index stands at 106.4 in May, down from 108.6 in April. The Present Situation Index, based on consumers’ assessment of current business and labor market conditions, decreased to 149.6 in May, down from 152.9 in April. The Expectations Index, based on consumers’ short-term outlook for income, business, and labor market conditions, inched lower to 77.5 in May from 79.0 in April.

Eye on the Month Ahead

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

What I’m Watching This Week – 31 May 2022

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

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

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

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

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

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

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

Stock Market Indexes

Market/Index2021 ClosePrior WeekAs of 5/27Weekly ChangeYTD Change
DJIA36,338.3031,261.9033,212.966.24%-8.60%
Nasdaq15,644.9711,354.6212,131.136.84%-22.46%
S&P 5004,766.183,901.364,158.246.58%-12.76%
Russell 20002,245.311,773.271,887.866.46%-15.92%
Global Dow4,137.633,730.183,913.194.91%-5.42%
Fed. Funds target rate0.00%-0.25%0.75%-1.00%0.75%-1.00%0 bps75 bps
10-year Treasuries1.51%2.78%2.74%-4 bps123 bps
US Dollar-DXY95.64103.06101.68-1.34%6.32%
Crude Oil-CL=F$75.44$112.70$115.122.15%52.60%
Gold-GC=F$1,830.30$1,843.90$1,857.200.72%1.47%

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

Last Week’s Economic News

  • The second estimate of first-quarter gross domestic product showed that the economy contracted at an annualized rate of -1.5%. The decrease in GDP reflected decreases in private inventory investment, exports, federal government spending, and state and local government spending; imports, which are a subtraction in the calculation of GDP, increased. However, consumer spending, as measured by personal consumption expenditures, increased 3.1% in the first quarter. On the other hand, exports fell 5.4%, while imports increased 18.3%. The personal consumption expenditures price index (a measure of price inflation) increased 7.0% in the first quarter. Excluding food and energy prices, the PCE price index increased 5.1% (revised).
  • According to the latest report on personal income and outlays, inflationary pressures waned in April as the personal consumption expenditures price index rose 0.2% after increasing 0.9% in March. Since April 2021, consumer prices have risen 6.3%. Personal consumption expenditures, a measure of consumer spending, increased 0.9% following a 1.4% advance in March. Personal income increased 0.4% in April, and disposable (after-tax) personal income rose 0.3%.
  • The international trade in goods deficit was $105.9 billion in April, a decrease of 15.9% from March. Exports rose 3.1%, while imports fell 5.0%.
  • The housing sector has slowed considerably from the pace set last year as rising home prices and mortgage rates have impacted the market. New single-family home sales fell 16.6% in April. Since April 2021, sales of new single-family homes are down 26.9%. The median sales price of new houses sold in April 2022 was $450,600 ($435,000 in March). The average sales price was $570,300 ($522,500 in March). Inventory of new single-family homes for sale sits at a supply of 9.0 months at the current sales rate, well off the April 2021 pace of 4.7 months.
  • New durable goods orders increased 0.4% in April following a 0.6% advance in March. Durable goods orders have increased in six of the last seven months. Excluding transportation, new orders increased 0.3%. Excluding defense, new orders increased 0.3%. Transportation equipment, up following two consecutive monthly decreases, led the April increase after advancing 0.6%. Since April 2021, new orders for durable goods have risen 10.5%. New orders for nondefense capital goods used in the production of final products rose 0.4% in April. New orders for defense capital goods jumped 2.5% last month.
  • The national average retail price for regular gasoline was $4.593 per gallon on May 23, $0.102 per gallon above the prior week’s price and $1.573 higher than a year ago. Also as of May 25, the East Coast price increased $0.10 to $4.53 per gallon; the Gulf Coast price rose $0.10 to $4.26 per gallon; the Midwest price climbed $0.10 to $4.40 per gallon; the West Coast price increased $0.13 to $5.49 per gallon; and the Rocky Mountain price increased $0.05 to $4.33 per gallon. Residential heating oil prices averaged $3.74 per gallon on May 20, about $0.18 per gallon less than the prior week’s price. According to the U.S. Energy Information Administration, the average retail price of regular gasoline is the highest inflation-adjusted price since 2012 and the fourth highest price on record. The high price of gasoline is currently driven by several factors, including the price of crude oil, the effects of Russia’s full-scale invasion of Ukraine, and U.S. gasoline demand growth outpacing refinery runs, resulting in large gasoline inventory draws.
  • For the week ended May 21, there were 210,000 new claims for unemployment insurance, a decrease of 8,000 from the previous week’s level. According to the Department of Labor, the advance rate for insured unemployment claims for the week ended May 14 was 1.0%, an increase of 0.1 percentage point from the previous week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended May 14 was 1,346,000, an increase of 31,000 from the previous week’s level, which was revised down by 2,000. States and territories with the highest insured unemployment rates for the week ended May 7 were California (2.0%), New Jersey (1.9%), Alaska (1.7%), New York (1.4%), Puerto Rico (1.4%), Rhode Island (1.3%), Massachusetts (1.3%), Minnesota (1.2%), Illinois (1.2%), Pennsylvania (1.2%), and the Virgin Islands (1.2%). The largest increases in initial claims for the week ended May 14 were in Kentucky (+6,712), California (+1,968), Illinois (+1,742), Ohio (+1,189), and Florida (+629), while the largest decreases were in Michigan (-384), Georgia (-325), Colorado (-301), Arizona (-278), and the District of Columbia (-251).

Eye on the Week Ahead

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

What I’m Watching This Week – 23 May 2022

The Markets (as of market close May 20, 2022)

In another volatile week of trading, stocks fell for the seventh consecutive week. A late-day surge last Friday kept the S&P 500 out of bear territory, but not enough to keep it out of the red for the week. Disappointing earnings and declining profits from some major retailers apparently caused concern that retailers will pass on higher input costs to customers. Federal Reserve Chair Jerome Powell added to the angst when he said that “some pain” may be involved in the fight to tame inflation. This was enough to prompt investors to pull away from stocks. By the end of last week, the Nasdaq, the Dow, and the S&P 500 all fell by 2.9% or more. Crude oil prices climbed higher, while the dollar slid lower. Ten-year Treasury yields fell 15 basis points as bond prices increased. Gold prices rose by nearly $37.00.

Wall Street got off to a rough start last week after downbeat Chinese economic data increased worries of a global economic slowdown. Among the benchmark indexes listed here, only the Dow (0.1%) and the Global Dow (0.4%) eked out gains. The Nasdaq (-1.2%), the Russell 2000 (-0.5%), and the S&P 500 (-0.4%) dipped lower. Bond prices rose pulling yields down. Ten-year Treasury yields fell 5.8 basis points to close the day at 2.87%. Crude oil prices climbed $3.60 to $114.04 per barrel. The dollar slid lower, while gold prices advanced.

Stocks rallied last Tuesday, with all 11 major industry sectors advancing to drive the S&P 500 up over 2.0%. The Nasdaq jumped 2.8% as several major tech companies bounced back from Monday’s sell-off. The Russell 2000 increased 3.2%, the Global Dow rose 2.0%, and the Dow added 1.3%. Ten-year Treasury yields climbed 9.1 basis points to reach 2.96%. Crude oil prices, the dollar, and gold prices declined.

Last Tuesday’s rally was short-lived as stocks plunged lower last Wednesday, posting the largest one-day drop in nearly two years. The S&P 500 and the Nasdaq fell more than 4.0%, the Dow and the Russell 2000 slid 3.6%. The Global Dow dipped 2.2%. Ten-year Treasury yields lost more than 8.0 basis points, closing at 2.88%. Crude oil prices declined over $3.00 to $109.23 per barrel. The dollar advanced, while gold prices decreased. Consumer shares, particularly those of major retailers, tumbled as investors tried to weigh the impact of higher prices and monetary policy tightening on corporate earnings and economic growth.

Equities continued to spiral lower last Thursday, with only the Russell 2000 able to close barely in the black. The Dow (-0.8%), the S&P 500 (-0.6%), and the Nasdaq (-0.3%) declined on a volatile day of trading. Crude oil prices climbed $1.70 to $111.30 per barrel. The dollar sank lower, while gold prices advanced. Ten-year Treasury yields slipped to 2.85%.

Stocks closed last Friday with mixed returns, with the Dow and the S&P 500 barely eking out a gain, while the Nasdaq and the Russell 2000 slid lower. Ten-year Treasury yields fell for the third consecutive session, closing the day down 6.8 basis points. Crude oil prices rose for the second day in a row. The dollar and gold prices also advanced on the day.

Stock Market Indexes

Market/Index2021 ClosePrior WeekAs of 5/20Weekly ChangeYTD Change
DJIA36,338.3032,196.0031,261.90-2.90%-13.97%
Nasdaq15,644.9711,805.0011,354.62-3.82%-27.42%
S&P 5004,766.184,023.893,901.36-3.05%-18.14%
Russell 20002,245.311,792.671,773.27-1.08%-21.02%
Global Dow4,137.633,743.163,730.18-0.35%-9.85%
Fed. Funds target rate0.00%-0.25%0.75%-1.00%0.75%-1.00%0 bps75 bps
10-year Treasuries1.51%2.93%2.78%-15 bps127 bps
US Dollar-DXY95.64104.56103.06-1.43%7.76%
Crude Oil-CL=F$75.44$110.46$112.702.03%49.39%
Gold-GC=F$1,830.30$1,806.90$1,843.902.05%0.74%

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

  • Retail sales in April rose 0.9% after increasing 1.4% in March. Retail sales advanced 8.2% since April 2021. Retail trade sales in April were up 0.7% from March and increased 6.7% over last year. Gasoline station sales dropped 2.7% last month but were up 36.9% from April 2021, while sales at food services and drinking places climbed 2.0% in April and were up 19.8% from last year.
  • Industrial production increased for the fourth consecutive month following a 1.1% advance in April. Manufacturing output rose 0.8%, utilities moved up 2.4%, and mining gained 1.6%. Total industrial production in April was 6.4% above its year-earlier level.
  • The housing market is showing definite signs of slowing. In April, building permits (-3.2%), housing starts (-0.2%), and housing completions (-5.1%) decreased from their respective March totals. In particular, single-family new home construction is beginning to wane. The number of single-family building permits issued in April was 4.6% below the March figure, while single-family housing starts (-7.3%), and housing completions (-4.9%) also declined.
  • Sales of existing homes fell for the third consecutive month after declining 2.4% in April. Existing-home sales are down 5.9% since April 2021. According to the National Association of Realtors®, higher home prices and rising mortgage rates have limited buyer activity. The median existing-home price in April was $391,200, up from the March price of $374,800 and well ahead of the April 2021 price of $340,700. Unsold inventory sits at a 2.2 month supply at the current sales pace, slightly ahead of the March rate of 1.9 months. Sales of existing single-family homes also declined in April after dropping 2.5% from March. Single-family existing-home sales are off 4.8% from a year ago. The median existing single-family home price was $397,600 in April, higher than the $381,300 March price.
  • The national average retail price for regular gasoline was $4.491 per gallon on May 16, $0.163 per gallon above the prior week’s price and $1.463 higher than a year ago. Also as of May 16, the East Coast price increased $0.20 to $4.43 per gallon; the Gulf Coast price rose $0.14 to $4.16 per gallon; the Midwest price climbed $0.15 to $4.30 per gallon; the West Coast price increased $0.14 to $5.36 per gallon; and the Rocky Mountain price increased $0.05 to $4.28 per gallon. Residential heating oil prices averaged $3.92 per gallon on May 13, about $0.03 per gallon less than the prior week’s price. U.S. crude oil refinery inputs averaged 15.9 million barrels per day during the week ended May 13, which was 239,000 barrels per day more than the previous week’s average. During the week ended May 13, refineries operated at 91.8% of their operable capacity, while gasoline production decreased, averaging 9.6 million barrels per day.
  • For the week ended May 14, there were 218,000 new claims for unemployment insurance, an increase of 21,000 from the previous week’s level, which was revised down by 6,000. According to the Department of Labor, the advance rate for insured unemployment claims for the week ended May 7 was 0.9%, a decrease of 0.1 percentage point from the previous week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended May 7 was 1,317,000, a decrease of 25,000 from the previous week’s level, which was revised down by 1,000. This is the lowest level for insured unemployment since December 27, 1969, when it was 1,304,000. States and territories with the highest insured unemployment rates for the week ended April 30 were California (2.1%), New Jersey (2.0%), Alaska (1.8%), New York (1.5%), Puerto Rico (1.4%), Rhode Island (1.4%), Massachusetts (1.3%), Minnesota (1.3%), and Illinois (1.2%). The largest increases in initial claims for the week ended May 7 were in California (+3,046), Ohio (+772), Texas (+452), Arkansas (+393), and Iowa (+337), while the largest decreases were in New York (-9,899), Kentucky (-1,479), Indiana (-1,341), Florida (-746), and Massachusetts (-615).

Eye on the Week Ahead

Two important reports are available this week: one related to the economy and the other targeting inflation. The second estimate of the first-quarter gross domestic product is out this week. The economy decelerated at an annualized rate of 1.4%, according to the initial estimate. The April report on personal income and outlays is also available this week. The Personal Consumption Expenditures Price Index, a measure of inflationary trends favored by the Federal Reserve, shows prices have risen 6.6% since April 2021 — well above the 2.0% rate targeted by the Fed.

What I’m Watching This Week – 16 May 2022

The Markets (as of market close May 13, 2022)

Despite a late-week rally, stocks closed last week lower, extending the market’s streak of losses to six consecutive weeks. In what proved to be a very choppy week of trading, each of the benchmark indexes lost value, led by the Nasdaq, which is down over 24.0% so far this year. The large caps of the Dow and the S&P 500 are down 11.4% and 15.6%, respectively, in 2022. On the other hand, 10-year Treasury yields have risen over 140 basis points so far this year. Last week, crude oil prices ended relatively flat, while the dollar advanced marginally. Gold prices slid lower. Investors are still grappling with the economic impact of the Federal Reserve’s response to persistent inflation. In a sign that inflation is still running hot, two major inflation reports, the Producer Price Index and the Consumer Price Index (see below) showed annual increases of 11.0% and 8.3% through April.

Last Monday saw the S&P 500 dip 3.2% to fall below 4,000 for the first time since March 2021. Investors moved away from stocks, uncertain of how aggressive the Federal Reserve will be to slow rising inflation. The Nasdaq fell 4.3% to its lowest level since November 2020. The Russell 2000 dropped 4.2%, and the Dow declined more than 650 points, or 2.0%. Ten-year Treasury yields slipped 4.4 basis points, but remained over 3.00%, closing the day at 3.07%. The dollar was flat. Crude oil prices fell $7.30 to $102.47 per barrel.

Stocks ended last Tuesday slightly higher in a day of choppy trading. The Nasdaq gained 1.0% and the S&P 500 rose 0.3%. The Dow inched up less than 0.1%, the Global Dow gained 0.1%, while the Russell 2000 lost 0.3%. Ten-year Treasury yields fell for the second consecutive day, sliding more than 10 basis points to 2.97%. Crude oil prices also dipped below $100.00, to close the day at around $99.87 per barrel. The dollar increased, while gold prices fell.

Wall Street saw stocks retreat last Wednesday, with each of the benchmark indexes listed here ending the day in the red. A drop in the Consumer Price Index (see below) wasn’t enough to temper investor concerns about rising inflation. Once again, the Nasdaq led the declines, dropping 3.2%, followed by the Russell 2000 (-2.5%), the S&P 500 (-1.7%), the Dow (-1.0%), and the Global Dow (-0.1%). Crude oil prices vaulted higher, jumping nearly $5.50 to reach $105.25 per barrel. The dollar and gold prices advanced, while 10-year Treasury yields fell to 2.92%.

Last Thursday was another day of extreme volatility in the market. Ultimately, the Nasdaq eked out a 0.1% gain, the Russell 2000 rose 1.2%, while the Dow (-0.3%) and the S&P 500 (-0.1%) dipped lower. Ten-year Treasury yields fell 10.4 basis points to 2.81% as bond prices climbed higher. Crude oil prices jumped for the second consecutive day, closing at $106.73 per barrel. The dollar also advanced, while gold prices fell.

In what may prove to be a robust day of dip buying, stocks rebounded last Friday. Each of the benchmark indexes listed here posted solid gains, led by the Nasdaq (3.8%) and the Russell 2000 (3.3%). The S&P 500 advanced 2.4%, the Global Dow rose 1.6%, and the Dow gained 1.5%. As equity values rose, so did bond yields, reversing a rally in bond prices. Ten-year Treasury yields added 11.8 basis points to reach 2.93%. Crude oil prices advanced over $4.00 to hit $110.30 per barrel. The dollar slid lower for the first time all week.

Stock Market Indexes

Market/Index2021 ClosePrior WeekAs of 5/13Weekly ChangeYTD Change
DJIA36,338.3032,899.3732,196.00-2.14%-11.40%
Nasdaq15,644.9712,144.6611,805.00-2.80%-24.54%
S&P 5004,766.184,123.344,023.89-2.41%-15.57%
Russell 20002,245.311,839.561,792.67-2.55%-20.16%
Global Dow4,137.633,805.923,743.16-1.65%-9.53%
Fed. Funds target rate0.00%-0.25%0.75%-1.00%0.75%-1.00%0 bps75 bps
10-year Treasuries1.51%3.12%2.93%-19 bps142 bps
US Dollar-DXY95.64103.67104.560.86%9.33%
Crude Oil-CL=F$75.44$110.56$110.46-0.09%46.42%
Gold-GC=F$1,830.30$1,882.10$1,806.90-4.00%-1.28%

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

  • Inflation decelerated in April, according to the Consumer Price Index. The CPI rose 0.3% last month after advancing 1.2% in March. The year-over-year rate lowered from 8.5% in March to 8.3% in April. However, the CPI, excluding food and energy prices, rose 0.3 percentage point to 0.6% in April. Helping to pull the April CPI lower was a 2.7% drop in energy prices after increasing 11.0% in March. On the other hand, food prices rose 0.9% in April and have increased 9.4% over the last 12 months, the largest year-over-year increase since April 1981. Also, contributing to the April rise in the CPI were increases in prices for shelter, airline fares, new vehicles, medical care, recreation, and household furnishings and operations. Whether the April data is a sign of slowing inflation remains to be seen. It is unlikely to have an immediate impact on the fiscal tightening policy of the Federal Reserve.
  • The Producer Price Index for April rose 0.5% after advancing 1.6% in March. Producer prices have increased 11.0% since April 2021. Energy and food prices increased last month and have risen 40.0% and 16.3%, respectively, over the past 12 months. Also marking a notable increase in April were prices for construction, which climbed 4.0%. Prices less foods, energy, and trade services moved up 0.6% in April after increasing 0.9% in March. For the 12 months ended in April, the index less foods, energy, and trade services rose 6.9%.
  • In a sign that inflationary pressures may have peaked, April import prices were unchanged from a month earlier. Import prices are up 12.0% since April 2021. Fuel import prices declined 2.4% in April following a 17.3% increase the previous month, the first one-month drop since December 2021. Despite the decrease in April, import fuel prices rose 64.3% over the past 12 months. Nonfuel import prices increased 0.4% in April. Higher prices for nonfuel industrial supplies and materials, capital goods, foods, feeds, and beverages, and automotive vehicles all contributed to the April increase in nonfuel import prices. Nonfuel imports rose 7.2% over the past 12 months. Export prices advanced 0.6% last month after climbing 4.1% in March. Agricultural exports advanced 1.1% in April, after increasing 4.3% the previous month. Nonagricultural exports advanced 0.5% in April following an increase of 4.1% in March.
  • The federal budget in April posted a $308.2 billion surplus, compared to a $225.6 billion deficit a year ago. Government receipts totaled $863.6 billion, or $548.4 billion more than March receipts and 97.0% above the total from April of last year. Government expenditures were $555.4 billion, or $47.6 billion more than March outlays. Through the first seven months of the fiscal year, the government budget deficit sits at $360.0 billion, 81.0% lower than the $1,931.8 billion shortfall over the same period last year. Contributing to the increase in government receipts this fiscal year is a 69.0% increase in individual income tax receipts. Also, employment and general retirement tax receipts are up 7.0% and corporate income taxes increased 22.0%.
  • The national average retail price for regular gasoline was $4.328 per gallon on May 9, $0.146 per gallon above the prior week’s price and $1.367 higher than a year ago. Also as of May 9, the East Coast price increased $0.15 to $4.24 per gallon; the Gulf Coast price rose $0.15 to $4.01 per gallon; the Midwest price climbed $0.17 to $4.15 per gallon; the West Coast price increased $0.12 to $5.22 per gallon; and the Rocky Mountain price increased $0.04 to $4.23 per gallon. Residential heating oil prices averaged $3.95 per gallon on May 6, about $0.83 per gallon less than the prior week’s price. U.S. crude oil refinery inputs averaged 15.7 million barrels per day during the week ended May 6, which was 230,000 barrels per day more than the previous week’s average. During the week ended May 6, refineries operated at 90.0% of their operable capacity, and gasoline production increased, averaging 9.7 million barrels per day.
  • For the week ended May 7, there were 203,000 new claims for unemployment insurance, an increase of 1,000 from the previous week’s level, which was revised up by 2,000. According to the Department of Labor, the advance rate for insured unemployment claims for the week ended April 30 was 1.0%, unchanged from the previous week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended April 30 was 1,343,000, a decrease of 44,000 from the previous week’s level, which was revised up by 3,000. This is the lowest level for insured unemployment since January 3, 1970, when it was 1,332,000. States and territories with the highest insured unemployment rates for the week ended April 23 were California (2.1%), New Jersey (2.1%), Alaska (1.9%), Rhode Island (1.8%), New York (1.7%), Puerto Rico (1.6%), Massachusetts (1.5%), Minnesota (1.5%), Pennsylvania (1.4%), Connecticut (1.3%), and Illinois (1.3%). The largest increases in initial claims for the week ended April 30 were in New York (+7,329), Illinois (+3,140), Kentucky (+1,152), Michigan (+1,092), and New Hampshire (+469), while the largest decreases were in Massachusetts (-3,029), California (-2,816), New Jersey (-2,466), Connecticut (-2,319), and Ohio (-2,018).

Eye on the Week Ahead

The April figures for existing home sales are out this week. The housing sector has slowed from last year’s torrid pace. Sales of existing homes have declined in both February and March. An indicator of consumer spending, the retail sales report for April is available this week. March saw retail sales advance 0.5%, bringing the year-over-year increase to 5.5%. Also out this week is the Federal Reserve’s monthly index of industrial production for April. Industrial production advanced 0.9% in March and is up 5.5% from March 2021.

What I’m Watching This Week – 9 May 2022

The Markets (as of market close May 6, 2022)

Stocks ended last week lower, marking the fifth consecutive week of losses. Despite suggestions from Federal Reserve Chair Jerome Powell that the central bank is not likely to raise interest rates by 75 basis points, stubbornly high inflation has set the Fed on a path of quantitative tightening and interest-rate advances that presents a risk to economic growth. April’s solid jobs numbers (see below) suggest employers may be inclined to keep raising wages in order to attract workers, adding to inflationary pressures. Once again, tech shares took the brunt of the sell off, with only energy shares and utility stocks posting gains. The Nasdaq and the Russell 2000 each fell more than 1.2% last week, while the S&P 500 extended its losing streak after slipping 0.2%. Treasury bond prices continued to drop, pushing yields higher. Crude oil prices advanced again last week on supply concerns fueled by the impending European Union sanctions on Russian oil.

Stocks began last week on an uptick, likely influenced by dip buyers. Each of the benchmark indexes listed here gained ground, led by the Nasdaq, which rose 1.6% on the heels of a rally by several major tech companies. The Russell 2000 added 1.0%, the S&P 500 gained 0.6%, and the Dow climbed 3.0%. The Global Dow slid 0.5%. Ten-year Treasury yields traded near 3.0%, ending the day at 2.99%. The dollar rose $0.67 to reach $103.63 against a basket of foreign currencies. Crude oil prices increased $1.13 to $105.82 per barrel.

For the second session in a row, stocks ended the day higher last Tuesday as investors awaited Wednesday’s expected Federal Reserve rate hike. The Russell 2000 (1.0%) and the S&P 500 (0.5%) led the indexes, followed by the Global Dow (0.8%). The Nasdaq and the Dow each gained 0.2%. Crude oil prices, 10-year Treasury yields, and the dollar declined. Gold prices advanced.

Wall Street rallied last Wednesday after Jerome Powell eased concerns that the central bank would pursue a more aggressive pace of tightening. Nevertheless, earlier in the day, the Federal Open Market Committee announced the steepest interest-rate hike in 20 years. Each of the benchmark indexes listed here posted notable gains, with both the Nasdaq and the S&P 500 adding 3.0%. The Dow jumped 2.8% and the Russell 2000 advanced 2.7%. The Global Dow rose 1.8%. Ten-year Treasury yields slid 4.3 basis points to 2.91%. The dollar dropped nearly 1.0%, while crude oil prices soared, adding $5.50 to reach $107.90 per barrel after the European Union proposed an import ban on Russian oil.

The Wall Street rally from last Wednesday reversed to a retreat last Thursday as stocks plunged by the end of trading. The Nasdaq fell 5.0%, the Russell 2000 dropped 4.3%, the S&P 500 slid 3.6%, and the Dow declined 3.1%. The Global Dow gave back 1.8%. Ten-year Treasury yields added nearly 15 basis points to close at 3.06%, the highest rate since 2018. The dollar rose to $103.50. Crude oil prices jumped to $108.25 per barrel.

Stocks fell again last Friday to end a roller-coaster week. The small caps of the Russell 2000 (-1.7%) and the tech-heavy Nasdaq (-1.4%) led the declining indexes, followed by the S&P 500 (-0.6%), the Global Dow (-0.4%), and the Dow (-0.3%). Ten-year Treasury yields gained 5.7 basis points to end the week at 3.12%. Crude oil prices topped $110.00 per barrel after climbing $2.23. The dollar was little changed, while gold prices advanced $6.10 to $1,881.80 per ounce.

Stock Market Indexes

Market/Index2021 ClosePrior WeekAs of 5/6Weekly ChangeYTD Change
DJIA36,338.3032,977.2132,899.37-0.24%-9.46%
Nasdaq15,644.9712,334.6412,144.66-1.54%-22.37%
S&P 5004,766.184,131.934,123.34-0.21%-13.49%
Russell 20002,245.311,862.161,839.56-1.21%-18.07%
Global Dow4,137.633,815.073,805.92-0.24%-8.02%
Fed. Funds target rate0.00%-0.25%0.25%-0.50%0.75%-1.00%50 bps75 bps
10-year Treasuries1.51%2.88%3.12%24 bps161 bps
US Dollar-DXY95.64103.17103.670.48%8.40%
Crude Oil-CL=F$75.44$104.07$110.566.24%46.55%
Gold-GC=F$1,830.30$1,897.90$1,882.10-0.83%2.83%

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

  • As expected, the Federal Open Market Committee increased the target range for the federal funds rate by 50 basis points to 0.75%-1.00%. The Committee anticipates that ongoing increases in the target range will be appropriate. In addition, the FOMC decided to begin reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities on June 1. In support of its decision, the Committee noted that, despite strength in household spending and employment, overall economic activity edged down in the first quarter, while inflation remained elevated. This led to supply-and-demand imbalances related to the pandemic, higher energy prices, and broader price pressures. The FOMC also said the implications on the U.S. economy resulting from the invasion of Ukraine by Russia are highly uncertain. However, the invasion and related events are creating additional upward pressure on inflation and are likely to weigh on economic activity. In addition, COVID-related lockdowns in China are likely to exacerbate supply-chain disruptions. The Committee made it a point to state that it is “highly attentive” to inflation risks.
  • The employment sector continued to show strength in April, with 428,000 new jobs added. Job gains were widespread, with the largest increases occurring in leisure and hospitality, in manufacturing, and transportation and warehousing. Total employment is nearing its February 2020 pre-pandemic level but remains down by 1.2 million, or 0.8%. In April, the unemployment rate, at 3.6%, was unchanged from the previous month, and the total number of unemployed persons edged down to 5.9 million. In another sign of the employment sector’s recovery from the pandemic, both the unemployment rate and the total number of unemployed are near their February 2020 levels (3.5% and 5.7 million, respectively). In April, both the labor force participation rate, at 62.2%, and the employment-population ratio, at 60.0%, were little changed over the previous month. In April, 7.7% of employed persons teleworked because of the coronavirus pandemic, down from 10.0% in March. In April, 1.7 million persons reported that they had been unable to work because their employer closed or lost business due to the pandemic, which is down 2.5 million from the previous month. Average hourly earnings rose by $0.10, or 0.3%, to $31.85 in April. Over the past 12 months, average hourly earnings have increased by 5.5%. The average work week was unchanged at 34.6 hours in April.
  • Manufacturing improved in April, according to the latest S&P Global US Manufacturing PMI™. The S&P Global US Manufacturing Purchasing Managers’ Index™ posted 59.2 in April, up from 58.8 in March. The rate of growth accelerated for the third consecutive month and was the sharpest since last September. Contributing to the uptick in manufacturing was a faster rise in output during April as new orders increased. Although manufacturing expanded in April, severe material and capacity shortages at suppliers led to sharper increases in cost burdens and selling prices.
  • The S&P Global US Services PMI Business Activity Index registered 55.6 in April, down from 58.0 in March. The April reading marked an uptick in business activity in the services sector, but at a slower pace than in the previous month. At the same time, cost burdens rose substantially in April. Higher wage, transportation, and material costs drove up input prices. Service providers mentioned greater food, energy and fuel costs in particular. The rate of input price inflation accelerated for the third successive month to the fastest in more than 11 years. Service firms attempted to pass on the price increases to customers, which weighed on customer spending.
  • According to the latest Job Openings and Labor Turnover report, at the end of March there were 11.5 million job openings, the highest level in the history of the series, which began in December 2000. Job openings increased in retail trade (+155,000) and in durable goods manufacturing (+50,000). Job openings decreased in transportation, warehousing, and utilities (-69,000); state and local government education (-43,000); and federal government (-20,000). Also in March, there were 6.7 million hires. On the other side of the ledger, 6.3 million people were separated from their jobs, including 4.5 million quits and 1.4 million layoffs and discharges, along with 380,000 other separations. Over the 12 months ended in March, hires totaled 77.7 million and separations totaled 71.4 million, yielding a net employment gain of 6.3 million.
  • The goods and services trade deficit was $109.8 billion in March, up $20.0 billion, or 22.3%, from the February deficit. Exports increased 5.6% while imports vaulted 10.3% in March. Year to date, the goods and services deficit increased $84.8 billion, or 41.5%, from the same period in 2021. Exports increased $104.5 billion, or 17.7%. Imports increased $189.3 billion, or 23.8%. Of particular note, the trade in goods deficit with China increased $7.4 billion in March; the goods deficit with Canada rose $3.7 billion; while the goods deficit with the European Union decreased $1.3 billion.
  • The national average retail price for regular gasoline was $4.182 per gallon on May 2, $0.075 per gallon above the prior week’s price and $1.292 higher than a year ago. Also as of April 25, the East Coast price increased $0.11 to $4.09 per gallon; the Gulf Coast price rose $0.07 to $3.86 per gallon; the Midwest price climbed $0.07 to $3.99 per gallon; the West Coast price increased $0.02 to $5.10 per gallon; and the Rocky Mountain price was unchanged at $4.19 per gallon. Residential heating oil prices averaged $4.78 per gallon on April 29, about $0.84 per gallon more than the prior week’s price. U.S. crude oil refinery inputs averaged 15.5 million barrels per day during the week ended April 29, which was 218,000 barrels per day less than the previous week’s average. During the week ended April 29, refineries operated at 88.4% of their operable capacity, and gasoline production increased, averaging 9.7 million barrels per day.
  • For the week ended April 30, there were 200,000 new claims for unemployment insurance, an increase of 19,000 from the previous week’s level, which was revised up by 1,000. According to the Department of Labor, the advance rate for insured unemployment claims for the week ended April 23 was 1.0%, unchanged from the previous week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended April 23 was 1,384,000, a decrease of 19,000 from the previous week’s level, which was revised down by 5,000. This is the lowest level for insured unemployment since February 17, 1970, when it was 1,371,000. States and territories with the highest insured unemployment rates for the week ended April 16 were California (2.1%), New Jersey (2.1%), Alaska (1.9%), Minnesota (1.6%), New York (1.6%), Illinois (1.5%), Puerto Rico (1.5%), Connecticut (1.4%), Massachusetts (1.4%), Michigan (1.4%), and Rhode Island (1.4%). The largest increases in initial claims for the week ended April 23 were in New York (+4,760), Massachusetts (+3,491), Connecticut (+1,045), Georgia (+932), and New Jersey (+888), while the largest decreases were in California (-2,860), Ohio (-2,609), Michigan (-1,887), Washington (-475), and Minnesota (-453).

Eye on the Week Ahead

Inflation data for April is available this week, including the Consumer Price Index. Consumer prices advanced 1.2% in March and were up 6.5% since March 2021. The Producer Price Index is also available this week. March showed that prices at the producer level rose 1.4% and are up a notable 11.2% for the 12 months ended in March. Another indicator of inflationary trends is the report on import and export prices. Import prices climbed 2.6% in March, while export prices rose 4.5%. Since March 2021, import prices have risen 12.5%, and export prices have climbed 18.8%.