Tag: Future Plan

The Markets (as of market close March 29, 2018)

Each of the benchmark indexes listed here posted weekly gains last week, as stocks recovered from the prior week’s steep losses. The S&P 500 and Dow posted returns exceeding 2.0%, respectively, followed by the Russell 2000 and the Nasdaq. While many of the markets were closed for Good Friday, last week was relatively slow in trading overall, albeit somewhat fruitful.

The price of crude oil (WTI) fell last week, closing at $64.91 per barrel early Thursday evening, off from the prior week’s closing price of $65.74 per barrel. The price of gold (COMEX) also dropped to $1,329.60 by early Friday evening, falling from the prior week’s price of $1,352.90. The national average retail regular gasoline price increased to $2.648 per gallon on March 26, 2018, $0.050 higher than the prior week’s price and $0.333 more than a year ago.

Market/Index	2017 Close	Prior Week	As of 3/29	Weekly Change	YTD Change
DJIA	24719.22	23533.20	24103.11	2.42%	-2.49%
Nasdaq	6903.39	6992.67	7063.44	1.01%	2.32%
S&P 500	2673.61	2588.26	2640.87	2.03%	-1.22%
Russell 2000	1535.51	1510.08	1529.43	1.28%	-0.40%
Global Dow	3085.41	2988.62	3026.70	1.27%	-1.90%
Fed. Funds target rate	1.25%-1.50%	1.50%-1.75%	1.50%-1.75%	0 bps	25 bps
10-year Treasuries	2.41%	2.81%	2.73%	-8 bps	32 bps

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

Last Week’s Economic Headlines

• Gross domestic product increased at an annual rate of 2.9% in the fourth quarter of 2017, according to the third and final estimate released by the Bureau of Economic Analysis. GDP increased 3.2% in the third quarter. The deceleration in real GDP growth in the fourth quarter reflected a downturn in private inventory investment that was partly offset by accelerations in personal consumption expenditures, exports, state and local government spending, nonresidential (business) fixed investment, and federal government spending, and an upturn in residential fixed investment. Imports, which are a subtraction in the calculation of GDP, increased. For the fourth quarter, consumer spending increased 4.0%, nonresidential (commercial/business) investment grew 6.8%, and residential investment expanded at a rate of 12.8%. GDP increased 2.3% in 2017 (that is, from the 2016 annual level to the 2017 annual level), compared with an increase of 1.5% in 2016. Overall, economic growth, as measured by GDP, was solid in 2017. However, heading into 2018, a slowdown in consumer spending may curtail growth in the first quarter.
• Personal (pre-tax) income and disposable (after-tax) personal income increased 0.4%, respectively, in February. Of particular note, wages and salaries increased 0.5% over January. Personal consumption expenditures, which measures how much consumers are spending for goods and services, jumped 0.2% in February, matching January’s increase. Of that total, purchases of durable goods rose by 0.2%, while services climbed 0.3%. The prices paid by consumers for goods and services, as measured by the PCE price index and core PCE price index (excluding food and energy) each increased by 0.2% in February. While consumer prices for goods and services rose a bit in February, consumer spending remained somewhat subdued. Consumer saving, as expected, increased 0.2% to 3.4%.
• The international trade deficit increased by $0.1 billion in February to $75.4 billion. Exports expanded by $2.9 billion (2.2%), while imports increased by $3.0 billion (1.4%).
• Consumers lost a little faith in the economy in March, according to the latest report from The Conference Board. The Consumer Confidence Index® fell to 127.7 in March after reaching an 18-year high of 130.0 in February. Consumers’ confidence waned in their assessment of present economic conditions as well as short-term economic growth.
• In the week ended March 24, there were 215,000 initial claims for unemployment insurance, a decrease of 12,000 from the previous week’s level, which was revised down by 2,000. This is the lowest level for initial claims since January 27, 1973, when it was 214,000. The advance insured unemployment rate remained at 1.3% for the week ended March 17. The advance number of those receiving unemployment insurance benefits during the week ended March 17 was 1,871,000, an increase of 35,000 from the prior week’s level, which was revised up by 8,000.

Eye on the Week Ahead

The latest employment report for March is out the end of this week. Job growth has been strong in 2018, although wage inflation has been rather subdued. A strong employment report could provide further assurance of economic strength, propelling investors back to the market.

 

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The Markets (as of market close March 23, 2018)

Volatility is the catchword when describing the market lately. Investors had better buckle up for a bumpy ride from here on, at least according to indications from the Chicago Board Options Exchange (Cboe) Volatility Index®, which attempts to provide a forward-looking expectation of price fluctuation in the S&P 500 based on stock option trading. The Cboe Volatility Index® soared from 15.80 on March 16 to 24.87 last Friday. Last week’s market performance was one of the worst in years, with the S&P 500 suffering its biggest drop since the beginning of 2016. The tech-heavy Nasdaq exceeded the losses suffered by the large-cap index, falling over 6.50%. The prospect of escalating trade tensions is also weighing on investors as indicated by last Thursday’s sell-off following the Trump administration’s call for tariffs on Chinese imports.

The price of crude oil (WTI) surged last week, closing at $65.74 per barrel early Friday evening, ahead of the prior week’s closing price of $62.25 per barrel. The price of gold (COMEX) also climbed to $1,352.90 by early Friday evening, rising from the prior week’s price of $1,313.90. The national average retail regular gasoline price increased to $2.598 per gallon on March 19, 2018, $0.039 higher than the prior week’s price and $0.277 more than a year ago.

Market/Index	2017 Close	Prior Week	As of 3/23	Weekly Change	YTD Change
DJIA	24719.22	24946.51	23533.20	-5.67%	-4.80%
Nasdaq	6903.39	7481.99	6992.67	-6.54%	1.29%
S&P 500	2673.61	2752.01	2588.26	-5.95%	-3.19%
Russell 2000	1535.51	1586.05	1510.08	-4.79%	-1.66%
Global Dow	3085.41	3121.33	2988.62	-4.25%	-3.14%
Fed. Funds target rate	1.25%-1.50%	1.25%-1.50%	1.50%-1.75%	25 bps	25 bps
10-year Treasuries	2.41%	2.84%	2.81%	-3 bps	40 bps

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

Last Week’s Economic Headlines

• Citing continued strengthening of the labor market and moderate rising of economic activity, the Federal Open Market Committee decided to increase the target range for the federal funds rate 25 basis points to 1.50% to 1.75%. The Committee raised the target range despite inflation that continues to run below the Fed’s target rate of 2.0%. Two more rate hikes remain likely during the remainder of 2018.
• Sales of existing homes picked up the pace in February following two consecutive monthly declines. Existing home sales grew 3.0% for the month, and are now 1.1% above a year ago. The median existing-home price expanded for the 72nd straight month in February, increasing to $241,700, which is up 5.9% from February 2017 ($228,200). Helping drive sales was an increase in existing home inventory, which rose 4.6% (still 8.1% lower than a year ago). There is a 3.4-month supply of unsold inventory at the current sales pace, compared to a 3.8-month supply in January. Despite surging prices and low inventories, the uptick in sales of existing homes is likely attributable to a healthy economy.
• New home sales slipped in February, down 0.6% from their January pace. Nevertheless, sales are still 0.5% ahead of their February 2017 estimate. The median sales price of new houses sold in February 2018 was $326,800. The average sales price was $376,700. Inventory of new homes for sale represents a supply of about 5.9 months at the current sales rate.
• The manufacturing sector bounced back in February as new orders for durable goods increased by 3.1% for the month, compared to January’s 3.5% drop. Excluding transportation, which led the increase (up 7.1%), new orders increased 1.2%. Shipments, inventories, and unfilled orders also increased in February. New orders are up 8.9% year-over-year, while core capital goods (excluding defense and transportation) are up an impressive 8.0% over last year.
• In the week ended March 17, there were 229,000 initial claims for unemployment insurance, an increase of 3,000 from the previous week’s level. The advance insured unemployment rate remained at 1.3% for the week ended March 10. The advance number of those receiving unemployment insurance benefits during the week ended March 10 was 1,828,000, a decrease of 57,000 from the prior week’s level, which was revised up by 6,000. This is the lowest level for insured unemployment since December 29, 1973, when it was 1,805,000.

Eye on the Week Ahead

The third and final release for the fourth-quarter gross domestic product is available this week. The annualized rate of growth is expected to remain about 2.5% for the quarter. Also worth noting this week is the international trade in goods report for February. The trade deficit continues to widen, as the cost of imports regularly outpace exports.

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The Markets (as of market close March 16, 2018)

Market volatility has been fueled by investor concerns of accelerating inflation. However, last week’s Consumer Price Index, retail sales, and Producer Price Index reports showed inflationary trends in February were subdued. Nevertheless, stocks posted weekly losses, possibly resulting from investor fears that the administration’s trade policy could drive up costs for domestic manufacturers. Each of the indexes listed here lost value by last week’s end, led by the large caps of the Dow and S&P 500, followed closely by the Nasdaq, which dropped a little over 1.0%. The small caps of the Russell 2000 and the Global Dow outperformed larger shares. Treasury yields receded as bond prices advanced, possibly reflecting the weak inflation data previously referenced.

The price of crude oil (WTI) rose slightly last week, closing at $62.25 per barrel early Friday evening, ahead of the prior week’s closing price of $62.12 per barrel. The price of gold (COMEX) dipped to $1,313.90 by early Friday evening, down from the prior week’s price of $1,324.00. The national average retail regular gasoline price decreased to $2.559 per gallon on March 12, 2018, $0.001 less than the prior week’s price and $0.236 higher than a year ago.

Market/Index	2017 Close	Prior Week	As of 3/16	Weekly Change	YTD Change
DJIA	24719.22	25335.74	24946.51	-1.54%	0.92%
Nasdaq	6903.39	7560.81	7481.99	-1.04%	8.38%
S&P 500	2673.61	2786.57	2752.01	-1.24%	2.93%
Russell 2000	1535.51	1597.14	1586.05	-0.69%	3.29%
Global Dow	3085.41	3143.16	3121.33	-0.69%	1.16%
Fed. Funds target rate	1.25%-1.50%	1.25%-1.50%	1.25%-1.50%	0 bps	0 bps
10-year Treasuries	2.41%	2.89%	2.84%	-5 bps	43 bps

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

Last Week’s Economic Headlines

• The prices consumers paid for goods and services increased 0.2% in February after rising 0.5% in January. Over the last 12 months, consumer prices have risen 2.2%. Consumer prices less food and energy rose 1.8% over the past year. Price pressures over the first two months of the year have yet to appear, contrary to some opinions that inflation is on the rise. The February price increase is primarily attributable to a 0.3% advance in services — prices for goods dipped 0.1%.
• The prices producers received for goods and services advanced 0.2% in February, and are up 2.8% from February 2017. Producer prices rose 0.4% in January. Prices less food and energy also increased 0.2% for the month and 2.5% for the year.
• Sales at the retail level fell in February for the third consecutive month, as consumers held off buying automobiles and other big-ticket items. A big tax cut, high consumer confidence in the economy, and a flourishing job market haven’t been enough to send consumers on a spending spree. Retail sales fell 0.1% in February following January’s revised dip of 0.1%. Not since 2012 have retail sales fallen three consecutive months.
• The federal government deficit expanded to $215.25 billion in February, following a $49 billion surplus the previous month. Government receipts were $155.62 billion, while government outlays totaled $370.87 billion. Through the first five months of the 2018 fiscal year, the deficit sits at $390.97 billion compared to $350.62 billion over the same period last year — an increase of 11.5%.
• Building permits and housing starts both dipped in February. Permits for all types of privately owned housing units fell 5.7% below the January rate. Single-family building permits slipped only 0.6%. Privately owned housing starts came in 7.0% below the January level, although single-family starts were up 2.9%. A positive from the report came from housing completions, which were 7.8% ahead of January’s figures. Single-family housing completions in February were 3.0% above the January rate.
• According to the Federal Reserve’s report, industrial production rose 1.1% in February following a decline of 0.3% in January. Manufacturing production increased 1.3%, its largest gain since October. Mining output jumped 4.3%, mostly reflecting strong gains in oil and gas extraction. The index for utilities fell 4.7%, as warmer-than-normal temperatures last month reduced the demand for heating. Capacity utilization for the industrial sector climbed 0.7 percentage point in February to 78.1%, its highest reading since January 2015.
• Prices paid by the United States for imports continue to advance at a faster pace than the prices for goods sold by U.S. manufacturers to foreign countries. The price index for U.S. imports rose 0.4% in February, the seventh consecutive monthly increase, after advancing 0.8% in January. The last time the index declined on a monthly basis was a 0.2% drop in July 2017. Import prices advanced 3.5% for the 12-month period ended in February, matching the 12-month rise in November. Those were the largest annual increases since the index rose 3.6% for the 12-month period ended April 2017. Export prices increased 0.2% in February after rising 0.8% in January. The last time the index declined on a monthly basis was a 0.1% decrease in June 2017. The price index for U.S. exports increased 3.3% over the past 12 months.
• The labor sector remained steady, according to the Job Openings and Labor Turnover summary. January saw the number of job openings increase to 6.3 million, over 600,000 more than December. Overall, the number of hires remained relatively the same in January, as did total separations. Job openings increased in professional and business services, transportation, warehousing, and utilities. There were 1.8 million layoffs and discharges in January, with increases in health care and social assistance. Over the 12 months ended in January, hires totaled 65.4 million and separations totaled 63.2 million, yielding a net employment gain of 2.1 million.
• In the week ended March 10, there were 226,000 initial claims for unemployment insurance, a decrease of 4,000 from the previous week’s level, which was revised down by 1,000. The advance insured unemployment rate remained at 1.3% for the week ended March 3. The advance number of those receiving unemployment insurance benefits during the week ended March 3 was 1,879,000, an increase of 4,000 from the prior week’s level, which was revised up by 5,000.

Eye on the Week Ahead

Of particular interest to investors, the Federal Open Market Committee meets next week, after which it is expected to increase interest rates based on favorable economic conditions and strengthening in the labor sector. Inflationary pressures, which have been subdued, should not factor into the Committee’s decision

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The Markets (as of market close March 9, 2018)

Last week’s jobs report appears to have quelled investor fears, at least for the time being. Each of the indexes listed here posted impressive weekly gains, led by the tech-heavy Nasdaq and the small-cap Russell 2000, each of which gained over 4.0%. While the February employment figures saw over 300,000 new jobs added, meager wage growth didn’t support accelerating inflation. Last week’s rebound also pushed the major indexes ahead of their 2017 year-end values.

The price of crude oil (WTI) rose last week, closing at $62.12 per barrel early Friday evening, ahead of the prior week’s closing price of $61.45 per barrel. The price of gold (COMEX) climbed to $1,324.00 by early Friday evening, up from the prior week’s price of $1,323.70. The national average retail regular gasoline price increased to $2.560 per gallon on March 5, 2018, $0.012 greater than the prior week’s price and $0.219 higher than a year ago.

Market/Index	2017 Close	Prior Week	As of 3/9	Weekly Change	YTD Change
DJIA	24719.22	24538.06	25335.74	3.25%	2.49%
Nasdaq	6903.39	7257.87	7560.81	4.17%	9.52%
S&P 500	2673.61	2691.25	2786.57	3.54%	4.22%
Russell 2000	1535.51	1533.17	1597.14	4.17%	4.01%
Global Dow	3085.41	3065.64	3143.16	2.53%	1.87%
Fed. Funds target rate	1.25%-1.50%	1.25%-1.50%	1.25%-1.50%	0 bps	0 bps
10-year Treasuries	2.41%	2.86%	2.89%	3 bps	48 bps

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

Last Week’s Economic Headlines

• February saw 313,000 new jobs added, according to the latest employment report from the Bureau of Labor Statistics. Notable job gains occurred in construction (61,000), retail trade (50,000), professional and business services (50,000), and manufacturing (31,000). The unemployment rate remained at 4.1% for the fifth consecutive month. The average workweek for all employees rose by 0.1 hour to 34.5 hours in February. Average hourly earnings for all employees rose by $0.04 to $26.75, following a $0.07 gain in January. Over the year, average hourly earnings have increased by $0.68, or 2.6%. Overall, the number of significant new jobs added is a positive, while wages increased by only 0.1% for the month. The year-over-year gain slowed in February (2.6%) compared to January (2.9%), which was the largest gain since 2009. This should be positive news for investors who shunned the market for fear of rising inflation and interest rates.
• The non-manufacturing (services) sector of the economy expanded in February, but at a slightly slower pace than the previous month, according to the latest report from the Institute for Supply Management. Supply managers indicated that manufacturing business activity, and new orders expanded, while employment and prices decreased last month. According to the report, the majority of respondents remain positive about business conditions and the economy.
• A report that could bolster President Trump’s trade policy of increasing tariffs on imports, January’s goods and services trade deficit expanded sharply to $56.6 billion, up $2.7 billion from the $53.9 billion December revised deficit. In January, exports narrowed by $2.7 billion, while imports remained relatively the same, down less than $0.1 billion from December’s imports. Year-over-year, the goods and services deficit increased $7.9 billion, or 16.2%, from January 2017. Exports increased $9.7 billion, or 5.1%. Imports increased $17.6 billion, or 7.4%.
• In the week ended March 3, there were 231,000 initial claims for unemployment insurance, an increase of 21,000 from the previous week’s level. The advance insured unemployment rate dipped to 1.3% for the week ended February 24. The advance number of those receiving unemployment insurance benefits during the week ended February 24 was 1,870,000, a decrease of 64,000 from the prior week’s level, which was revised up by 3,000.

Eye on the Week Ahead

Fears of rising inflation and interest rates have worried investors over the past several weeks. Important inflationary indicators are out this week with the Consumer Price Index, Producer Price Index, and retail sales report. While consumer spending has been modest, prices for consumer goods and services have been rising in a sure sign of inflationary pressures.

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The Markets (as of market close March 2, 2018)

Trade wars: That was the ominous phrase that spooked many investors toward week’s end, as President Trump announced plans to implement a tariff of 25% on steel imports and 10% on aluminum imports. While no one can say for certain whether such tariffs will actually materialize, Trump’s pronouncements were enough to send stocks tumbling on Thursday and Friday morning, only to recover somewhat by the market’s close Friday afternoon. Unfortunately, the recovery wasn’t enough to stave off weekly losses on all the indexes tracked here, led by the Dow, which closed the week down more than 3%. Year to date, only the Nasdaq and S&P 500 remain in positive territory.

Crude oil (WTI) lost ground last week, closing at $61.45 per barrel early Friday evening, down from the prior week’s closing price of $63.57 per barrel. The price of gold (COMEX) fell to $1,323.70 by early Friday evening, down from the prior week’s price of $1,330.70. The national average retail regular gasoline price decreased for the second week in a row to $2.548 per gallon on February 26, 2018, $0.009 lower than the prior week’s price but $0.234 higher than a year ago.

Market/Index	2017 Close	Prior Week	As of 3/2	Weekly Change	YTD Change
DJIA	24719.22	25309.99	24538.06	-3.05%	-0.73%
Nasdaq	6903.39	7337.39	7257.87	-1.08%	5.13%
S&P 500	2673.61	2747.30	2691.25	-2.04%	0.66%
Russell 2000	1535.51	1549.19	1533.17	-1.03%	-0.15%
Global Dow	3085.41	3152.06	3065.64	-2.74%	-0.64%
Fed. Funds target rate	1.25%-1.50%	1.25%-1.50%	1.25%-1.50%	0 bps	0 bps
10-year Treasuries	2.41%	2.86%	2.86%	0 bps	45 bps

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

Last Week’s Economic Headlines

• The net value of goods and services produced in the United States, as measured by the gross domestic product, increased at an annual rate of 2.5% in the fourth quarter of 2017, according to the second estimate released by the Bureau of Economic Analysis. In the third quarter, the GDP increased by 3.2%. The price index for gross domestic purchases (a measure of price changes in goods and services) increased 2.5% in the fourth quarter, compared with an increase of 1.7% in the third quarter. The personal consumption expenditures price index (which measures the increase in prices paid for personal consumption) increased 2.7%, compared with an increase of 1.5%. Excluding food and energy prices, the PCE price index increased 1.9%, compared with an increase of 1.3%. Consumer spending increased 3.8% compared to the third quarter, as purchases of durable goods jumped 13.8%.
• Personal (pre-tax) earnings rose 0.4% in January, the same increase as December, according to the latest report from the Bureau of Economic Analysis. After-tax income surged ahead by 0.9%, which matches the largest such gain since December 2012, reflective of the tax-law changes taking effect in January. Despite increased income, consumers didn’t spend significantly more, as personal consumption expenditures rose by only 0.2% over December’s rate. Instead of spending, consumers apparently added their newfound income to savings, which jumped 3.2% in January.
• Manufacturing output expanded in February, but at a slightly slower pace than January, according to the IHS Markit final U.S. Manufacturing Purchasing Managers’ Index™ (PMI™). The PMI™ registered 55.3 in February, down slightly from 55.5 in January. The advance in production was attributable to greater client demand. New business expanded at a faster pace, while input prices increased at the fastest pace since December 2012.
• The Institute for Supply Management’s Report On Business® reported similar results as Markit’s submission. The ISM® Purchasing Managers’ Index registered 60.8% in February, an increase of 1.7 percentage points from the January reading. However, ISM® respondents reported a slight decrease in new orders and production. Employment increased substantially, as did prices.
• New home sales fell 7.8% in January and 1.0% below their pace from a year ago. The median sales price of new homes sold in January was $323,000. The average sales price was $382,700. The seasonally adjusted estimate of new houses for sale at the end of January was 301,000. This represents a supply of 6.1 months at the current sales rate. While new home sales were soft in January, inventory increased 10.9% and the average sales price fell 3.1% — factors which should help spur sales in February.
• Orders for long-lasting products (durable goods) slipped in January, according to the latest report from the Census Bureau. New orders decreased $9.2 billion, or 3.7%, for the month following two consecutive monthly increases. Unfilled orders, down following four consecutive monthly increases, decreased $3.1 billion, or 0.3%, to $1,140.9 billion. On the plus side of the report, both shipments ($0.6 billion, or 0.2%) and inventories ($1.3 billion, or 0.3%) increased in January over December.
• The advance report on international trade in goods saw the deficit increase by $2.1 billion in January over December. Exports of goods for January were $133.9 billion, $3.1 billion less than December exports. Imports of goods for January were $208.3 billion, $0.9 billion less than December imports. Wholesale inventories increased 0.7%, while retail inventories advanced 0.8%.
• The Conference Board Consumer Confidence Index® increased in February, following a modest increase in January. Coming in at 130.8, this is the highest level since November 2000. According to the report, “despite the recent stock market volatility, consumers expressed greater optimism about short-term prospects for business and labor market conditions, as well as their financial prospects.”
• In the week ended February 24, there were 210,000 initial claims for unemployment insurance, a decrease of 10,000 from the previous week’s level, which was revised down by 2,000. This is the lowest level for initial claims since December 6, 1969, when it was 202,000. The advance insured unemployment rate inched up to 1.4% for the week ended February 17. The advance number of those receiving unemployment insurance benefits during the week ended February 17 was 1,931,000, an increase of 57,000 from the prior week’s level, which was revised down by 1,000.

Eye on the Week Ahead

The important monthly employment report for February is out this week. Pay close attention to wage appreciation as another sign of building inflationary pressure. Also, the international trade report for January is out. It is expected to reveal an expanding goods and services trade deficit.

To view the What I’m Watching This Week Portfolio, please click here. (Free Membership is required) https://www.barchart.com/my/featured-portfolios

The Markets (as of market close February 28, 2018)

Despite some positive economic signs, rising consumer confidence, and favorable corporate earnings reports, February marked the end of the 10-month winning streak for the benchmark indexes listed here. Concerns over rising inflation and interest rates triggered a notable sell-off early in the month and pushed volatility to the forefront. Although the indexes listed here recovered much of their early February losses to close the month ahead of their 2017 closing values (with the exception of the Russell 2000), stocks did not maintain the pace set last year into January. New Fed chair Jerome Powell’s bullish assessment of the economy last week pushed the yields on 10-year Treasuries to their highest rates in several years (bond yields rise as prices fall), giving investors more reason to believe multiple interest rate hikes are in the offing for 2018.

The month started slowly as the Dow dropped over 4.0%, while the Nasdaq, S&P 500, Russell 2000, and Global Dow each fell over 3.0%. Despite a partial recovery mid-month, it was not enough to push stocks past their January closing values. The Global Dow and the Dow each plummeted more than 4.0% month-over-month, followed by the Russell 2000 and the S&P 500. The Nasdaq lost almost 2.0%, yet remained far ahead of the remaining listed indexes year-to-date. Overall, February was the worst month for the large caps of the Dow and S&P 500 since January 2016.

By the close of trading on February 28, the price of crude oil (WTI) was $61.55 per barrel, down from the January 31 price of $64.77 per barrel. The national average retail regular gasoline price was $2.548 per gallon on February 26, down from the January 29, 2017, selling price of $2.607 but $0.234 more than a year ago. The price of gold decreased by the end of February, closing at $1,319.40 on the last trading day of the month, down from its price of $1,348.50 on January 31, 2017.

Market/Index	2017 Close	Prior Month	As of February 28	Month Change	YTD Change
DJIA	24719.22	26149.39	25029.20	-4.28%	1.25%
NASDAQ	6903.39	7411.48	7273.01	-1.87%	5.35%
S&P 500	2673.61	2823.81	2713.83	-3.89%	1.50%
Russell 2000	1535.51	1574.98	1512.45	-3.97%	-1.50%
Global Dow	3085.41	3265.63	3122.28	-4.39%	1.19%
Fed. Funds	1.25%-1.50%	1.25%-1.50%	1.25%-1.50%	0 bps	0 bps
10-year Treasuries	2.41%	2.70%	2.86%	16 bps	45 bps

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

Last Month’s Economic News

• Employment: Total employment rose by 200,000 in January following December’s upwardly revised total of 160,000. Employment gains occurred in health care, construction, food services and drinking places, and manufacturing. The unemployment rate remained at 4.1%. The number of unemployed persons marginally increased from 6.576 million to 6.684 million. The labor participation rate remained unchanged at 62.7%. The employment-population ratio was unchanged at 60.1% in January. The average workweek for all employees declined by 0.2 hour to 34.3 hours in January. Average hourly earnings increased by $0.09 to $26.74, following an $0.11 gain in December. Over the year, average hourly earnings have risen $0.75, or 2.9%.
• FOMC/interest rates: The Federal Open Market Committee did not meet in February. The next meeting, the first under new chair Jerome Powell, is scheduled for March 20-21.
• GDP/budget: The second estimate of the fourth-quarter gross domestic product showed expansion at an annual rate of 2.5%, according to the Bureau of Economic Analysis. The third-quarter GDP grew at an annualized rate of 3.2%. Consumer spending rose 3.8%, with notable increases in durable goods spending (13.8%). As to the government’s budget, January’s deficit surged to $49.2 billion, compared to December’s deficit of $23.2 billion. The fiscal 2018 deficit (which began in October 2017) is $175.718 billion — an increase of $17.14 billion, or 9.6%, above the deficit over the same period last year.
• Inflation/consumer spending: Inflationary pressures continued to show upward momentum in January. The personal consumption expenditures (PCE) price index (a measure of what consumers pay for goods and services) ticked up 0.4% for January following a December gain of 0.1%. The core PCE price index (excluding energy and food) jumped ahead 0.3% in January. Personal (pre-tax) income increased 0.4% and disposable personal (after-tax) income climbed 0.9% over the prior month. Personal consumption expenditures (the value of the goods and services purchased by consumers) climbed 0.2% in January after jumping 0.4% the prior month.
• The Consumer Price Index, which rose 0.2% in December, climbed 0.5% in January. Over the last 12 months ended in January, consumer prices are up 2.1%, a mark that hits the Fed’s 2.0% target for inflation. Core prices, which exclude food and energy, increased 0.3% in January, and are up 1.8% for the year.
• The Producer Price Index showed the prices companies receive for goods and services also jumped 0.4% in January following no gain in December. Year-over-year, producer prices have increased 2.7%. Prices less food and energy increased 0.4% for the month and are up 2.5% over the last 12 months.
• Housing: Home sales continued to recede during the winter. Total existing-home sales dropped 3.2% in January after falling 3.6% the prior month. Year-over-year, existing home sales are down 4.8%. The January median price for existing homes was $240,500, which is 2.6% lower than the December 2017 price of $246,800. What may help spur sales is continuing inventory expansion for existing homes, which rose 4.1% in January, representing a 3.4-month supply. The Census Bureau’s latest report reveals sales of new single-family homes also fell in January, declining 7.8% following a 9.3% drop in December. The median sales price of new houses sold in January was $323,000 ($335,400 in December). The average sales price was $382,700 ($398,900 in December). There were 301,000 houses for sale at the end of January, which represents a supply of 6.1 months at the current sales rate.
• Manufacturing: Industrial production edged down a bit in January, decreasing 0.1% compared to a downward-revised 0.4% increase in December. Manufacturing output was unchanged in January for a second consecutive month; the index has increased 1.8% over the past 12 months. Capacity utilization for manufacturing was also unchanged in January, coming in at 76.2%, a rate that is 2.1 percentage points below its long-run average. New orders for manufactured durable goods fell 3.7% in January following a 2.6% revised December gain. For the year, new durable goods orders are up 8.9%.
• Imports and exports: The advance report on international trade in goods revealed that the trade gap increased in January from December, rising from $72.3 billion to $74.4 billion. Exports of goods for January fell 2.2% following December’s 2.5% gain. Imports of goods dropped 0.5% after rising 2.9% in December. Still, total imports ($208.3 billion) far exceeded exports ($133.9 billion). Prices for both imported and exported goods and services advanced in January. Import prices rose only 1.0% for the month, while export prices increased 0.8%. For the year, import prices climbed 3.6%, while export prices jumped 3.4%.
• International markets: The potential for rising inflation isn’t just affecting U.S. stocks, but is being felt in other major world markets as well. The Stoxx Europe 600 Index dropped about 3.0% for February, as did the Nikkei 225 Index. While the European Central Bank has maintained its programs of quantitative easing, some hawkish officials are pushing for an end to the easing bias. China’s manufacturing output slowed in February, dragging stocks down in the aftermath. Strengthening of the yuan has curtailed China’s export growth, which also likely contributed to the manufacturing slowdown.
• Consumer sentiment: Consumer confidence, as measured by The Conference Board Consumer Confidence Index®, increased significantly in February after a modest increase in January. The index increased to 130.8, up from 124.3 in January. According to the report, consumer expectations in the economy reached a height not seen since November 2000.

Eye on the Month Ahead

Market volatility is likely to continue into March, at least until the Federal Open Market Committee meets later in the month. If the Committee maintains interest rates at their current level in March, investor fears of rising inflation and interest rates may subside, which should boost stocks.

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The Markets (as of market close February 23, 2018)

For the second week in a row, stocks closed the week ahead. Each of the benchmark indexes listed here ended the holiday-shortened week with marginal gains, led by the Nasdaq, which climbed 1.35%. While equities may have advanced modestly, volatility was prevalent during the week, as investors may be concerned that rising inflation will prompt the Federal Reserve to increase interest rates next month.

The price of crude oil (WTI) continued to climb last week, closing at $63.57 per barrel early Friday evening, up from the prior week’s closing price of $61.67 per barrel. The price of gold (COMEX) fell last week to $1,330.70 by early Friday evening, down from the prior week’s price of $1,350.40. The national average retail regular gasoline price decreased for the second week in a row to $2.557 per gallon on February 19, 2018, $0.050 lower than the prior week’s price but $0.255 higher than a year ago.

Market/Index	2017 Close	Prior Week	As of 2/23	Weekly Change	YTD Change
DJIA	24719.22	25219.38	25309.99	0.36%	2.39%
Nasdaq	6903.39	7239.47	7337.39	1.35%	6.29%
S&P 500	2673.61	2732.22	2747.30	0.55%	2.76%
Russell 2000	1535.51	1543.55	1549.19	0.37%	0.89%
Global Dow	3085.41	3144.75	3152.06	0.23%	2.16%
Fed. Funds target rate	1.25%-1.50%	1.25%-1.50%	1.25%-1.50%	0 bps	0 bps
10-year Treasuries	2.41%	2.87%	2.86%	-1 bps	45 bps

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

Last Week’s Economic Headlines

• Home sales have slowed over the winter months, as existing home sales fell 3.2% in January following a 3.6% drop in December. According to the National Association of Realtors®, sales of existing homes are 4.8% below a year ago, which is the largest annual decline since August 2014. The NAR suggests that a lack of inventory has driven prices higher, pushing some potential buyers out of the market. Nevertheless, total housing inventory at the end of January rose 4.1%, which is still 9.5% lower than a year ago. Unsold inventory is at a 3.4-month supply (3.6 months a year ago). The median existing-home price for all housing types in January was $240,500, up 5.8% from January 2017 ($227,300).
• In the week ended February 17, there were 222,000 initial claims for unemployment insurance, a decrease of 7,000 from the previous week’s level, which was revised down by 1,000. The advance insured unemployment rate slipped to 1.3% for the week ended February 10. The advance number of those receiving unemployment insurance benefits during the week ended February 10 was 1,875,000, a decrease of 73,000 from the prior week’s level, which was revised up 6,000.

Eye on the Week Ahead

The week opens with the January report on new home sales, which slid in December. The second report on the fourth-quarter gross domestic product is out mid-week. The first installment showed annualized economic growth at 2.6%, with consumer spending up a strong 3.8%. This week’s report is based on more detailed information and may change noticeably from last month’s account.

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The Markets (as of market close February 16, 2018)

Stocks rebounded last week following a tumultuous few weeks of significant losses. Led by the Nasdaq, each of the benchmark indexes listed here posted solid gains. Both the large caps of the Dow and S&P 500 put up impressive gains exceeding 4.0%, as did the small-cap Russell 2000 and the Global Dow. Also of note is the fact that each index listed here is, once again, ahead of its respective 2017 year-end value. All told, last week was the best for stocks since early 2013. And, these gains occurred despite signals that inflation is beginning to pick up steam.

The price of crude oil (WTI) rebounded last week to close at $61.67 per barrel early Friday evening, up from the prior week’s closing price of $59.24 per barrel. The price of gold (COMEX) also increased last week to $1,350.40 by early Friday evening, climbing from the prior week’s price of $1,318.50. The national average retail regular gasoline price decreased for the first time in several weeks, falling to $2.607 per gallon on February 12, 2018, $0.030 lower than the prior week’s price but $0.300 higher than a year ago.

Market/Index	2017 Close	Prior Week	As of 2/16	Weekly Change	YTD Change
DJIA	24719.22	24190.90	25219.38	4.25%	2.02%
Nasdaq	6903.39	6874.49	7239.47	5.31%	4.87%
S&P 500	2673.61	2619.55	2732.22	4.30%	2.19%
Russell 2000	1535.51	1477.84	1543.55	4.45%	0.52%
Global Dow	3085.41	3016.88	3144.75	4.24%	1.92%
Fed. Funds target rate	1.25%-1.50%	1.25%-1.50%	1.25%-1.50%	0 bps	0 bps
10-year Treasuries	2.41%	2.85%	2.87%	2 bps	46 bps

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

Last Week’s Economic Headlines

• Consumer prices for goods and services rose 0.5% in January, according to the Bureau of Labor Statistics. Over the last 12 months, the Consumer Price Index has risen 2.1%. Contributing to the price growth were increases in prices for gasoline, shelter, apparel, medical care, and food. The index less food and energy increased 0.3% in January and 1.8% over the past year. The energy index increased 5.5% and the food index advanced 1.7%. Rising consumer prices could spark fear of rising inflation (and interest rates) among investors, who may react by selling equity holdings, which, in turn, could drive down stock market values.
• In yet another sign of potentially escalating inflation, the Producer Price Index increased 0.4% in January. Over the 12 months ended in January, producer prices are up 2.7%. The PPI less foods, energy, and trade services rose 0.4% in January, the largest advance since increasing 0.5% in April 2017.
• Retail and food service sales fell by their largest margin in almost a year in January, according to the Census Bureau report. Retail sales decreased 0.3% compared to December — the largest month-over-month decline since February 2017. January’s drop was not as profound as it could have been since December’s sales figures were revised to show no gain from November following an initial report of a 0.4% increase. Notable drop-offs in January occurred in auto sales (-1.3%); building material, garden equipment, and supplies dealers (-2.4%); and health and personal care (-1.2%). Year-over-year, retail sales are up 3.6%. Nonstore (internet) retail sales showed no change in January but advanced 10.2% from January 2017.
• The monthly government budget for January saw a surplus of $49.2 billion. For fiscal 2018, the deficit sits at $175.7 billion compared to $158.6 billion over the same period in 2017. While government receipts are up 4.2% from the same period last fiscal year, government expenditures have increased 5.1%.
• Industrial production edged down 0.1% in January following four consecutive monthly increases. Manufacturing output was unchanged in January for a second consecutive month, although the index has increased 1.8% over the past 12 months. Mining output fell 1.0%, while the index for utilities moved up 0.6%. Capacity utilization for manufacturing was unchanged in January at 76.2%, a rate that is 2.1 percentage points below its long-run average.
• New residential construction, which finished 2017 in fine fashion, continued to surge in January. According to the Census Bureau report, building permits increased 7.4% from December and housing starts jumped 9.7%. Housing completions fell 1.9%, but are 7.7% ahead of their January 2017 pace.
• Prices are rising in trade, both foreign and domestic. January saw prices for U.S. exports rise 0.8%, while import prices climbed 1.0%. The 1.0% advance (which also occurred last November) marked the largest one-month rise since the index increased 1.2% in May 2016. Import prices advanced 3.6% between January 2017 and January 2018. Exports have not risen by more than 0.8% since advancing 1.1% in May 2016.
• In the week ended February 10, there were 230,000 initial claims for unemployment insurance, an increase of 7,000 from the previous week’s level, which was revised up by 2,000. The advance insured unemployment rate remained 1.4% for the week ended February 3. The advance number of those receiving unemployment insurance benefits during the week ended February 3 was 1,942,000, an increase of 15,000 from the prior week’s level, which was revised up by 4,000.

Eye on the Week Ahead

The Presidents’ Day week is a slow one for economic reports. However, the minutes from the last Federal Open Market Committee meeting held in January are available and may shed some light on the Committee’s take on inflationary trends and the prospects of increasing the federal funds target rate.

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The Markets (as of market close February 9, 2018)

OUCH! That’s probably the most apt way to describe investor sentiment about the stock market over the past couple of weeks. Despite a strong close last Friday, each of the benchmark indexes listed here lost significant value for the week. Volatility is running rampant, marked by big swings occurring throughout each day of trading. The Dow suffered 1000 point losses last Monday and Thursday — the largest in history. Following months of record highs, market indexes have given back January gains to fall below their year-end values. Last week’s losses are the steepest in over two years. And the hits taken by equities aren’t restricted to domestic stocks, as many major indexes around the globe saw significant downturns. Apparently, fear of impending inflation and interest rate escalation has pushed investors out of stocks and long-term bonds, as evidenced by the increase in the yield on 10-year Treasuries (as prices fall, yields increase).

Will this trend continue? Of course, it’s hard to predict, but fourth-quarter corporate earnings continue to exceed expectations and the employment sector continues to expand, albeit at a slower pace. Also, stocks hit a similar wall at the beginning of 2016, only to bounce back to post strong gains by the end of the year.

The price of crude oil (WTI) fell for the second consecutive week to $59.24 per barrel last Friday, down from the prior week’s closing price of $65.06 per barrel. The price of gold (COMEX) decreased last week to $1,318.50 by early Friday evening, falling from the prior week’s price of $1,335.20. The national average retail regular gasoline price increased for the seventh consecutive week to $2.637 per gallon on February 5, 2018, $0.030 above the prior week’s price and $0.344 more than a year ago.

Market/Index	2017 Close	Prior Week	As of 2/9	Weekly Change	YTD Change
DJIA	24719.22	25520.96	24190.90	-5.21%	-2.14%
Nasdaq	6903.39	7240.95	6874.49	-5.06%	-0.42%
S&P 500	2673.61	2762.13	2619.55	-5.16%	-2.02%
Russell 2000	1535.51	1547.27	1477.84	-4.49%	-3.76%
Global Dow	3085.41	3214.56	3016.88	-6.15%	-2.22%
Fed. Funds target rate	1.25%-1.50%	1.25%-1.50%	1.25%-1.50%	0 bps	0 bps
10-year Treasuries	2.41%	2.83%	2.85%	2 bps	44 bps

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

Last Week’s Economic Headlines

• According to the latest Job Openings and Labor Turnover report for December, the number of job openings fell by about 167,000 from November. The number of hires in December compared to November was essentially the same at 5.5 million, as was the number of separations (5.24 million). Job openings increased in accommodation and food services, government, and information. Sectors with decreasing job openings include construction, manufacturing, retail trade, and professional and business services. Over the 12 months ended in December, hires totaled 64.7 million and separations totaled 62.6 million, yielding a net employment gain of 2.2 million.
• The trade gap widened in December by $53.1 billion, according to the latest report from the Census Bureau. While exports expanded by 1.8%, imports grew by a steep 2.5%. Rising exports reflects strong global demand for domestic products and services, particularly on the heels of a falling dollar. Imports of consumer goods drove the increase on that side of the ledger, rising 6.1% in December. For 2017, the goods and services deficit increased $61.2 billion, or 12.1%, from 2016.
• Growth in the non-manufacturing (services) sector expanded in January, according to the Institute for Supply Management’s non-manufacturing survey. The ISM® Non-Manufacturing Index registered 59.9%, almost 4.0 percentage points ahead of December’s reading. The index, which surveys 17 service industries such as real estate and food services, had been slowing until January’s reading. Survey respondents noted growth in new orders, employment, and prices last month.
• In the week ended February 3, initial claims for unemployment insurance was 221,000, a decrease of 9,000 from the previous week’s level. The advance insured unemployment rate remained 1.4%. The advance number of those receiving unemployment insurance benefits during the week ended January 27 was 1,923,000, a decrease of 33,000 from the prior week’s level, which was revised up by 3,000.

Eye on the Week Ahead

While the economy has been steady, price inflation has lagged. This week, January’s figures on prices for goods and services at both the consumer and retail level are available. A bump in prices could be a warning of rising inflation, prompting investors to sell equities and long-term bonds.

The Markets (as of market close February 2, 2018)

Whether it was the start of a market correction or just a blip in what otherwise has been an almost nine-year bull run, equities suffered their largest losses in quite some time last week. Each of the benchmark indexes listed here fell more than 3.0%, led by the Dow, which endured its largest weekly drop-off since last January. The S&P 500, which fell 3.85%, marked its largest decrease in two years. Lower-than-expected earnings reports from some major energy companies drove stocks down. But a possible fear that interest rates — along with inflation — would be rising may have pushed investors to sell not only equities but long-term bonds as well.

The price of crude oil (WTI) fell for the first time in several weeks to $65.06 per barrel last Friday, down from the prior week’s closing price of $66.24 per barrel. The price of gold (COMEX) decreased last week to $1,335.20 by early Friday evening, falling from the prior week’s price of $1,353.30. The national average retail regular gasoline price increased for the sixth consecutive week to $2.607 per gallon on January 29, 2018, $0.040 above the prior week’s price and $0.311 more than a year ago.

Market/Index	2017 Close	Prior Week	As of 2/2	Weekly Change	YTD Change
DJIA	24719.22	26616.71	25520.96	-4.12%	3.24%
Nasdaq	6903.39	7505.77	7240.95	-3.53%	4.89%
S&P 500	2673.61	2872.87	2762.13	-3.85%	3.31%
Russell 2000	1535.51	1608.06	1547.27	-3.78%	0.77%
Global Dow	3085.41	3322.69	3214.56	-3.25%	4.19%
Fed. Funds target rate	1.25%-1.50%	1.25%-1.50%	1.25%-1.50%	0 bps	0 bps
10-year Treasuries	2.41%	2.66%	2.83%	17 bps	42 bps

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

Last Week’s Economic Headlines

• The labor sector continues to be strong entering the new year. January saw 200,000 new jobs added, while the unemployment rate remained at 4.1%, according to the latest report from the Bureau of Labor Statistics. Employment continued to trend up in construction, food services and drinking establishments, health care, and manufacturing. There were 6.7 million unemployed, yielding a labor participation rate of 62.7%, unchanged for the fourth consecutive month. The employment-population ratio was 60.1% for the third month in a row. The average workweek declined by 0.2 hours in January to 34.3 hours. Average hourly earnings rose $0.09 to $26.74, following an $0.11 increase in December. Over the year, average hourly earnings have risen by $0.75, or 2.9%. The drop in the average workweek could be an indication of a lack of available workers, which would likely hold down production.
• The Federal Open Market Committee met last week for the first time in 2018, which also marked the final meeting over which Janet Yellen would preside as chairperson. The Committee did not increase the federal funds rate, noting that the labor market has continued to strengthen and that economic activity has been rising at a solid rate. Gains in employment, household spending, and business fixed investment have been solid, and the unemployment rate has stayed low. Nevertheless, both overall inflation and inflation for items other than food and energy have continued to run below 2%. The Committee still expects three rate adjustments over the course of the year. Also, the Committee unanimously approved the selection of Jerome H. Powell as chair.
• Personal income increased $58.7 billion, or 0.4%, in December, according to estimates released by the Bureau of Economic Analysis. Disposable (after-tax) personal income (DPI) increased $48.0 billion, or 0.3%, and personal consumption expenditures (PCE) increased $54.2 billion, or 0.4%. Showing little inflationary pressures, prices for consumer goods and services bumped up 0.1% (1.7% from a year ago), while prices excluding food and energy rose 0.2% for the month (1.5% from a year ago). Wages and salaries climbed a noteworthy 0.5% for the month. On the other hand, consumer savings dipped 0.1 percentage point to 2.4%, possibly an indication that consumers may have dropped into savings for purchases.
• The IHS Markit final U.S. Manufacturing Purchasing Managers’ Index™ (PMI™) registered 55.5 in January, up from 55.1 in December. The latest index reading indicated a strong improvement in business conditions across the manufacturing sector. Moreover, the index signaled the strongest upturn in the health of the sector for over two and a half years. The rate of manufacturers’ growth accelerated at the fastest pace in 12 months. As demand increased, manufacturers raised their selling prices at the second-steepest pace since September 2014. At first blush, the Manufacturing ISM® Report On Business® appears to contradict Markit’s report. However, a closer reading reveals that new orders are increasing, but a slowing in employment may be an indication that there aren’t enough workers to meet the accelerating demands of manufacturing and product shipment.
• Consumer confidence in the economy has cooled from earlier last year, yet it rose a bit in January, according to The Conference Board. Consumer confidence in the present economic situation decreased slightly, while consumers were more optimistic about economic improvement in the short term.
• In the week ended January 27, initial claims for unemployment insurance was 230,000, a decrease of 1,000 from the previous week’s level, which was revised down by 2,000. The advance insured unemployment rate remained 1.4%. The advance number of those receiving unemployment insurance benefits during the week ended January 20 was 1,953,000, an increase of 13,000 from the prior week’s level, which was revised up by 3,000.

Eye on the Week Ahead

Equities continue to break records, as fourth-quarter corporate earnings reports remain relatively positive. This week is relatively quiet as to impactful economic reports. The December report on international trade in goods and services may reveal a shrinking trade deficit, as exports could increase following the dollar’s slippage.

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