Tag: Future Plan

The Markets (as of market close June 9, 2017)

The benchmark indexes listed here produced mixed results last week. The large-cap Dow gained a little more than 0.25%, while the small-cap Russell 2000 jumped over 1.0% by last week’s end. On the other hand, tech stocks took a hit as the Nasdaq fell over 1.5%. Long-term bond prices fell last week as evidenced by the 4-basis-point jump in the yield of 10-year Treasuries. It’s hard to tell what impact, if any, the domestic (Comey testimony) and foreign (UK election) political developments may have had on the market.

The price of crude oil (WTI) fell back last week, closing at $45.90 per barrel, down from the prior week’s closing price of $47.74 per barrel. The price of gold (COMEX) decreased last week, closing at $1,268.80 by late Friday afternoon, down from the prior week’s price of $1,281.50. The national average retail regular gasoline price increased to $2.414 per gallon on June 5, 2017, $0.008 higher than the prior week’s price and $0.033 more than a year ago.

Market/Index	2016 Close	Prior Week	As of 6/9	Weekly Change	YTD Change
DJIA	19762.60	21206.29	21271.97	0.31%	7.64%
Nasdaq	5383.12	6305.80	6207.92	-1.55%	15.32%
S&P 500	2238.83	2439.07	2431.77	-0.30%	8.62%
Russell 2000	1357.13	1405.39	1421.71	1.16%	4.76%
Global Dow	2528.21	2790.26	2782.75	-0.27%	10.07%
Fed. Funds target rate	0.50%-0.75%	0.75%-1.00%	0.75%-1.00%	0 bps	25 bps
10-year Treasuries	2.44%	2.16%	2.20%	4 bps	-24 bps

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

Last Week’s Headlines

• Activity has slowed in the non-manufacturing sector in May, according to the Institute for Supply Management. The Non-Manufacturing Index registered 56.9%, which is 0.6 percentage point lower than the April reading of 57.5%. The non-manufacturing sector, which includes such industries as real estate, accommodations, food, arts and entertainment, and health care, grew for the 89th consecutive month (a reading of 50% or higher indicates growth), but at a slower pace than the prior month. According to the Non-Manufacturing ISM® Report On Business®, new orders, business activity, and prices all showed a slower rate of growth compared to April. Only employment grew at a faster pace.
• According to the Job Openings and Labor Turnover (JOLTS) report, there were 6.0 million job openings in April. Job openings increased in a number of industries, with the largest increase occurring in accommodation and food services (+118,000). Job openings decreased in durable goods manufacturing (-30,000). The number of job openings increased in the Midwest and Northeast regions. The number of job hires decreased by 253,000 to 5.1 million. Hires decreased in health care and social assistance (-68,000) and real estate and rental and leasing (-23,000). The number of hires decreased in the West region. Total separations (turnover) edged down 225,000 to 5.0 million in April. Total separations increased in state and local government education (+17,000) but decreased in retail trade (-100,000). Over the 12 months ended in April, hires totaled 62.9 million and separations totaled 60.7 million, yielding a net employment gain of 2.2 million.
• Following last week’s election, the UK’s ruling Conservative Party lost its parliamentary majority. How this development will impact the Brexit remains to be seen, but indications are that negotiations will push ahead even though the political strength of Prime Minister May has been weakened.
• In the week ended June 3, the advance figure for seasonally adjusted initial claims for unemployment insurance was 245,000, a decrease of 10,000 from the previous week’s revised level. The advance seasonally adjusted insured unemployment rate remained at 1.4% for the eighth consecutive week. For the week ended May 27, there were 1,917,000 receiving unemployment benefits, a decrease of 2,000 from the previous week’s level, which was revised up 4,000.

Eye on the Week Ahead

The big news this week surrounds the FOMC meeting and whether interest rates will be increased. The Committee held off on an interest rate hike in May and appeared primed to jack up rates in June. However, major economic indicators, such as consumer prices, consumer spending, the GDP, and the employment sector, have not been especially strong, leading to speculation that at least some members of the Committee may be inclined to hold rates as is until steadier economic progress is evident.

 

The Markets (as of market close May 31, 2017)

May provided a bumpy ride for investors. However, by the end of the month, each of the indexes listed here posted monthly gains with the exception of the Russell 2000, which lost over 2.0%. Technology shares continued to climb as the Nasdaq climbed 2.50% in May over April and has risen over 15% since the start of the year. Despite terrorist attacks, mundane oil prices, a rocky first quarter in Washington, and a slowdown in economic growth, U.S. stocks closed the month in positive territory, spurred by generally favorable quarterly corporate earnings reports. May saw the Dow and S&P 500 post monthly gains for the second consecutive month, while the Nasdaq increased in value for the seventh month in a row. Long-term bond prices rose in May over April, evidenced by the falling yield on 10-year Treasuries.

By the close of trading on May 31, the price of crude oil (WTI) was $48.63 per barrel, down from the April 28 price of $49.19 per barrel. The national average retail regular gasoline price was $2.406 per gallon on the last day of May, down from the May 1 selling price of $2.411 but $0.138 more than a year ago. The price of gold increased by the end of May, closing at $1,271.40 on the last trading day of the month, up from its April 28 price of $1,269.50.

Market/Index	2016 Close	Prior Month	As of May 31	Month Change	YTD Change
DJIA	19762.60	20940.51	21008.65	0.33%	6.31%
NASDAQ	5383.12	6047.61	6198.52	2.50%	15.15%
S&P 500	2238.83	2384.20	2411.80	1.16%	7.73%
Russell 2000	1357.13	1400.43	1370.21	-2.16%	0.96%
Global Dow	2528.21	2731.15	2758.92	1.02%	9.13%
Fed. Funds	0.50%-0.75%	0.75%-1.00%	0.75%-1.00%	0 bps	25 bps
10-year Treasuries	2.44%	2.28%	2.20%	-8 bps	-24 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: The employment sector picked up the pace in April following a weak March. There were 211,000 new hires in April in contrast to March’s revised total of only 79,000. For April, employment growth occurred in leisure and hospitality (+55,000), food services and drinking places (+26,000), health care and social assistance (+37,000), and professional and business services (+39,000). The unemployment rate dipped to 4.4% — the lowest rate since May 2001. Over the year, the unemployment rate has declined by 0.6 percentage point, and the number of unemployed has fallen by 854,000. There were 7.056 million unemployed persons in April (7.202 million in March). The labor participation rate remained at 62.9%. The average workweek was 34.4 hours in April. Average hourly earnings increased by $0.07 to $26.19, following a $0.05 increase in March. Over the last 12 months ended in April, average hourly earnings have risen by $0.65, or 2.5%.
• FOMC/interest rates: The Federal Open Market Committee conceded that consumer spending may have slowed in the first quarter, prompting the Committee to leave interest rates unchanged at 0.75%-1.00%. However, labor has remained strong, nearing full employment, while a dip in consumer spending and consumer prices was deemed transitory by the Committee. Continued strength in employment and increases in consumer spending and inflation next month may prompt the FOMC to consider a rate increase when it next meets in June.
• GDP/Budget: Expansion of the U.S. economy slowed over the first three months of 2017. According to the Bureau of Economic Analysis, the first-quarter 2017 gross domestic product grew at an annualized rate of 1.2%. The fourth-quarter 2016 GDP grew at an annual rate of 2.1%. The first-quarter GDP reflected positive contributions from nonresidential fixed investment, exports, residential fixed investment, and personal consumption expenditures that were partly offset by negative contributions from private inventory investment, federal government spending, and state and local government spending. Imports, which are a subtraction in the calculation of the GDP, increased. An indicator of inflationary trends, the price index for gross domestic purchases increased 2.6% in the first quarter, compared to an increase of 2.0% in the fourth quarter. As to the government’s budget, the federal deficit through the first eight months of fiscal 2017 was $344 billion — $8 billion less than the deficit over the same period last year. For the month of April, the government realized a budget surplus of $182.4 billion, which is $76 billion more than the April 2016 surplus.
• Inflation/consumer spending: Inflation, as measured by personal consumption expenditures, picked up in April. For the 12 months ended in April 2017, the personal consumption expenditures price index expanded at a rate of 1.7%. For April, personal income increased 0.4% over March. Disposable personal (after-tax) income increased 0.4%. Personal consumption expenditures (the value of goods and services purchased by consumers) also increased 0.4% for the month. The prices companies receive for goods and services showed improvement in April from March, as the Producer Price Index increased 0.5% in April following a 0.1% dip the prior month. Year-over-year, producer prices have increased 2.5%. In April, energy prices climbed 0.8% while food prices increased 0.9%. The PPI less food and energy increased 0.4% for the month and has risen 1.9% over the last 12 months. Consumer prices, which retreated in March, increased 0.2% in April. For the year, consumer prices are up 2.2%. Core prices, which exclude volatile food and energy, increased 0.1% for the month and have climbed 1.9% since April 2016.
• Housing: The housing sector, which had shown strength over the first three months of 2017, slowed considerably in April. Existing home sales plunged 2.3% to a seasonally adjusted annual rate of 5.570 million, down from March’s revised annual rate of 5.700 million. Existing home sales are only 1.6% ahead of the sales pace from a year ago. The median sales price for existing homes rose to $244,800 from the March price of $236,400. Total housing inventory at the end of April climbed 7.2% to 1.93 million existing homes available for sale (9.0% lower than a year ago). Sales of newly constructed homes also dropped in April, according to the Census Bureau. Sales of new single-family homes fell 11.4% in April to an annual rate of 569,000 — down from March’s revised rate of 642,000. The median sales price of new houses sold in April was $309,200 ($318,700 in March), while the average sales price was $368,300 ($388,200 in March). The seasonally adjusted estimate of new houses for sale at the end of April was 268,000. This represents a supply of 5.7 months at the current sales rate.
• Manufacturing: According to the Federal Reserve, industrial production ticked up 1.0% in April. Manufacturing output increased 1.0% following a 0.4% decline in March. Manufacturing gains were led by production of motor vehicles, business equipment, and consumer goods. The indexes for mining and utilities posted gains of 1.2% and 0.7%, respectively. Total industrial production for April was 2.2% above its year-earlier level. Capacity utilization increased 0.6 percentage point to 76.7%, which is 3.2 percentage points below its long-run average. As for durable goods, the Census Bureau report reveals that new orders dropped 0.7% in April following a 2.3% revised increase in March. Excluding the volatile transportation segment, new durable goods orders fell 0.4%. Orders for core capital goods (excluding defense and transportation) had no change from March, but are up 2.9% over the past 12 months.
• Imports and exports: The advance report on international trade in goods revealed that the trade gap grew by $2.5 billion in April. The overall trade deficit was $67.6 billion, up from March’s deficit of $65.1 billion. Exports declined 0.9% to $125.9 billion. Imports increased by 0.7% to $193.4 billion in April. The prices for U.S. imports of goods showed strength in April following a weak March. Import prices jumped 0.5% for the month, led by a 1.6% increase in petroleum prices. U.S. export prices rose 0.2% after advancing a revised 0.1% in March. Export prices haven’t recorded a monthly decline since the index fell 0.8% in August 2016.
• International markets: The election of Emmanuel Macron as France’s president was greeted favorably by eurozone investors early in May. Despite the tragic terrorist attack in Manchester, England, investors maintained a “steady-as-she-goes” approach with moderate trading throughout the month. OPEC and Russia agreed to extend the cut in oil output. However, oil prices haven’t climbed appreciably as investors apparently were hoping for deeper cuts than those announced. Moody’s Investors Service cut China’s sovereign credit rating for the first time since 1989 on the premise that the country’s financial strength is expected to weaken as debt continues to rise and the economy slows.
• Consumer sentiment: Consumer confidence is holding steady in May. The Conference Board Consumer Confidence Index® for May fell slightly to 117.9 from April’s 119.4. While consumers continued to express optimism about both the current state of the economy and its future, their enthusiasm has waned some from earlier in the year. The Surveys of Consumers of the University of Michigan Index of Consumer Sentiment also dropped marginally to 97.1 in May from 97.6 in April.

Eye on the Month Ahead

Economic signs were mixed last month, so it isn’t certain that the FOMC will raise interest rates when it meets in June. The final GDP figures for the first quarter are out in June. Consumer spending has been relatively weak through much of the first part of 2017, causing inflation to slow a bit.

The Markets (as of market close May 26, 2017)

Following two weeks of losses, equities rebounded last week, with each of the benchmark indexes listed here posting week-over-week gains, led by the Nasdaq, which climbed over 2.0% for the week and is up 15% since the beginning of the year. The S&P reached another record high last Friday, posting its largest weekly gain since the end of April. The Global Dow advanced less than 1.0% but is firmly in the black for the year, up almost 10.0% since December 31, 2016.

The price of crude oil (WTI) fell back last week after the prior week’s increase, closing at $49.79 per barrel, down from the prior week’s closing price of $50.53 per barrel. The price of gold (COMEX) increased almost 1.15%, closing at $1,270.10 by late Friday afternoon, up from the prior week’s price of $1,255.70. The national average retail regular gasoline price increased to $2.399 per gallon on May 22, 2017, $0.030 higher than the prior week’s price and $0.099 more than a year ago.

Market/Index	2016 Close	Prior Week	As of 5/26	Weekly Change	YTD Change
DJIA	19762.60	20804.84	21080.28	1.32%	6.67%
Nasdaq	5383.12	6083.70	6210.19	2.08%	15.36%
S&P 500	2238.83	2381.73	2415.82	1.43%	7.91%
Russell 2000	1357.13	1367.33	1382.24	1.09%	1.85%
Global Dow	2528.21	2748.33	2769.02	0.75%	9.52%
Fed. Funds target rate	0.50%-0.75%	0.75%-1.00%	0.75%-1.00%	-0 bps	25 bps
10-year Treasuries	2.44%	2.23%	2.24%	-1 bps	-20 bps

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

Last Week’s Headlines

• The second estimate of the first-quarter GDP was a bit more positive than April’s preliminary estimate. The gross domestic product increased at an annual rate of 1.2% compared to the preliminary estimate of only a 0.7% annual rate of growth. The fourth-quarter GDP grew at an annual rate of 2.1%. Accounting for the increase in the annual growth rate were increases in business investment and consumer spending, while the decreases in state and local government were smaller than previously estimated. Gross domestic income (the sum of income less costs in the production of GDP) increased 0.9% in the first quarter, in contrast to a 1.4% decrease in the fourth quarter.
• Continuing a trend of less than robust economic news for April, new orders for manufactured durable goods decreased $1.6 billion, or 0.7%, following four consecutive monthly increases, including March’s 2.3% gain. Shipments decreased 0.3%, led by a 0.5% drop in shipments of transportation equipment. On the positive side, unfilled orders and inventories both increased.
• New home sales fell precipitously in April, according to the Census Bureau. Sales of new single-family homes were 11.4% below the March rate of sales and only 0.5% above the April 2016 rate. The median sales price of new houses sold in April was $309,200 ($318,700 in March). The average sales price was $368,300 ($385,400 in March). With the number of sales falling, the inventory of new homes for sale rose 16.3%, representing a supply of 5.7 months at the current sales rate. By comparison, the supply of homes for sale in March was 4.9 months.
• Sales of existing homes were also off in April — slipping 2.3% compared to March. Low supply held down sales as the median number of days a home was on the market fell to a new low of 29 days, according to the National Association of Realtors®. Despite the decline, existing home sales are still 1.6% above their pace a year ago. The median existing-home price for all housing types in April was $244,800 ($236,400 in March), up 6% from April 2016 ($230,900). April’s price increase marks the 62nd straight month of year-over-year gains. Total housing inventory at the end of April climbed 7.2% to 1.93 million existing homes available for sale, but is still 9% lower than a year ago (2.12 million) and has fallen year-over-year for 23 consecutive months. Unsold inventory is at a 4.2-month supply at the current sales pace, which is down from 4.6 months a year ago.
• According to the advanced international trade report from the Census Bureau, exports fell in April while imports increased, pushing the international trade deficit higher for the month. The trade deficit was $67.6 billion in April, an increase of $2.5 billion from March. Exports of goods for April were $125.9 billion, $1.1 billion less than March exports. Imports of goods for April were $193.4 billion, $1.4 billion more than March imports.
• Consumer sentiment in May remained at the same high level as April. Consumers were not quite as enthusiastic about current economic conditions but were optimistic about the economy moving forward.
• In the week ended May 20, the advance figure for seasonally adjusted initial claims was 234,000, an increase of 1,000 from the previous week’s unrevised level. The advance seasonally adjusted insured unemployment rate remained at 1.4% for the sixth consecutive week. For the week ended May 13, there were 1,923,000 receiving unemployment benefits, an increase of 24,000 from the previous week’s revised level.

Eye on the Week Ahead

Memorial Day week unofficially kicks off the summer, which is typically a slower time for market activity. However, two important economic reports for May are out this week. Personal income and outlays looks at consumer income, spending, and price changes for consumer products and services. It is one of the main indicators of inflationary trends relied upon by the Fed. Also coming out this week is the May employment report. New hires kicked up in April following a weak March, although increases in average hourly earnings have only marginally surpassed the rate of inflation.

The Markets (as of market close May 19, 2017)

A rally late last week pulled equities higher, but not enough to overcome a midweek tumble. Only the Global Dow posted a slight gain by last week’s end, as each of the other indexes listed here lost value. Possibly shaken by continuing controversy between Russia and the White House, investors appeared to move from equities to bonds, with the yield on 10-year Treasuries falling 9 basis points from the previous week while dropping over 20 points year-to-date.

The price of crude oil (WTI) increased for the first time in several weeks, closing at $50.53 per barrel, up from the prior week’s closing price of $46.47 per barrel. The price of gold (COMEX) also jumped, closing at $1,255.70 by late Friday afternoon, ahead of the prior week’s price of $1,228.40. The national average retail regular gasoline price decreased to $2.369 per gallon on May 15, 2017, $0.003 less than the prior week’s price but $0.127 more than a year ago.

Market/Index	2016 Close	Prior Week	As of 5/19	Weekly Change	YTD Change
DJIA	19762.60	20896.61	20804.84	-0.44%	5.27%
Nasdaq	5383.12	6121.23	6083.70	-0.61%	13.01%
S&P 500	2238.83	2390.90	2381.73	-0.38%	6.38%
Russell 2000	1357.13	1382.77	1367.33	-1.12%	0.75%
Global Dow	2528.21	2745.02	2748.33	0.12%	8.71%
Fed. Funds target rate	0.50%-0.75%	0.75%-1.00%	0.75%-1.00%	-0 bps	25 bps
10-year Treasuries	2.44%	2.32%	2.23%	-9 bps	-21 bps

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

Last Week’s Headlines

• The pace of new home construction took a step back in April, according to the Census Bureau. Housing starts, housing completions, and the number of building permits each lagged in volume compared to March. The annualized rate of housing starts in April was 2.6% below the March total. Privately owned housing completions were 8.6% below the revised March estimate. And the number of building permits issued in April for all residential housing units was 2.5% behind March’s total. However, compared to a year ago, housing starts (+0.7%), housing completions (+15.1%), and building permits issued (+5.7%) are ahead of their respective totals from April 2016.
• According to the Federal Reserve, industrial production advanced 1.0% in April for its third consecutive monthly increase and its largest gain since February 2014. Manufacturing output rose 1.0% for the month following a 0.4% decline in March. The indexes for mining and utilities posted gains in April of 1.2% and 0.7%, respectively. However, capacity utilization for the industrial sector increased 0.6 percentage point to 76.7%, a rate that is 3.2 percentage points below its long-run average. Nevertheless, total industrial production in April was 2.2% above its year-earlier level.
• In the week ended May 13, the advance figure for seasonally adjusted initial claims was 232,000, a decrease of 4,000 from the previous week’s unrevised level of 236,000. The advance seasonally adjusted insured unemployment rate remained at 1.4% for the fifth consecutive week. For the week ended May 6, there were 1,898,000 receiving unemployment insurance, a decrease of 22,000 from the previous week’s revised level. This is the lowest level for insured unemployment since November 5, 1988, when it was 1,898,000.

Eye on the Week Ahead

The first-quarter GDP report based on updated information is released this week. The initial report in April revealed lackluster economic growth for the start of 2017. The latest figures on durable goods orders, which are included in the GDP computation, are also available this week. Both of these reports are good indicators of the relative strength of the economy through the first part of 2017.

The Markets (as of market close May 12, 2017)

Lackluster economic data (weak price gains and import prices that are outpacing export prices), coupled with some not-so-strong quarterly corporate earnings reports, kept trading down last week. Only the Nasdaq posted weekly gains as each of the benchmark indexes listed here lost ground against their respective prior week’s values. The leading loser was the small-cap Russell 2000, which dropped over 1.0%. The yield on 10-year Treasuries fell slightly as prices crept higher. Despite last week’s marginal tailspin, each of the indexes listed here are still well ahead of their 2016 closing values.

The price of crude oil (WTI) fell for the third straight week, closing at $46.47 per barrel, down from the prior week’s closing price of $49.19 per barrel. The price of gold (COMEX) also dropped, closing at $1,228.40 by late Friday afternoon, down from the prior week’s price of $1,269.50. The national average retail regular gasoline price decreased to $2.372 per gallon on May 8, 2017, $0.039 less than the prior week’s price but $0.152 more than a year ago.

Market/Index	2016 Close	Prior Week	As of 5/12	Weekly Change	YTD Change
DJIA	19762.60	21006.94	20896.61	-0.53%	5.74%
Nasdaq	5383.12	6100.76	6121.23	0.34%	13.71%
S&P 500	2238.83	2399.29	2390.90	-0.35%	6.79%
Russell 2000	1357.13	1397.00	1382.77	-1.02%	1.89%
Global Dow	2528.21	2754.32	2745.02	-0.34%	8.58%
Fed. Funds target rate	0.50%-0.75%	0.75%-1.00%	0.75%-1.00%	-0 bps	25 bps
10-year Treasuries	2.44%	2.35%	2.32%	-3 bps	-12 bps

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

Last Week’s Headlines

• Consumer prices increased 0.2% in April following a 0.3% decrease in March, according to the Bureau of Labor Statistics. For the 12 months ended in April, the Consumer Price Index rose 2.2%. The energy index rose 1.1% for the month, while prices increased in shelter, energy, tobacco, and food. However, prices fell in medical care, communications, and apparel. The index less food and energy rose a scant 0.1% in April after declining in March. While better than March, April’s price gains are marginal at best and not in line with the Fed’s expectations for steady price growth.
• Retail and food services sales in April increased 0.4% from the previous month, and 4.5% above April 2016. Gasoline stations sales were up 12.3% from April 2016, while nonstore retailers were up 11.9% (internet sales) from last year. Excluding automobile and gas, sales are up 0.3% in April over March.
• Wholesale prices climbed in April, as the Producer Price Index advanced 0.5% after edging down 0.1% in March, according to the U.S. Bureau of Labor Statistics. The PPI rose 2.5% for the 12 months ended April 2017 — the largest increase since moving up 2.8% for the 12 months ended February 2012. Almost two-thirds of the April advance in the index is attributable to prices for services, which moved up 0.4%. Prices for goods climbed 0.5%. Prices less foods, energy, and trade services increased 0.7% for the month and are up 2.1% for the 12 months ended in April.
• Not unexpectedly, the number of job openings was little changed at 5.743 million on the last day of March, according to the Job Openings and Labor Turnover (JOLTS) report. The number of openings exceeded the number of hires (5.260 million) by about 483,000. Over the month, hires and separations were also little changed at 5.3 million and 5.1 million, respectively. The job openings rate remained at 3.8% for the month. There were 5.1 million total separations in March, little changed from February. Over the 12 months ended in March, hires totaled 62.9 million and separations totaled 60.5 million, yielding a net employment gain of 2.3 million.
• The price index for U.S. imports advanced 0.5% in April after ticking up 0.1% the previous month, the Bureau of Labor Statistics reported. Export prices rose 0.2% in April following a 0.1% advance in March. Export prices have not recorded a monthly decline since the index fell 0.8% in August 2016. Prices for exports rose 3.0% over the past 12 months. The increase in export prices was driven by both agricultural and nonagricultural (e.g., automobiles, foods, feeds, and beverages) price increases. Import prices rose 0.5% in April and have not recorded a monthly decline since the index edged down 0.1% in November. Prices for imports rose 4.1% for the 12 months ended in April. Import prices were boosted by a 1.6% increase in fuel prices in April.
• According to the Treasury Department, the federal government realized a surplus of $182 billion in April — $76 billion more than the surplus in April 2016. Receipts in April were $455 billion, while total spending was $273 billion — $59 billion less than spending in April 2016. The budget deficit in March was $176 billion. For fiscal 2017, which began in October 2016, the federal budget deficit was $344 billion — $8 billion less than the shortfall recorded during the same span last year, largely due to the timing of certain payments. If not for those shifts in payments, the deficit for the first seven months of fiscal 2017 would be $77 billion larger than the one recorded for the same period last year.
• In the week ended May 6, the advance figure for seasonally adjusted initial claims was 236,000, a decrease of 3,000 from the previous week’s unrevised level of 238,000. The advance seasonally adjusted insured unemployment rate remained at 1.4% for the fourth consecutive week. The advance number for seasonally adjusted insured unemployment during the week ended April 29 was 1,918,000, a decrease of 61,000 from the previous week’s level, which was revised up 15,000. This is the lowest level for insured unemployment since November 5, 1988, when it was 1,898,000.

Eye on the Week Ahead

This week is a slow one for important economic reports. Investors will be watching for more corporate earnings information, while also tracking the EU following France’s presidential election and Puerto Rico’s continuing debt crisis.

 

The Markets (as of market close May 5, 2017)

Both the S&P 500 and Nasdaq reached record highs last week as most of the benchmark indexes listed here posted solid gains. Only the Russell 2000 ended last week in negative territory, falling almost a quarter of a point. While the economic news last week was mixed, a strong labor report was apparently enough to offset stagnant price and wage gains in April. While the Fed didn’t see enough economic growth to raise interest rates, the Committee expects the economy to continue to strengthen over time. Prices fell for 10-year Treasuries, pushing yields higher. Overall, equities performed fairly well, despite falling oil prices and the petition of Puerto Rico for federal relief from its $51 billion debt, which would be the largest restructuring of municipal debt in U.S. history.

The price of crude oil (WTI) fell for the third straight week, closing at $46.47 per barrel, down from the prior week’s closing price of $49.19 per barrel. The price of gold (COMEX) also dropped, closing at $1,228.40 by late Friday afternoon, down from the prior week’s price of $1,269.50. The national average retail regular gasoline price decreased to $2.411 per gallon on May 1, 2017, $0.038 less than the prior week’s price but $0.171 more than a year ago.

Market/Index	2016 Close	Prior Week	As of 5/5	Weekly Change	YTD Change
DJIA	19762.60	20940.51	21006.94	0.32%	6.30%
Nasdaq	5383.12	6047.61	6100.76	0.88%	13.33%
S&P 500	2238.83	2384.20	2399.29	0.63%	7.17%
Russell 2000	1357.13	1400.43	1397.00	-0.24%	2.94%
Global Dow	2528.21	2731.15	2754.32	0.85%	8.94%
Fed. Funds target rate	0.50%-0.75%	0.75%-1.00%	0.75%-1.00%	0 bps	25 bps
10-year Treasuries	2.44%	2.28%	2.35%	7 bps	-9 bps

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

Last Week’s Headlines

• The FOMC decided to maintain interest rates at their current level following its meeting last week. The Committee noted that, while the labor market has continued to strengthen and business fixed investment has firmed, household spending rose only modestly in March with consumer prices falling and inflation continuing to run somewhat below the Fed’s 2.0% target rate. However, the Committee views the slowing in economic growth during the first quarter as likely to be transitory and expects that economic activity will expand at a moderate pace, labor market conditions will strengthen, and inflation will stabilize around 2.0%. The FOMC had earlier suggested that interest rates would be increased three times during the year. It may be backing off that timetable, as the actual path of the federal funds rate will depend on the economic outlook based on incoming data.
• The employment sector picked up the pace in April following a lackluster March as total employment increased by 211,000 for the month (79,000 in March). The unemployment rate ticked down 0.1 percentage point to 4.4%. Job gains occurred in leisure and hospitality, health care and social assistance, financial activities, and mining. Over the year, the unemployment rate has declined by 0.6 percentage point, and the number of unemployed has fallen by 854,000. The labor force participation rate was 62.9%, while the employment-population ratio came in at 60.2%. The average workweek increased by 0.1 hour to 34.4 hours in April. Average hourly earnings for the month rose by $0.07 to $26.19. Over the year, average hourly earnings have risen by $0.65, or 2.5%.
• Inflation receded in March as consumer spending noticeably slowed. According to the latest report from the Bureau of Labor Statistics, personal consumption expenditures (the value of goods and services purchased by consumers) was essentially stagnant in March compared to February. The PCE price index, which measures the change in prices of goods and services purchased by consumers, decreased 0.2% in March. The core PCE price index, which excludes food and energy prices, fell 0.1% — the weakest showing in over 16 years. Personal income rose for the month, but not appreciably. Wages and salaries posted a weak 0.1% increase.
• The Census Bureau reported that the goods and services deficit was $43.7 billion in March, down $0.1 billion from $43.8 billion in February, revised. March exports were $191.0 billion, $1.7 billion less than February exports. March imports were $234.7 billion, $1.7 billion less than February imports. Year-to-date, the goods and services deficit increased $9.4 billion, or 7.5%, from the same period in 2016. Exports increased $38.0 billion, or 7.1%. Imports increased $47.5 billion, or 7.1%.
• Purchasing managers noted a slowdown in manufacturing production in April, according to the latest data from the Markit U.S. Manufacturing PMI™. The final Purchasing Managers’ Index™ registered 52.8 in April, down from 53.3 in March — the slowest improvement in overall business conditions since September 2016 (a reading of 50 or better indicates growth). The Institute for Supply Management’s PMI registered 54.8%, a decrease of 2.4 percentage points from the March reading. Purchasing managers reported a decrease in new orders, employment, and prices. On the plus side of the report, production increased slightly in April over March.
• Economic activity in the non-manufacturing sector grew in April, according to the Non-Manufacturing ISM® Report On Business®. The non-manufacturing sector includes wholesale trade, utilities, arts and entertainment, mining, retail trade, health care, real estate, and accommodations and food. The Non-Manufacturing Index increased 2.3 percentage points to 57.5% in April compared to March. Business activity increased in April, as did new orders and prices. The Employment Index decreased 0.2 percentage point in April to 51.4%. Overall, the non-manufacturing sector showed renewed strength following a slowdown in March.
• In the week ended April 29, the advance figure for seasonally adjusted initial claims was 238,000, a decrease of 19,000 from the previous week’s unrevised level of 257,000. The advance seasonally adjusted insured unemployment rate remained at 1.4% for the third consecutive week. The advance number for seasonally adjusted insured unemployment during the week ended April 22 was 1,964,000, a decrease of 23,000 from the previous week’s revised level. This is the lowest level for insured unemployment since April 15, 2000, when it was 1,962,000.

Eye on the Week Ahead

The pace of inflation slowed in March. How inflation trended in April will be revealed through this week’s Consumer Price Index, Producer Price Index, and retail sales report.

The Markets (as of market close April 28, 2017)

Equities continued their positive trend in April, spurred by favorable corporate earnings reports, proposed federal tax cuts, and positive economic signals overseas. The Nasdaq surpassed 6000 for the first time in its history, while the small-cap Russell 2000 reached a record high by the end of April. Each of the benchmark indexes listed here posted monthly gains, led by Nasdaq, which increased 2.30%, followed by the Global Dow, which gained almost 1.50% month-over-month. The large-cap Dow and S&P 500, while gaining in value, may have lagged a bit following less than favorable GDP and jobs growth. The yield on 10-year Treasuries fell 10 basis points as bond prices increased.

By the close of trading on April 28, the price of crude oil (WTI) was $49.19 per barrel, down from the March 31 price of $50.85 per barrel. The national average retail regular gasoline price was $2.449 per gallon on April 24, 2017, up from the March 27 selling price of $2.315 and $0.287 more than a year ago. The price of gold climbed at the end of April, closing at $1,269.50 on the last trading day of the month, up from its March 31 price of $1,250.60.

Market/Index	2016 Close	Prior Month	As of April 28	Month Change	YTD Change
DJIA	19762.60	20663.22	20940.51	1.34%	5.96%
NASDAQ	5383.12	5911.74	6047.61	2.30%	12.34%
S&P 500	2238.83	2362.72	2384.20	0.91%	6.49%
Russell 2000	1357.13	1385.92	1400.43	1.05%	3.19%
Global Dow	2528.21	2691.45	2731.15	1.48%	8.03%
Fed. Funds	0.50%-0.75%	0.75%-1.00%	0.75%-1.00%	0 bps	25 bps
10-year Treasuries	2.44%	2.38%	2.28%	-10 bps	-16 bps

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

Last Month’s Economic News

• Employment: The employment report for March showed job hirings slowed to 98,000 following gains of 219,000 in February and 216,000 in January, revised. Over the month, employment growth occurred in professional and business services (+56,000) and in mining (+11,000), while retail trade lost jobs (-30,000). The unemployment rate dipped to 4.5% — the lowest rate since April 2007. There were 7.2 million unemployed persons in March (7.5 million in February). The labor participation rate remained at 63.0%. The average workweek was 34.4 hours in March. Average hourly earnings increased by $0.05 to $26.14, following a $0.06 increase in February. Over the last 12 months ended in March, average hourly earnings have risen by $0.68, or 2.7%.

• FOMC/interest rates:The Federal Open Market Committee did not meet in April, but is scheduled to meet during the first week of May. The minutes from its March meeting revealed all 17 members of the Committee supported the March rate hike and agreed that the economy was at or near full employment. However, inflation remains below the 2.0% target, although several members of the Committee expected that target to be reached during the year. While the FOMC anticipated raising interest rates three times during 2017, some members of the Committee will want to see solid economic growth before voting to increase rates at the next FOMC meeting in May.

• GDP/budget: Expansion of the U.S. economy slowed over the first three months of 2017. According to the Bureau of Economic Analysis, the first-quarter 2017 gross domestic product grew at an annualized rate of 0.7% compared to the fourth-quarter 2016 GDP, which grew at an annual rate of 2.1%. Growth in the GDP was slowed by an increase in imports, and by weakening consumer, federal, state, and local government spending. Positives include increases in residential and nonresidential (business) investment. An indicator of inflationary trends, the price index for gross domestic purchases increased 2.6% in the fourth quarter, compared to an increase of 2.0% in the fourth quarter. As to the government’s budget, the federal deficit for March was $176.2 billion. Over the first six months of the 2017 fiscal year, the deficit sits at $526.9 billion, which is 15.0% higher than the deficit for the first six months of the 2016 fiscal year.

• Inflation/consumer spending: Inflation, as measured by personal consumption expenditures, slowed a bit in March. For the 12 months ended in March 2017, the personal consumption expenditures price index expanded at a rate of 1.8%. For the 12 months ended in February, the PCE price index expanded at a rate of 2.1%. For March, personal income increased 0.2% over February. Disposable personal income (after-tax income) increased 0.2%. Personal consumption expenditures (the value of goods and services purchased by consumers) gained less than 0.1% for the month.

The prices companies receive for goods and services fell in March from February, as the Producer Price Index dropped 0.1% for the month. Year-over-year, producer prices have increased 2.3%. Energy prices play a large part in the movement of the PPI, and in March energy prices slipped 2.9%, while food prices increased 0.9%. The PPI less food and energy has risen 1.6% for the year, after recording no change in March from February.

In another sign of waning inflation, consumer prices also retreated in March, slipping 0.3% from February. For the year, consumer prices are up 2.4%. Core prices, which exclude food and energy, dropped 0.1% for the month and have increased 2.0% since March 2016.

• Housing: The housing sector showed strength in March as home sales, prices, and building permits increased over the prior month. Existing home sales surged in March, climbing 4.4% to a seasonally adjusted annual rate of 5.71 million, up from February’s revised annual rate of 5.47 million. Existing home sales are 5.9% ahead of the sales pace from a year ago, which marks the strongest sales month since February 2007. The median sales price for existing homes rose 3.6% to $236,400. Total housing inventory at the end of March increased 5.8% to 1.83 million existing homes available for sale (6.6% lower than a year ago). Sales of newly constructed homes also increased in March, according to the Census Bureau’s report. Sales of new single-family homes expanded 5.8% in March to an annual rate of 621,000 — up from February’s rate of 587,000. The median sales price of new houses sold in March was $315,100, while the average sales price was $388,200. The seasonally adjusted estimate of new houses for sale at the end of March was 268,000. This represents a supply of 5.2 months at the current sales rate, which is up from 266,000 homes available (supply of 5.4 months) in February.

• Manufacturing: Manufacturing slowed in March, according to the Federal Reserve. Manufacturing output fell 0.4% in March, led by a large step-down in the production of motor vehicles and parts. Factory output, aside from motor vehicles and parts, moved down 0.2%. Overall, industrial production increased 0.5% due to a jump of 8.6% in the output of utilities — the largest increase in the history of the index — as the demand for heating returned to seasonal norms after being suppressed by unusually warm weather in February. For the first quarter as a whole, industrial production rose at an annual rate of 1.5%. At 104.1% of its 2012 average, total industrial production in March was 1.5% above its year-earlier level. As for durable goods, the Census Bureau shows new orders increased 0.7% in March, a slower growth rate than February’s revised 2.3% increase. Excluding the volatile transportation segment, new durable goods orders fell 0.2%. Orders for core capital goods (excluding defense and transportation) increased 0.2% for the month and 3.0% over the past 12 months.

• Imports and exports:The advance report on international trade in goods revealed that the trade gap grew by 1.4% in March. The overall trade deficit was $64.8 billion, up from February’s deficit of $63.9 billion. Exports declined $2.2 billion to $125.5 billion. Imports were $190.3 billion in March, down $1.4 billion from February’s total. The prices for U.S. imports of goods dropped 0.2% in March, led by a 3.6% drop in petroleum prices. U.S. export prices rose 0.2% for the month, after advancing a revised 0.4% in February. Export prices haven’t recorded a monthly decline since the index fell 0.8% in August 2016.

• International markets:In France, the rise of Emmanuel Macron, a former investment banker, as the heavy favorite to win the May 7 presidential race sent stocks and the euro higher, as the eurozone continues to gain its economic footing following the financial crisis of 2008. Long-term government bond prices continued to fall in China, sending bond yields to their highest levels in 20 months, following a sell-off of Chinese stocks. On a positive note, Greece reached a budget surplus that’s eight times higher than the 0.5% primary target set by its creditors. This bodes well for continued bailout support for the financially embattled country.

• Consumer sentiment:Consumer confidence in the economy slid back in April. The Conference Board Consumer Confidence Index® for April fell to 120.3 from March’s 123.1. While consumers expressed confidence in the job market, there was a decline in those who saw their income rising in the future. The Surveys of Consumers of the University of Michigan Index of Consumer Sentiment climbed to 98.0 in April. The March index was 96.9. Consumers expressed optimism about current economic conditions, as the Current Conditions Index increased 2.0 percentage points over March’s reading.

Eye on the Month Ahead

The FOMC did not meet in April, so the Committee will have plenty of economic data to consider when it next meets during the first week of May. Job creation slowed some in March, and April’s figures don’t come out until May 5. The FOMC may opt to leave interest rates alone until June’s meeting, to see if the labor market picks up the pace.

The Markets (as of market close April 28, 2017)

Tech-heavy Nasdaq reached 6000 for the first time in its history last Tuesday. The small-cap Russell 2000, which surged for much of 2016 but fell back earlier this year, rebounded over the past few weeks, attaining a record high of 1419.43 by midweek. Better-than-expected quarterly corporate earnings reports, a sign of sustained strength for many large companies, have pushed stocks higher. Each of the benchmark indexes listed here posted notable gains last week, led by the Global Dow, which rose over 2.50%, followed by Nasdaq’s 2.32% climb. Long-term bond yields increased on news of proposed tax cuts.

The price of crude oil (WTI) fell for the second straight week, closing at $49.19 per barrel, down from the prior week’s closing price of $49.62 per barrel. The price of gold (COMEX) also dropped, closing at $1,269.50 by late Friday afternoon, down from the prior week’s price of $1,286.40. The national average retail regular gasoline price increased for the fourth week in a row to $2.449 per gallon on April 24, 2017, $0.013 higher than the prior week’s price and $0.287 more than a year ago.

Market/Index	2016 Close	Prior Week	As of 4/28	Weekly Change	YTD Change
DJIA	19762.60	20547.76	20940.51	1.91%	5.96%
Nasdaq	5383.12	5910.52	6047.61	2.32%	12.34%
S&P 500	2238.83	2348.69	2384.20	1.51%	6.49%
Russell 2000	1357.13	1379.85	1400.43	1.49%	3.19%
Global Dow	2528.21	2661.88	2731.15	2.60%	8.03%
Fed. Funds target rate	0.50%-0.75%	0.75%-1.00%	0.75%-1.00%	0 bps	25 bps
10-year Treasuries	2.44%	2.24%	2.28%	4 bps	-16 bps

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

Last Week’s Headlines

• The initial estimate for the first-quarter gross domestic product showed economic growth slowed compared to the fourth quarter. The GDP increased at an annual rate of 0.7% in the first quarter. In the fourth quarter of 2016, the GDP increased at an annual rate of 2.1%. While the first estimate is based on source data that is incomplete or subject to further revision, this quarter’s growth rate is the slowest in three years. Weakened consumer spending cut into economic growth in the first quarter. Consumer spending increased a mere 0.3%, which is the worst showing since the end of 2009. Consumers spent less on high-cost items such as cars, and home heating during a mild winter. Conversely, residential investment grew at a 13.7% pace and nonresidential (business) investment, which has been sluggish, climbed 9.4%. Rising inflation may be cutting into consumers’ paychecks, prompting them to hold off on buying nonessential big-ticket items.
• New home sales continued to surge in March, according to the latest figures from the Census Bureau. Sales of new single-family homes in March were 5.8% higher than the revised February sales figures. The sales rate is 15.6% above the March 2016 estimate. The median sales price of new houses sold in March 2017 was $315,100. The average sales price was $388,200. The seasonally-adjusted estimate of new houses for sale at the end of March was 268,000. This represents a supply of 5.2 months at the current sales rate.
• New orders for manufactured durable goods in March increased $1.6 billion, or 0.7%, to $238.7 billion, according to the Census Bureau. This increase, up three consecutive months, followed a 2.3% February increase. Excluding transportation, new orders decreased 0.2% — the first decline in six months. Excluding defense, new orders increased 0.1%. Transportation equipment, also up three consecutive months, drove the increase, climbing $2.0 billion, or 2.4%, to $83.3 billion. On the other hand, orders for automobiles and machinery slowed. Shipments of manufactured durable goods in March, up four of the last five months, increased $0.6 billion, or 0.2%, to $239.8 billion. Unfilled orders for manufactured durable goods in March, up two consecutive months, increased $2.5 billion, or 0.2%, to $1,119.0 billion. Inventories of manufactured durable goods in March, up four of the last five months, increased $0.5 billion, or 0.1%, to $385.7 billion.
• The international trade deficit was $64.8 billion, an increase of $0.9 billion in March from the prior month. Exports of goods were $125.5 billion, $2.2 billion less than February exports. Imports were $190.3 billion, $1.4 billion less than the previous month.
• Consumer confidence in the economy took a step back in April following an increase in March. The Conference Board Consumer Confidence Index® registered 120.3 in April, down from 124.9 in March. The Present Situation Index decreased from 143.9 to 140.6 and the Expectations Index declined from 112.3 last month to 106.7. The Index of Consumer Sentiment from the University of Michigan inched up in April to 98.0 from 96.9 in March. Consumers were bullish about current economic conditions and expectations for further economic growth.
• In the week ended April 22, the advance figure for seasonally adjusted initial claims was 257,000, an increase of 14,000 from the previous week’s revised level of 243,000. The advance seasonally adjusted insured unemployment rate remained at 1.4% for the second consecutive week. The advance number for seasonally adjusted insured unemployment during the week ended April 15 was 1,988,000, an increase of 10,000 from the prior week’s revised level of 1,978,000.

Eye on the Week Ahead

The all-important employment figures for April are out at the end of the week. March saw new hires for the month drop to under 100,000 for the first time in a long time. However, the unemployment rate fell to 4.5% while average hourly earnings continue to rise — all of which points to an expanding economy.

The Markets (as of market close April 21, 2017)

Better-than-expected earnings reports for the first quarter helped push stocks higher last week. Each of the benchmark indexes listed here posted gains, some for the first time in several weeks. The small-cap Russell 2000, which had fallen below its end-of-year closing value, jumped 2.57% for the week and is now over 1.50% ahead of last year’s closing value. Gains in the industrial sector were reflected in an almost 1.0% advance in the S&P 500, while the Nasdaq increased nearly 2.0% for the week. On the other hand, energy companies didn’t fare as well, as oil fell below $50 per barrel.

The price of crude oil (WTI) fell last week, closing at $49.62 per barrel, down from the prior week’s closing price of $52.91 per barrel. The price of gold (COMEX) also dropped, closing at $1,286.40 by late Friday afternoon, down from the prior week’s price of $1,290.10. The national average retail regular gasoline price increased to $2.436 per gallon on April 17, 2017, $0.012 higher than the prior week’s price and $0.299 more than a year ago.

Market/Index	2016 Close	Prior Week	As of 4/21	Weekly Change	YTD Change
DJIA	19762.60	20453.25	20547.76	0.46%	3.97%
Nasdaq	5383.12	5805.15	5910.52	1.82%	9.80%
S&P 500	2238.83	2328.95	2348.69	0.85%	4.91%
Russell 2000	1357.13	1345.24	1379.85	2.57%	1.67%
Global Dow	2528.21	2649.04	2661.88	0.48%	5.29%
Fed. Funds target rate	0.50%-0.75%	0.75%-1.00%	0.75%-1.00%	0 bps	25 bps
10-year Treasuries	2.44%	2.23%	2.24%	1 bps	-20 bps

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

Last Week’s Headlines

• March storms may have played a role in holding back the start of new home construction, according to the latest report from the Census Bureau. Privately owned housing starts in March were at an annual rate of 1,215,000 — 6.8% below the revised February estimate, but 9.2% above the rate for March 2016. On the plus side, building permits were 3.6% above the February rate and 17.0% ahead of March 2016. While the start of new home construction slowed, housing completions maintained a steady pace, with the number of completions 3.2% above February and 13.4% over last March.
• Sales of existing homes followed a dismal February with a robust March. According to the National Association of Realtors®, existing home sales jumped 4.4% for the month over February — the strongest month since February 2007. March’s pace is 5.9% above March 2016. The median existing-home price for all housing types in March was $236,400, up 6.8% from March 2016 ($221,400). March’s price increase marks the 61st consecutive month of year-over-year gains. Total housing inventory at the end of March increased 5.8% to 1.83 million existing homes available for sale, but is still 6.6% lower than a year ago (1.96 million) and has fallen year-over-year for 22 straight months. Unsold inventory is at a 3.8-month supply at the current sales pace (unchanged from February).
• According to the Federal Reserve’s report, industrial production increased 0.5% in March over February, primarily bolstered by a jump of 8.6% in the output of utilities — the largest in the history of the index. Unusually warm weather in February gave way to colder conditions, resulting in a spike in demand for heating in March. Manufacturing output fell 0.4% in March, led by a large step-down in the production of motor vehicles and parts; factory output aside from motor vehicles and parts moved down 0.2%. The production at mines edged up 0.1%. For the first quarter as a whole, industrial production rose at an annual rate of 1.5%.
• In the week ended April 15, the advance figure for seasonally adjusted initial claims was 244,000, an increase of 10,000 from the previous week’s unrevised level of 234,000. The advance seasonally adjusted insured unemployment rate fell to 1.4%. The advance number for seasonally adjusted insured unemployment during the week ended April 8 was 1,979,000, a decrease of 49,000 from the prior week’s unrevised level of 2,028,000. This is the lowest level for insured unemployment since April 15, 2000.

Eye on the Week Ahead

Initial estimates for the first-quarter GDP are out at the end of the week. Final figures for the fourth quarter revealed that the economy increased at an annual rate of 2.1%. A first-quarter rate at or below 2.0% may sway the Fed to hold interest rates at their current levels when the Committee next meets during the first week of May.