Tag: Future Plan

The Markets (as of market close October 31, 2016)

Trading in the early part of October saw equities respond negatively to rumors of a pullback on stimulus measures by the European Central Bank, which ultimately proved to be unfounded. Each of the indexes listed here closed the first week of October below their respective September closing values, except for the Global Dow, which eked out a marginal gain. Markets continued their tailspin during the second week of October led by the Global Dow and Nasdaq, each of which lost close to 1.5%.

Stocks rebounded during the third week of the month, posting week-over-week gains by the October 21 market close. Nevertheless, equities fell on the last day of October, closing the month in the red. The Dow fell for the third consecutive month in October, losing almost 1.0%. The S&P 500 lost nearly 2.0% compared to September. But the biggest downturn was posted by the Russell 2000, which plunged about 5.0%. Ultimately, investors may be cautious entering November’s presidential election.

U.S. government bond prices fell during October, as the yield on 10-year Treasuries closed up 23 basis points month-over-month. Gold lost value, closing October at $1,277.80, down $41 from its September closing value.

Market/Index	2015 Close	Prior Month	As of October 31	Month Change	YTD Change
DJIA	17425.03	18308.15	18142.42	-0.91%	4.12%
NASDAQ	5007.41	5312.00	5189.13	-2.31%	3.63%
S&P 500	2043.94	2168.27	2126.15	-1.94%	4.02%
Russell 2000	1135.89	1251.65	1191.39	-4.81%	4.89%
Global Dow	2336.45	2459.66	2445.57	-0.57%	4.67%
Fed. Funds	0.25%-0.50%	0.25%-0.50%	0.25%-0.50%	0 bps	0 bps
10-year Treasuries	2.26%	1.59%	1.82%	23 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.

The Month in Review

• Employment: The employment sector has not been overwhelmingly strong, but it has been steady throughout much of the year. According to the Bureau of Labor Statistics, there were 156,000 new jobs added in September, up from 151,000 jobs added in August. Thus far this year, job growth has averaged 178,000 per month, compared with an average of 229,000 per month in 2015. The unemployment rate remained relatively the same at 5.0% (4.9% in August). There were 7.9 million unemployed persons. Both the unemployment rate and the number of unemployed persons has changed little since August of last year. The labor force participation rate was 62.9% and the employment/population ratio came in at 59.8%. The average workweek increased by 0.1 hour to 34.4 hours (the workweek in manufacturing was 40.7 hours compared to 33.3 workweek hours for private service-providing employees). Average hourly earnings rose by $0.06 to $25.79. Over the year, average hourly earnings have risen by 2.6%.

• FOMC/interest rates:The FOMC did not meet in October, keeping the federal funds target rate at the 0.25%-0.50% range. However, minutes from its September meeting indicate several Committee members are of the opinion that the time is right for another rate hike — at least by the end of the year.

• Oil: The price of crude oil (WTI) fluctuated during October, reaching almost $52 per barrel, before finally settling at $46.74 per barrel by the end of the month. The national average retail regular gasoline price was $2.243 per gallon on October 24, down from the September 26 selling price of $2.224.

• GDP/budget: According to the first advance estimate of the GDP from the Bureau of Economic Analysis, the third-quarter 2016 gross domestic product grew at an annualized rate of 2.9% — exceeding the second-quarter GDP growth rate of 1.4%. The primary positives driving the upward movement of the GDP were exports, which increased at a 10% rate in the third quarter, offsetting a 2.3% increase in imports, which are a negative in the calculation of GDP. Nonresidential (e.g., business) fixed investment increased at a rate of 1.2%, slightly ahead of the prior quarter’s 1.0% rate of growth. The third quarter’s 2.9% annualized increase is the strongest since the third quarter of 2014. September was the last month of the government’s fiscal year. The federal deficit for FY 2016 was $587.4 billion — about 34% over the FY 2015 budget deficit. For the year, total receipts increased only 0.6%, while expenditures rose 4.5%. For the month, September saw a surplus of $33.4 billion.

• Inflation/consumer spending: Inflationary trends showed some life in September. Personal income (pre-tax earnings) and disposable personal income (income less taxes) each rose 0.3%, while personal spending, as measured by personal consumption expenditures, increased 0.5% for the month. Core personal consumption expenditures (personal spending excluding volatile food and energy costs) rose 0.1% in September, following a 0.2% monthly increase in August. The core PCE index is up 1.7% compared to last year. The price index increased 0.2% for the month, and is up 1.2% year-over-year. The Producer Price Index, which measures the prices companies receive for goods and services, jumped 0.3% in September and is up 0.7% year-over-year — the largest 12-month increase since December 2014. Excluding food, trade services, and energy, prices increased 0.3% for the month, the same as August. For the 12 months ended in September, the index for final demand less foods, energy, and trade services rose 1.5% — the largest increase since climbing 1.5% for the 12 months ended November 2014. The Consumer Price Index, which measures what consumers pay for both goods and services, increased 0.3% in September. Over the last 12 months, the CPI has risen 1.5%. Increases in the shelter (0.4%) and gasoline (5.8%) indexes were the main causes of the rise in the CPI. The index less food and energy increased 0.1% in September after a 0.3% increase in August.

• Housing: The housing sector has been a mixed bag for much of the year. Higher home prices and a lack of available homes for sale are keeping the housing market in check. Existing home sales for all housing types increased 3.2% in September to an annual rate of 5.47 million sales, compared to a downwardly revised 5.30 million in August, according to the National Association of Realtors®. Existing home sales are at their highest pace since June (5.57 million) and are 0.6% above a year ago (5.44 million). The median sales price for existing homes in September was $234,200, down over 2.5% from the price in August, but up 5.6% from September 2015. Total housing inventory at the end of September increased 1.5% to 2.04 million existing homes available for sale, but is 6.8% lower than a year ago (2.19 million) and has declined year-over-year for 16 straight months. The Census Bureau’s latest report reveals sales of new single-family homes increased 3.1% in September to an annual rate of 593,000 — up from August’s rate of 575,000. The median sales price of new houses sold in September was $235,000, while the average sales price was $377,700. The seasonally adjusted estimate of new houses for sale at the end of September was 235,000. This represents a supply of 4.8 months at the current sales rate, which is down from 236,000 homes available (supply of 4.9 months) in August.

• Manufacturing:One of the reasons the Fed has held off on raising interest rates is the continued weakness in the manufacturing and industrial production sectors. The Federal Reserve’s monthly index of industrial production (which includes factories, mines, and utilities) rose a scant 0.1% in September following a 0.4% drop in August. Manufacturing output increased 0.2% for the month. Industrial production rose at an annual rate of 1.8% for the third quarter, which is its first quarterly increase since the third quarter of 2015. However, compared to last year, industrial production is down 1.0%. At 104.2% of its 2012 average, total industrial production in September was 1.0% lower than its year-earlier level. Capacity utilization for the industrial sector edged up 0.1 percentage point in September to 75.4%, a rate that is 4.6 percentage points below its long-run (1972-2015) average. The advance report from the Census Bureau shows new orders for all durable goods (expected to last at least three years) fell $0.3 billion, or 0.1%, in September from the prior month. Excluding the volatile transportation segment, new orders increased 0.2%. Orders for capital goods increased $1.0 billion, or 1.5%, and shipments rose 0.8%.

• Imports and exports:In a positive sign for business investment, the advance report on international trade in goods revealed that the trade gap narrowed by about 3.1% in September from August. The overall trade deficit was $56.10 billion in September, down from $59.15 billion in August. Exports rose 0.9% to $125.6 billion, $1.1 billion more than August exports. Imports dropped 1.1% to $181.7 billion, $2.0 billion less than August imports. Rising fuel prices lifted the prices for U.S. imports (goods purchased here but produced abroad) 0.1% in September following a 0.2% decline in August. The prices for exports rose 0.3% following an 0.8% dip the prior month. Year-over-year, import prices are down 1.1% and export prices have fallen 1.5%.

• International markets: The European Central Bank didn’t expand its stimulus measures, but it didn’t retract them either — keeping its policies and benchmark interest rate intact. In the United Kingdom, September’s CPI was up 1.0%, which is a two-year high. Following completion of several economic overhauls, Greece is expected to receive an additional round of fresh loans. In China, the GDP expanded 6.7% from a year ago. Retail sales were up almost 11%, while industrial production advanced 6.1%.

• Consumer sentiment:Consumers’ confidence in the economy gained some momentum in September. The Conference Board Consumer Confidence Index® for September rose 2.3 points to 104.1. The Surveys of Consumers of the University of Michigan Index of Consumer Sentiment expanded from 90.1 in August to 91.2 in September. Both reports show consumers are bullish on future economic gains, but guarded when it comes to present economic conditions.

Eye on the Month Ahead

November should be an interesting month for the economy in general and the stock market in particular. Of course, the big news focuses on the results of the November 8 presidential election. In addition, the FOMC meets in November. While interest rates may be raised by the end of the year, it is not expected to occur until December. Once the dust settles from the election, and presuming interest rates aren’t increased in November, equities markets may begin to focus on what’s left of earnings season as well as the jobs and inflation data.

The Markets (as of market close October 28, 2016)

As the presidential election draws near, news about the candidates may be affecting the markets. Word of an FBI investigation into more Clinton emails, coupled with some earnings reports that were weaker than expected, sent equities into the red for the week. Of the indexes listed here, only the Dow posted a gain over the prior week, albeit less than 1.0%. The Nasdaq and Russell 2000 fell back a bit, dropping 1.28% and 2.50%, respectively. Gold climbed 0.8%, while the price of crude oil, which had been over $50 per barrel, dropped almost 5.0%.

The price of crude oil (WTI) fell by last week’s end, closing at $48.64 per barrel, down from the prior week’s price of $51.0 per barrel. The price of gold (COMEX) increased, closing at $1,277.00 by late Friday afternoon, up from the prior week’s price of $1,266.70. The national average retail regular gasoline price decreased to $2.243 per gallon on October 24, 2016, $0.014 less than the prior week’s price but $0.015 more than a year ago.

Market/Index	2015 Close	Prior Week	As of 10/28	Weekly Change	YTD Change
DJIA	17425.03	18145.71	18161.19	0.09%	4.22%
Nasdaq	5007.41	5257.40	5190.10	-1.28%	3.65%
S&P 500	2043.94	2141.16	2126.41	-0.69%	4.03%
Russell 2000	1135.89	1218.10	1187.61	-2.50%	4.55%
Global Dow	2336.45	2449.62	2449.11	-0.02%	4.82%
Fed. Funds target rate	0.25%-0.50%	0.25%-0.50%	0.25%-0.50%	0 bps	0 bps
10-year Treasuries	2.26%	1.73%	1.85%	12 bps	-41 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 first estimate of the third-quarter GDP exceeded expectations, increasing at an annual rate of 2.9% — the fastest growth rate in two years. The second-quarter GDP increased by 1.4%. There are three estimates for each quarterly GDP report, with each estimate based on more complete economic data, so the annual growth rate may change with subsequent reports. The biggest driver of the increase in the GDP was personal consumption expenditures, which rose 2.1% — a much slower rate of growth than the 4.3% gain during the second quarter. According to the Bureau of Economic Analysis report, the increase in real GDP growth in the third quarter reflected an upturn in private inventory investment, an acceleration in exports, a smaller decrease in state and local government spending, and an upturn in federal government spending.

• In the manufacturing sector, the report on durable goods orders is important as it shows the number of new orders placed with U.S. manufacturers. Last week’s advance report for September projects a decrease of $0.3 billion, or 0.1%, in new orders for manufactured durable goods (expected to last at least three years). A decrease in orders for transportation equipment drove the overall decrease. Excluding transportation, new orders increased 0.2%. Excluding defense, new orders increased 0.7%. On the other hand, shipments of durable goods in September increased $0.2 billion, or 0.8%, led by a jump in shipments of transportation equipment. As new orders slow, manufacturers draw down unfilled orders to keep shipments moving. Unfilled orders fell 0.4% in September for the fifth consecutive monthly decrease. Overall, the manufacturing sector continues to be relatively flat, with weakness in global demand for domestic products.

• Employer costs increased for the third straight quarter, according to the latest figures released by the Bureau of Labor Statistics. Compensation costs increased 0.6% for the third quarter, as wages and salaries rose 0.5%, and benefits increased 0.7%. Compensation costs for civilian workers increased 2.3% for the 12-month period ended in September 2016. In September 2015, compensation costs increased 2.0%. On the year, wages and salaries increased 2.4%, while benefit costs increased 2.3%. Growth in wages and salaries has been steady, but certainly not spectacular, over the past couple of years.

• The Census Bureau’s advance report on international trade in goods for September saw the trade deficit fall roughly $3.1 billion from $59.149 billion in August to $56.083 billion in September. Exports of goods for September were $125.6 billion, $1.1 billion more than August exports. Imports of goods for September were $181.7 billion, $2.0 billion less than August imports.

• New home sales picked up in September. The Census Bureau reported that sales of new single-family homes were at an annual rate of 593,000, 3.1% above the August rate of 575,000 and 29.8% above the September 2015 estimate of 457,000 houses for sale. The median sales price of new houses sold in September 2016 was $313,500; the average sales price was $377,700. The seasonally adjusted estimate of new houses for sale at the end of September was 235,000. This represents a supply of 4.8 months at the current sales rate.

• Consumer confidence in current business and employment conditions waned, as did consumers’ short-term outlook on economic conditions. The Conference Board Consumer Confidence Index® declined in October following an increase September. The index fell from 103.5 in September to October’s 98.6. Following suit, the University of Michigan’s Surveys of Consumers also shows consumer confidence fell in October as the Index of Consumer Sentiment dropped to 87.2, down from September’s 91.2. This is the lowest level since October 2014.

• In the week ended October 22, the advance figure for seasonally adjusted initial unemployment insurance claims was 258,000, a decrease of 3,000 from the previous week’s revised level. The advance seasonally adjusted insured unemployment rate remained at 1.5%. The advance number for seasonally adjusted insured unemployment during the week ended October 15 was 2,039,000, a decrease of 15,000 from the previous week’s revised level.

Eye on the Week Ahead

Economic news this week focuses on the Federal Open Market Committee meeting and the employment figures for October. While the Committee has hinted that interest rates might be raised by the end of the year, it is not expected to happen at this meeting. Employment figures for October are out this week. The employment sector has been steady, with 156,000 new jobs added in September. Payroll has increased only marginally, while the unemployment rate has remained at about 5.0%.

The Markets (as of market close October 21, 2016)

Last week began with a whimper as equities closed down (the Dow fell 0.3%), while the 10-year Treasuries yield dropped 4 basis points and bond prices increased. Oil (WTI) fell below $50 per barrel before rallying to around $50.50 per barrel last Tuesday morning. Midweek saw the markets remain steady after the European Central Bank decided to leave its interest rates unchanged. Favorable earnings reports pushed the markets into positive territory by last week’s end, as each of the indexes listed here posted gains week-over-week, led by the Global Dow and the Nasdaq, each of which gained almost 1.0%. The price of crude oil (WTI) advanced $0.68, while gold had a good week, gaining almost $14 over the prior week’s closing price.

The price of crude oil (WTI) closed at $51.0 per barrel last week, up from $50.32 per barrel the previous week. The price of gold (COMEX) increased, closing at $1,266.70 by late Friday afternoon, up from the prior week’s price of $1,252.90. The national average retail regular gasoline price decreased to $2.257 per gallon on October 17, 2016, $0.015 less than last week’s price and $0.020 lower than a year ago.

Market/Index	2015 Close	Prior Week	As of 10/21	Weekly Change	YTD Change
DJIA	17425.03	18138.38	18145.71	0.04%	4.14%
Nasdaq	5007.41	5214.16	5257.40	0.83%	4.99%
S&P 500	2043.94	2132.98	2141.16	0.38%	4.76%
Russell 2000	1135.89	1212.41	1218.10	0.47%	7.24%
Global Dow	2336.45	2426.05	2449.62	0.97%	4.84%
Fed. Funds target rate	0.25%-0.50%	0.25%-0.50%	0.25%-0.50%	0 bps	0 bps
10-year Treasuries	2.26%	1.80%	1.73%	-7 bps	-53 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

• Overall, consumer prices increased in September, but core prices changed very little. The Consumer Price Index, a measure of the change in the prices of goods and services purchased by consumers, increased 0.3% in September over August. The gasoline index rose 5.8% in September and accounted for more than half of the increase in the CPI. The energy index increased 2.9%, its largest advance since April. The index for all items less food and energy (core prices) rose a scant 0.1% in September after a 0.3% increase in August. The CPI has risen 1.5% over the last 12 months — its largest 12-month increase since October 2014. However, core prices actually fell 0.1 percentage point year-over-year. Based on this report, inflation may be trending up, but at a very moderate pace.

• As expected, the single-family housing market picked up steam in September after a brief retreat in August. Sales of existing homes jumped 3.2% in September to an annual rate of 5.47 million, up from August’s downwardly revised 5.30 million. Through September, existing home sales are at their highest pace since last June and are 0.6% above a year ago. The median existing-home price for all housing types in September was $234,200, up 5.6% from September 2015 ($221,700). The median existing single-family home price was $235,700 in September, up 5.6% from September 2015. Unsold inventory (2.04 million homes available) is at a 4.5-month supply at the current sales pace, which is down from 4.6 months in August. Adding to the increase of existing home sales is the jump in sales to first-time homebuyers, which accounts for 34% of total sales in September. First-time buyers represented 30% of sales in all of 2015.

• According to the latest information from the Census Bureau, building permits are up 6.3% and single-family housing starts increased 8.1% in September. On the negative side, single-family housing completions fell 8.8% and multifamily housing starts plummeted 38%. However, multifamily building permits advanced 16.8%, indicating that construction in that sector should pick up over the next several months.

• The National Association of Home Builders Housing Market Index, based on a survey of NAHB members, fell 2 points to 63 for October. Home builders have some reservations about the present market for new home sales due to concerns over shortages of lots and labor. However, the index for single-family home sales over the next six months increased 1 percentage point, as respondents expect the housing market to continue to make slow and steady gains.

• Industrial production edged up 0.1% in September after falling 0.5% in August. For the third quarter as a whole, industrial production rose at an annual rate of 1.8% for its first quarterly increase since the third quarter of 2015. Manufacturing output increased 0.2% in September and moved up at an annual rate of 0.9% in the third quarter. However, compared to last year, industrial production is down 1.0% with manufacturing output remaining unchanged from a year earlier.

• In the week ended October 15, the advance figure for seasonally adjusted initial unemployment insurance claims was 260,000, an increase of 13,000 from the previous week’s revised level. The advance seasonally adjusted insured unemployment rate remained at 1.5%. The advance number for seasonally adjusted insured unemployment during the week ended October 8 was 2,057,000, an increase of 7,000 from the previous week’s revised level.

Eye on the Week Ahead

After several weeks of volatility, investors will likely keep their fingers crossed for a break in the action as third-quarter earnings reports continue to stream in. Rising oil prices and increased consumer spending could expand the third-quarter GDP.

The Markets (as of market close October 14, 2016)

Oil prices reached a one-year high early last week, as Russia expressed its support of OPEC in its efforts to limit production, prompting stocks to post early week gains. With corporate earnings season upon us, early reports from some major companies were not encouraging. Globally, China’s 10% year-over-year drop in exports once again raised concerns about the weakening of the world’s second-largest economy. Major market indexes trended down midweek, while long-term bond yields expanded and the price of crude oil remained just above $50 per barrel. Favorable earnings reports from some of the world’s largest banks at the end of last week helped boost stocks, but not enough to prevent each of the indexes listed here from closing the week in the red.

The price of crude oil (WTI) closed at $50.32 per barrel last week, up from $49.55 per barrel the previous week. The price of gold (COMEX) continued to fall, closing at $1,252.90 by late Friday afternoon, down from the prior week’s price of $1,258.60. The national average retail regular gasoline price increased to $2.272 per gallon on October 10, 2016, $0.027 more than last week’s price but $0.065 less than a year ago.

Market/Index	2015 Close	Prior Week	As of 10/14	Weekly Change	YTD Change
DJIA	17425.03	18240.49	18138.38	-0.56%	4.09%
Nasdaq	5007.41	5292.40	5214.16	-1.48%	4.13%
S&P 500	2043.94	2153.74	2132.98	-0.96%	4.36%
Russell 2000	1135.89	1236.56	1212.41	-1.95%	6.74%
Global Dow	2336.45	2464.52	2426.05	-1.56%	3.83%
Fed. Funds target rate	0.25%-0.50%	0.25%-0.50%	0.25%-0.50%	0 bps	0 bps
10-year Treasuries	2.26%	1.72%	1.80%	8 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 Headlines

• The prices producers received for goods and services increased by 0.3% in September. The Producer Price Index increased 0.7% for the 12 months ended in September, the largest 12-month rise since December 2014. The price index less foods, energy, and trade services moved up 0.3% in September, the same as in August. For the 12 months ended in September, prices less foods, energy, and trade services rose 1.5%, the largest increase since climbing 1.5% for the 12 months ended November 2014.

• Retail sales at stores, online retailers, and restaurants increased 0.6% in September, following a 0.2% decline the prior month. Excluding automotive and gasoline, retail sales were up 0.3% for September. Compared to September 2015, retail sales are up 2.7%. Increased household spending, reflective of a healthy labor market, should give a boost to the GDP. Inflation may be starting to firm up based on the latest reports on producer prices and retail sales.

• The Labor Department’s Job Openings and Labor Turnover Summary for August revealed that the number of job openings decreased by 388,000 (7.3%) from July. The number of new hires fell from 5.258 million in July to 5.210 million in August. The number of job separations also dropped from 4.991 million in July to 4.954 million in August. Roughly 3.0 million workers quit their jobs in August, while 1.6 million were laid off or otherwise dismissed — rates that were essentially unchanged from the prior month. Over the 12 months ended in August, hires totaled 62.7 million and separations totaled 60.1 million, yielding a net employment gain of 2.6 million. Nevertheless, the fall in job openings coupled with the decrease in new hires seems to indicate a slowing in job growth.

• Not unexpectedly, the Fed was split as to whether to increase interest rates at its September meeting, according to the minutes released last week. In a 7-3 vote, the FOMC decided to keep rates at their current level “for the time being” with the expectation that rates would be raised, “relatively soon.” With the U.S. presidential election taking place in November, it isn’t likely that rates will be altered when the Committee meets next month. However, there is a growing expectation that rates will be increased when the Committee meets in December.

• The federal government’s fiscal year ended in September with a total deficit of $587.4 billion — roughly $148 billion over the 2015 fiscal year deficit. September saw a $33.4 billion surplus for the month. For the 2016 fiscal year, total receipts increased less than 1.0%, while expenses rose 4.5%, led by an 8.8% increase in Medicare spending.

• According to the latest information from the Bureau of Labor Statistics, both import and export prices increased in September. Prices for U.S. imports increased 0.1% in September, following a 0.2% decline the previous month. The increase is largely due to an increase in fuel prices. Export prices rose 0.3% in September, after decreasing 0.8% in August. Rising import and export prices, albeit marginal, could be a sign of strengthening inflationary trends.

• The preliminary results for October show consumers’ confidence in the economy is waning, particularly in households with incomes below $75,000. According to the Surveys of Consumers, the Index of Consumer Sentiment fell from 91.2 in September to 87.9 for October. The drop is likely driven by a fall in consumer expectations, as that index moved from 82.7 in September to 76.6 in October.

• In the week ended October 8, the advance figure for seasonally adjusted initial unemployment insurance claims was 246,000, unchanged from the prior week’s revised level, which had been revised down by 3,000. The advance seasonally adjusted insured unemployment rate remained at 1.5%. The advance number for seasonally adjusted insured unemployment during the week ended October 1 was 2,046,000, a decrease of 16,000 from the previous week’s revised level.

Eye on the Week Ahead

Several major corporations will be reporting their earnings, which have historically impacted the market — at least over the short term. Consumer spending, inflation, and housing are on tap this week. Through August, the Consumer Price Index for consumer goods and services is about 1.1% ahead of last year, and is expected to maintain that pace through September. As an indicator of inflationary trends, the CPI is still running short of the 2.0% target set by the Fed. The housing sector slowed a bit in August, but is expected to pick up the pace in September as this week’s reports on both housing starts and existing home sales should show improvement.

The Markets (as of market close October 7, 2016)

Equities took a tumble early last week as the Dow, the Nasdaq, the S&P 500, and the Russell 2000 lost value. Only the Global Dow saw gains, largely feeding off the fading value of the British pound. Oil (WTI) opened last week on an uptick, gaining over $0.40 per barrel late last Monday. On Tuesday, word that the European Central Bank would reduce stimulus and raise interest rates (a fact that was denied by the ECB) sent U.S. and global stocks reeling. Bond yields jumped, with the yield on 10-year Treasuries gaining almost 10 basis points by Wednesday morning. Gold fell $42 to $1,276.40, and the Dow tumbled almost 140 points compared to its closing value from the prior week. Oil prices continued to climb on news that U.S. reserves fell for the fifth consecutive week.

As last week came to a close, stocks slipped further as each of the indexes listed here lost value except for the Global Dow, which posted a small gain. A weaker-than-expected jobs report didn’t help matters. Bond prices fell as yields jumped to their highest levels in quite some time. The yield on 10-year Treasuries increased 13 basis points last week.

The price of crude oil (WTI) closed at $49.55 per barrel last week, up from $48.05 per barrel the previous week. The price of gold (COMEX) plummeted $60, closing at $1,258.60 by late Friday afternoon, down from the prior week’s price of $1,318.80. The national average retail regular gasoline price increased to $2.245 per gallon on October 3, 2016, $0.021 more than last week’s price but $0.073 less than a year ago.

Market/Index	2015 Close	Prior Week	As of 10/7	Weekly Change	YTD Change
DJIA	17425.03	18308.15	18240.49	-0.37%	4.68%
Nasdaq	5007.41	5312.00	5292.40	-0.37%	5.69%
S&P 500	2043.94	2168.27	2153.74	-0.67%	5.37%
Russell 2000	1135.89	1251.65	1236.56	-1.21%	8.86%
Global Dow	2336.45	2459.66	2464.52	0.20%	5.48%
Fed. Funds target rate	0.25%-0.50%	0.25%-0.50%	0.25%-0.50%	0 bps	0 bps
10-year Treasuries	2.26%	1.59%	1.72%	13 bps	-54 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 number of new jobs created in September fell a bit from August. According to the Bureau of Labor Statistics, there were 156,000 new jobs in September, down from 167,000 in August. September’s total number of new jobs is well below the 178,000 monthly average for 2016. The unemployment rate inched up 0.1 percentage point to 5.0%, and the number of unemployed persons was little changed at 7.9 million. The employment to population ratio was 59.8 — up 0.1 percentage point from August, while the labor participation rate was little changed at 62.9. In September, the average workweek for all employees on private nonfarm payrolls increased by 0.1 hour to 34.4 hours. In September, average hourly earnings for all employees on private nonfarm payrolls rose by $0.06 to $25.79. Over the year, average hourly earnings have risen by 2.6%. Overall, this lackluster jobs report should quell any thoughts of the Fed raising interest rates when it meets again in November.

• The Institute for Supply Management Report On Business® for September showed manufacturing expanding as the purchasing managers’ index (PMI) came in at 51.5% compared to 49.4% in August. Of the 18 manufacturing industries covered, 7 reported growth, including food, beverage & tobacco products, and computer & electronic products. Industries reporting contraction include petroleum & coal products; apparel, leather & allied products; transportation equipment; and machinery. Noteworthy is the 6 percentage point increase in new orders in September over August.

• The seasonally adjusted final Markit U.S. Manufacturing Purchasing Managers’ Index™ (PMI™) registered 51.5, down slightly from 52.0 in August, to signal the weakest improvement in overall business conditions since June. Manufacturers noted slower growth in September due to a reduction in client demand and diminished export sales. A reading above 50,0 indicates growth, but at a slower pace than in August. While the Markit and ISM reports may appear divergent, they are essentially reporting slow growth in the manufacturing sector.

• The Institute for Supply Management’s Non-Manufacturing ISM® Report On Business® shows economic activity expanded in the non-manufacturing, or services, sector in September. The non-manufacturing index registered 57.1% in September, 5.7 percentage points higher than the August reading of 51.4%. This is the highest reading since October 2015. Survey respondents also reported an increase in business activity, new orders, employment, and prices. Covered non-manufacturing sectors include agriculture, utilities, retail trade, management of companies & support services, health care & social assistance, transportation & warehousing.

• The U.S. goods and services deficit was $40.7 billion in August, up $1.2 billion from July. August exports were $187.9 billion, $1.5 billion more than July exports. August imports were $228.6 billion, $2.6 billion more than July imports. Year-to-date, the goods and services deficit decreased $4.3 billion, or 1.3%, from the same period in 2015. Exports decreased $62.4 billion, or 4.1%. Imports decreased $66.8 billion, or 3.6%. The positive from the report is the increase in exports against the continued strength of the dollar. Higher imports reflects strengthening of domestic demand for goods and services.

• In the week ended October 1, the advance figure for seasonally adjusted initial unemployment insurance claims was 249,000, a decrease of 5,000 from the prior week’s unrevised level. The advance seasonally adjusted insured unemployment rate remained at 1.5%. The advance number for seasonally adjusted insured unemployment during the week ended September 24 was 2,058,000, a decrease of 6,000 from the previous week’s revised level.

Eye on the Week Ahead

The Columbus holiday week begins with the job openings report for August. While a bit dated, the report provides information on the number of job openings, hires, and quits. At the end of the week, a couple of reports relating to inflationary trends are available. The Producer Price Index for September measures price changes from the producers’ perspective relative to goods, services, and construction sold to the consumer. The retail sales report offers a comparison on merchandise and services sold to consumers based on the total receipts of merchants.

The Markets (as of market close September 30, 2016)

The Markets (as of market close September 30, 2016)

Last week equities started off well enough, still feeding off the Fed’s decision to leave interest rates alone for the time being. But fear of financial instability for one of the world’s largest banks may have prompted many investors to sell, causing the market to tumble by mid-week. However, news that the bank in question was near a deal to settle some of its financial issues quelled some investors’ fears, lifting the market back to where it left off the prior week.

Both the Dow and S&P 500 posted slight gains, as did the Nasdaq. The Russell 2000 and Global Dow rebounded by last week’s end, but not enough to avoid posting a slight loss for the week.

The price of crude oil (WTI) closed at $48.05 per barrel last week, up from $44.59 per barrel the previous week. The price of gold (COMEX) fell, closing at $1,318.80 by late Friday afternoon, down from the prior week’s price of $1,341.10. The national average retail regular gasoline price decreased to $2.224 per gallon on September 26, $0.001 lower than the prior week’s price and $0.098 below a year ago.

Market/Index	2015 Close	Prior Week	As of 9/30	Weekly Change	YTD Change
DJIA	17425.03	18261.45	18308.15	0.26%	5.07%
Nasdaq	5007.41	5305.75	5312.00	0.12%	6.08%
S&P 500	2043.94	2164.69	2168.27	0.17%	6.08%
Russell 2000	1135.89	1254.62	1251.65	-0.24%	10.19%
Global Dow	2336.45	2465.66	2459.21	-0.24%	5.27%
Fed. Funds target rate	0.25%-0.50%	0.25%-0.50%	0.25%-0.50%	0 bps	0 bps
10-year Treasuries	2.26%	1.61%	1.59%	-2 bps	-67 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 gross domestic product grew at a slightly faster pace in the second quarter compared to the first, according to the third and final estimate released by the Bureau of Economic Analysis. The GDP increased at an annual rate of 1.4% in the second quarter of 2016, compared to an 0.8% increase in the first quarter. The second quarter increase in the GDP reflected positive contributions from personal consumption expenditures, exports, and nonresidential fixed investment. These were partly offset by negative contributions from private inventory investment, residential fixed investment, and state and local government spending. Imports, which are a subtraction in the calculation of GDP, increased. In any case, the current pace of economic expansion is the slowest since 1949. The price index for gross domestic purchases increased 2.1% in the second quarter, compared with an increase of 0.2% in the first. The price index of the GDP measures changes in the prices of goods and services included in the GDP. The GDP price index is an indicator of inflationary trends.
• Following several months of positive gains, August proved to be a soft month for consumer income and spending, leading to weak inflationary trends. The latest report from the Bureau of Economic Analysis shows consumer income increased $39.3 billion (0.2%) in August, disposable (after-tax) income increased $31.9 billion (0.2%), and consumer purchases of goods and services (personal consumption expenditures) increased $6.2 billion (less than 0.1%). The price index, which measures the change in prices of consumer goods and services, increased 0.1% for the month, while the price index excluding food and energy (core PCE) gained a scant 0.2%. Year-over-year, the core PCE is up 1.7% — still below the Fed’s target of 2.0% inflation.
• During testimony before the Committee on Financial Services, FOMC Chair Janet Yellen indicated that the majority of the Committee favors raising interest rates, but there is no fixed timetable. She said the Committee expects the jobless rate to fall further and job growth to continue.
• The U. S. trade deficit narrowed 0.6% in August from July, according to the latest report from the Census Bureau. The international trade deficit was $58.4 billion in August, down $0.4 billion from $58.8 billion in July. Exports of goods for August were $124.6 billion, $0.9 billion more than July exports. Imports of goods for August were $183.0 billion, $0.5 billion more than July imports.
• The manufacturing sector followed a favorable July with a weak August. According to the latest Census Bureau report, new orders for manufactured goods ($0.1 billion), shipments of manufactured goods ($0.8 billion), unfilled orders ($1.5 billion), and new orders for capital goods ($3.1 billion) each declined in August from July. Only inventories of manufactured goods increased, gaining $0.5 billion, or 0.1%, in August following a 0.4% increase in July.
• With both residential construction and existing home sales falling in August, it isn’t a surprise that sales of new homes also dropped off for the month. According to a Census Bureau report, sales of new single-family homes fell 7.6% in August compared to July. But at an annual rate of 609,000, the sales rate in August 2016 is over 20% higher than the sales rate a year ago. The median sales price of new houses sold in August was $284,000; the average sales price was $353,600. The seasonally adjusted estimate of new houses for sale at the end of August was 235,000. This represents a supply of 4.6 months at the current sales rate.
• Consumer confidence in the economy grew in September. The Conference Board Consumer Confidence Index® grew to 104.1 in September, up from 101.8 in August. The Present Situation Index rose from 125.3 to 128.5, while the Expectations Index improved from 86.1 last month to 87.8.
• The University of Michigan’s Survey of Consumers indicated consumer confidence in economic conditions edged upward in September due to gains among higher income households, while the Sentiment Index among households with incomes under $75,000 remained at the same level for the third consecutive month. The Index of Consumer Sentiment increased to 91.2 in September (89.8 in August), and the Current Economic Conditions index fell from 107 in August to 104.2, while the Index of Consumer Expectations jumped from 78.7 in August to 82.7 in September.
• In the week ended September 24, the advance figure for seasonally adjusted initial unemployment insurance claims was 254,000, an increase of 3,000 from the prior week’s revised level. The advance seasonally adjusted insured unemployment rate remained at 1.5%. The advance number for seasonally adjusted insured unemployment during the week ended September 17 was 2,062,000, a decrease of 46,000 from the previous week’s revised level.

Eye on the Week Ahead

Job growth has been steady throughout much of the year, averaging about 187,000 new jobs per month. The upcoming jobs report this week is expected to show continued growth for September. Also worth noting are reports focusing on the manufacturing sector, which has slowed during the summer but may pick up in the fall.

The Markets (as of market close September 23, 2016)

The Markets (as of market close September 16, 2016)

Volatility in the markets reigned last week as each of the indexes listed here enjoyed gains early in the week, only to give most of them back by last week’s end. The Dow and S&P 500 closed last week only slightly ahead of their respective closing values from the previous week. While the small-cap Nasdaq finished the week up over 2.0% compared to the previous week, it too gave back plenty of gains from earlier in the week. The equities markets could be in for a ride, both domestically and abroad, as the Fed and the Central Bank of Japan are scheduled to meet later this week.

The price of crude oil (WTI) closed at $43.19 a barrel last week, down from $45.71 per barrel the previous week. The price of gold (COMEX) also fell, closing at $1,313.20 by late Friday afternoon, down from the prior week’s price of $1,331.80. The national average retail regular gasoline price decreased for the second consecutive week, falling to $2.202 per gallon on September 12, $0.021 lower than the prior week’s price and $0.173 below a year ago.

Market/Index	2015 Close	Prior Week	As of 9/16	Weekly Change	YTD Change
DJIA	17425.03	18085.45	18123.80	0.21%	4.01%
Nasdaq	5007.41	5125.91	5244.57	2.31%	4.74%
S&P 500	2043.94	2127.81	2139.16	0.53%	4.66%
Russell 2000	1135.89	1219.21	1224.78	0.46%	7.83%
Global Dow	2336.45	2442.56	2403.06	-1.62%	2.85%
Fed. Funds target rate	0.25%-0.50%	0.25%-0.50%	0.25%-0.50%	0 bps	0 bps
10-year Treasuries	2.26%	1.67%	1.69%	2 bps	-57 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 rose 0.2% in August, facilitated by a 0.3% increase in the index less food and energy (the core index), which was the largest gain in that category since February. Over the last 12 months, the all items index has risen 1.1%, a larger increase than the 0.8% rise for the 12 months ended in July. Prices for medical care, shelter, and clothing increased in August. Major energy component indexes were mixed, with increases in the indexes for natural gas and electricity offsetting declines in the gasoline and fuel oil indexes. While it isn’t much, the increase in the Consumer Price Index for August shows some firming of inflationary pressure. However, price gains are still lagging compared to last August, when the all items index rose 1.1% and core prices increased 2.3%.
• An indicator of inflationary trends, the Producer Price Index (a measure of the change in prices received by U.S. producers of goods and services) was unchanged in August, the U.S. Bureau of Labor Statistics reported. Final demand prices declined 0.4% in July and rose 0.5% in June. Prices for final demand less foods, energy, and trade services increased 0.3% in August after no change in July. For the 12 months ended in August, the index for final demand less foods, energy, and trade services moved up 1.2%, the largest rise since climbing 1.3% for the 12 months ended in December 2014. A closer look at the report reveals that the price index for services increased a scant 0.1%, while the price index for goods dropped 0.4%, which can be traced to a 1.6% fall in food prices.
• Following increases in June and July, retail sales in August fell. According to the Census Bureau, advance estimates of U.S. retail and food services sales for August were at a seasonally adjusted rate of $456.3 billion, a decrease of 0.3% from the previous month, but 1.9% above August 2015. Excluding autos, retail sales dropped 0.1% in August. Sales for online retailers fell 0.3% in August, compared to July. A slowdown in consumer spending could impact the GDP for the quarter and the prospects of a Fed interest rate hike in September.
• The federal deficit grew to $107 billion in August, as total outlays ($338 billion) outpaced total receipts ($231 billion). For the fiscal year, which ends this month, the year-to-date deficit is $620.8 billion, compared to $530 billion over the same period last year. Year-to-date, total receipts are up 0.9% compared to last year, while total government expenditures have surged ahead by 13.6%.
• Industrial production decreased 0.4% in August after rising 0.6% in July. Manufacturing output also declined 0.4% in August, reversing its increase in July. Capacity utilization for the industrial sector decreased 0.4 percentage point in August to 75.5%, a rate that is 4.5 percentage points below its long-run (1972-2015) average.
• According to the latest report from the Bureau of Labor Statistics, both import prices and export prices fell in August compared to July. U.S. import prices declined 0.2% in August, after ticking up 0.1% in July. The August downturn was driven by lower fuel prices. Prices for U.S. exports decreased 0.8% in August following a 0.2% increase in July. The drop in import prices is another indication of weak inflationary pressure.
• Consumers’ opinions of the economy this month haven’t changed from August, according to the University of Michigan’s Surveys of Consumers. The Index of Consumer Sentiment was 89.8 for September, the same as August. Consumers’ opinions of the current economic conditions regressed a bit in September. However, consumers remain reasonably optimistic about their future economic prospects.
• In the week ended September 10, the advance figure for seasonally adjusted initial unemployment insurance claims was 260,000, an increase of 1,000 from the prior week’s unrevised level. The advance seasonally adjusted insured unemployment rate remained at 1.6%. The advance number for seasonally adjusted insured unemployment during the week ended September 3 was 2,143,000, an increase of 1,000 from the previous week’s revised level.

Eye on the Week Ahead

The latest reports on the sales of new and existing homes hit the news this week. But the biggest event of the week is the FOMC meeting. Clearly a market-mover, speculation as to whether the Fed will increase interest rates in September has run the gamut from “no chance” to “definitely.” Even if the Committee holds off on hiking interest rates, investors will likely focus on comments from Committee members, particularly Chair Janet Yellen, as to the future of the current quantitative easing measures.

The Markets (as of market close September 9, 2016)

Equities indexes rebounded early last week as lackluster economic reports in the labor and manufacturing sectors, coupled with a falling dollar, appear to be fueling speculation that the Fed won’t be raising interest rates following its meeting later this month. Energy shares made some positive headway early in the week, contributing to positive market returns.

However, by the close of the week, stocks and bonds posted their largest losses since the Brexit vote in June, as traders pulled an about-face, fearing that central banks would not continue further economic stimulus. First, the European Central Bank refused to commit to further stimulus. Then a few members of the Federal Reserve intimated that the time may be ripe for an interest rate increase.

By week’s end, the Dow had dropped over 400 points. Each of the indexes listed here (with the exception of the Global Dow) fell over 2.0%, led by the Russell 2000, which reversed the prior week’s gains with a fall in value of over 2.6%.

The price of crude oil (WTI) closed at $45.71 a barrel last week, up from $44.36 per barrel the previous week. The price of gold (COMEX) gained, closing at $1,331.80 by late Friday afternoon, up from the prior week’s price of $1,328.50. The national average retail regular gasoline price decreased for the first time in three weeks, falling to $2.223 per gallon on September 5, $0.014 lower than the prior week’s price and $0.214 below a year ago.

Market/Index	2015 Close	Prior Week	As of 9/9	Weekly Change	YTD Change
DJIA	17425.03	18491.96	18085.45	-2.20%	3.79%
Nasdaq	5007.41	5249.90	5125.91	-2.36%	2.37%
S&P 500	2043.94	2179.98	2127.81	-2.39%	4.10%
Russell 2000	1135.89	1251.83	1219.21	-2.61%	7.34%
Global Dow	2336.45	2463.98	2442.56	-0.87%	4.54%
Fed. Funds target rate	0.25%-0.50%	0.25%-0.50%	0.25%-0.50%	0 bps	0 bps
10-year Treasuries	2.26%	1.60%	1.67%	7 bps	-59 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 number of job openings increased to 5.9 million on the last business day of July, an increase of 228,000 from June, the U.S. Bureau of Labor Statistics reported. Most of the job gains occurred in the private sector, including professional and business services and durable goods manufacturing. The number of hires was 5.2 million in July, little changed from June.
• The Non-Manufacturing ISM® Report, which is based on a survey of the nation’s purchasing and supply executives, covers non-manufacturing industries including utilities, real estate, hotel and food services, education, and health care. The majority of survey respondents indicated that there has been a slowing in the level of business for their respective companies, as non-manufacturing business activity, new orders, employment, and prices each decreased in August from July. According to the report, the ISM® Non-Manufacturing Index (NMI®) fell to 51.4% in August from July’s reading of 55.5%. A reading over 50% indicates growth, so the non-manufacturing sector grew in August, but at a slower pace compared to the previous month.
• In the week ended September 3, the advance figure for seasonally adjusted initial unemployment insurance claims was 259,000, a decrease of 4,000 from the prior week’s unrevised level. The advance seasonally adjusted insured unemployment rate remained at 1.6%. The advance number for seasonally adjusted insured unemployment during the week ended August 27 was 2,144,000, a decrease of 7,000 from the previous week’s revised level.

Eye on the Week Ahead

Several key economic reports are released this week ahead of next week’s Federal Open Market Committee meeting. Inflationary trends may be gleaned from the perspective of both the seller (producer prices and retail sales) and the consumer (consumer prices).