Tag: Investment plan

The Markets (as of market close January 13, 2017)

The past few weeks have seen the markets experience some volatility following several weeks of post-election gains. The Dow fell for the second time in the past three weeks, while the S&P 500 stayed about the same. Both the Global Dow and Russell 2000 posted marginal gains last week, while the Nasdaq gained almost a point. It appears that investors are in a wait-and-see mode until the president-elect’s new policies gain some traction.

The price of crude oil (WTI) fell again last week, closing at $52.52 per barrel, down from the prior week’s closing price of $53.70 per barrel. The price of gold (COMEX) increased, closing at $1,197.30 by late Friday afternoon, up from the prior week’s price of $1,172.60. The national average retail regular gasoline price increased for the sixth week in a row to $2.388 per gallon on January 9, 2017, $0.011 more than the prior week’s price and $0.392 higher than a year ago.

Market/Index	2016 Close	Prior Week	As of 1/13	Weekly Change	YTD Change
DJIA	19762.60	19963.80	19885.73	-0.39%	0.62%
Nasdaq	5383.12	5521.06	5574.12	0.96%	3.55%
S&P 500	2238.83	2276.98	2274.64	-0.10%	1.60%
Russell 2000	1357.13	1367.28	1372.05	0.35%	1.10%
Global Dow	2528.21	2577.90	2598.07	0.78%	2.76%
Fed. Funds target rate	0.50%-0.75%	0.50%-0.75%	0.50%-0.75%	0 bps	0 bps
10-year Treasuries	2.44%	2.42%	2.39%	-3 bps	-5 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

• Retail and food services sales climbed 0.6% in December over November. However, much of the increase was tied to soaring automobile sales. Less auto sales, retail sales advanced only 0.2% during the busy holiday shopping season. Consumers really didn’t increase their spending in December, as sales, excluding autos and gas, were flat. Nevertheless, total sales were up 4.1% from December 2015. Nonstore (online) retail sales were up 13.2% from December 2015, while miscellaneous stores were up 7.1% from last year.
• Producer prices continued edging higher in December, increasing 0.3% following November’s 0.4% advance. In December, nearly 80% of the increase was attributable to a 0.7% increase in goods, led by increasing energy prices. Services inched up only 0.1%. Prices less foods, energy, and trade services moved up 0.1% in December after rising 0.2% in November. In 2016, the index less foods, energy, and trade services climbed 1.7% following a 0.3% advance in 2015.
• While a bit dated, the Job Openings and Labor Turnover report from the Bureau of Labor Statistics provides useful information on the number of job openings, hires, and quits. The latest edition for November 2016 shows the number of job openings was little changed at 5.5 million. Over the month, hires and separations were also little changed at 5.2 million and 5.0 million, respectively. The total separations rate was 3.5% for the month (3.4% in October). Within separations, the quits rate was unchanged at 2.1% and the layoffs and discharges rate was unchanged at 1.1%. The job openings rate was 3.7% in November (3.6% in October), while the hires rate was 3.6% (unchanged from the prior month).
• According to the latest information from the Bureau of Labor Statistics, import prices resumed an upward trend in December, rising 0.4%, after a 0.2% decline the previous month. The advance in December was primarily driven by higher fuel prices, which advanced 7.3% — the largest monthly increase since the index rose 10.5% in June. Excluding fuel, the import price index fell 0.2% for December. Prices for overall imports advanced 1.8% between December 2015 and December 2016, the largest 12-month increase since the index rose 3.5% in March 2012. U.S. export prices increased in December, rising 0.3% following a 0.1% decrease in November. Prices for overall exports rose 1.1% for the year ended in December, the first 12-month increase since the index advanced 0.4% in August 2014 and the largest over-the-year rise since a 1.5% increase in February 2013.
• The federal deficit shrunk in December compared to November. The December deficit was $27.5 billion compared to $136.6 billion the prior month. Government receipts were $319.2 billion, up from $199.8 billion in November, while expenditures were $346.7 billion — about $10 billion ahead of November’s receipts. These figures are comparable to December 2015, when the deficit was $14.4 billion. For fiscal 2017, which begins in October, the deficit is $208.4 billion compared to $215.5 billion for the first three months of fiscal 2016. Thus far for FY 2017, total receipts are $740.8 billion ($765.6 billion over the same three-month period in 2015), while total outlays are $949.1 billion ($981.2 billion last year).
• Consumer confidence remained at roughly the same level in January as it was in December, according to the Surveys of Consumers from the University of Michigan. Consumers maintained the same level of confidence in the current economic conditions, although consumer expectations waned a bit in January from December.
• In the week ended January 7, the advance figure for seasonally adjusted initial unemployment insurance claims was 247,000, an increase of 10,000 from the previous week’s revised level of 237,000. The advance seasonally adjusted insured unemployment rate remained at 1.5%. The advance number for seasonally adjusted insured unemployment during the week ended December 31 was 2,087,000, a decrease of 29,000 from the previous week’s revised level.

Eye on the Week Ahead

Corporate earnings reports could influence equities as investors look to whether companies finished the year strong. Consumer prices have climbed at an annual rate of 1.7% through November. The last report for 2016 on the CPI is out this week as prices push toward the Fed’s target inflation rate of 2.0%.

Overview

The year 2016 likely will be remembered for the election of Donald Trump as the 45th president of the United States and the Brexit vote. This year also saw the Fed raise interest rates for the first time since last December, noting that the labor market has continued to strengthen and that economic activity has been expanding at a moderate pace since midyear. While inflation remains below the Fed’s target of 2.0%, the Committee expects inflation to rise to its target level over the medium term on the heels of anticipated improvements in energy and import prices and continued labor strengthening. Equities began the year hitting the skids as receding oil prices and a plummeting Chinese stock market pushed stock prices down and bond prices up. By midyear equities had recovered, despite Great Britain’s decision to exit the European Union. Following the results of the presidential election, stocks surged to new highs. Whether this trend continues in 2017 remains to be seen following President-elect Trump’s first few months in office.

Market/Index	2015 Close	Prior Week	2016 Close	Month Change	Q4 Change	2016 Change
DJIA	17,425.03	19,933.81	19,762.60	3.34%	7.94%	13.42%
Nasdaq	5,007.41	5,462.69	5,383.12	1.12%	1.34%	7.50%
S&P 500	2,043.94	2,263.79	2,238.83	1.82%	3.25%	9.54%
Russell 2000	1,135.89	1,371.51	1,357.13	2.63%	8.43%	19.48%
Global Dow	2,336.45	2,536.42	2,528.21	3.02%	2.79%	8.21%
Fed. Funds target rate	0.25%-0.50%	0.50%-0.75%	0.50%-0.75%	25 bps	25 bps	25 bps
10-year Treasuries	2.26%	2.54%	2.44%	6 bps	85 bps

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

The Dow suffered its first weekly loss since the presidential election, and each of the indexes listed here closed the last week of 2016 on the down side. Despite the lackluster returns for the final week of the year, each of the indexes closed the year in positive territory, led by the Russell 2000, which posted almost a 20% year-over-year gain. Long-term bond prices and gold increased by the end of last week, with the yield on 10-year Treasuries dropping 10 basis points, while the price of gold climbed about 1.7%.

The price of crude oil (WTI) increased last week, closing at $53.83 per barrel, up from the prior week’s closing price of $53.10 per barrel. The price of gold (COMEX) increased for the first time in several weeks, closing at $1,152.40 by late Friday afternoon, up from the prior week’s price of $1,133.30. The national average retail regular gasoline price increased for the fourth week in a row to $2.309 per gallon on December 26, 2016, $0.045 more than last week’s price and $0.275 higher than a year ago.

Market/Index	2015 Close	Prior Week	As of 12/30	Weekly Change	YTD Change
DJIA	17425.03	19933.81	19762.60	-0.86%	13.42%
Nasdaq	5007.41	5462.69	5383.12	-1.46%	7.50%
S&P 500	2043.94	2263.79	2238.83	-1.10%	9.54%
Russell 2000	1135.89	1371.51	1357.13	-1.05%	19.48%
Global Dow	2336.45	2536.42	2528.21	-0.32%	8.21%
Fed. Funds target rate	0.25%-0.50%	0.50%-0.75%	0.50%-0.75%	0 bps	25 bps
10-year Treasuries	2.26%	2.54%	2.44%	-10 bps	18 bps

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

Last Week’s Headlines

• Once again, a strong dollar has led to a widening trade gap as imports are outpacing exports. The Census Bureau’s advance report on international trade in goods has the trade deficit at $65.3 billion in November, up $3.4 billion from October. Exports of goods for November were $121.7 billion, $1.2 billion less than October exports. Imports of goods for November were $187.0 billion, $2.2 billion more than October imports. Inventories of wholesale and retail goods in November were up 0.9% and 1.0%, respectively, over October.
• Consumer confidence in the economy increased in December, according to The Conference Board Consumer Confidence Index®. The index for December was 113.7 — up from November’s 109.4. The Expectations Index reached a 13-year high, jumping from 94.4 in November to 105.5 in December. Following the presidential election, consumers have expressed optimism for the economy, jobs, and stock prices.
• In the week ended December 24, the advance figure for seasonally adjusted initial unemployment insurance claims was 265,000, a decrease of 10,000 from the previous week’s unrevised level of 275,000. The advance seasonally adjusted insured unemployment rate remained at 1.5%. The advance number for seasonally adjusted insured unemployment during the week ended December 17 was 2,102,000, an increase of 63,000 from the previous week’s revised level.

Eye on the Week Ahead

Trading volume is expected to pick up entering the first full week of 2017. The last reports of 2016 on the employment situation and international trade close the week.

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

The Dow reached its seventh consecutive week of gains as it nears 20000. As it stood at the close of last week, the Dow was about 66 points away from that milestone. During a slow week of trading leading up to the holidays, each of the indexes listed here closed on the positive side except for the Global Dow, which lost about 6 points (0.23%). For the first time in several weeks, the yield on 10-year Treasuries narrowed as bond prices kicked up a bit.

The price of crude oil (WTI) increased last week, closing at $53.10 per barrel, up from the prior week’s closing price of $52.03 per barrel. Gold (COMEX) remained volatile as its price fell again last week, closing at $1,133.30 by late Friday afternoon, down from the prior week’s price of $1,136.80. The national average retail regular gasoline price increased to $2.264 per gallon on December 19, 2016, $0.028 more than last week’s price and $0.238 higher than a year ago.

Market/Index	2015 Close	Prior Week	As of 12/23	Weekly Change	YTD Change
DJIA	17425.03	19843.41	19933.81	0.46%	14.40%
Nasdaq	5007.41	5437.16	5462.69	0.47%	9.09%
S&P 500	2043.94	2258.07	2263.79	0.25%	10.76%
Russell 2000	1135.89	1364.40	1371.51	0.52%	20.74%
Global Dow	2336.45	2542.35	2536.42	-0.23%	8.56%
Fed. Funds target rate	0.25%-0.50%	0.50%-0.75%	0.50%-0.75%	0 bps	25 bps
10-year Treasuries	2.26%	2.59%	2.54%	-5 bps	28 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 third and final estimate of the gross domestic product for the third quarter showed the economy grew at an annual rate of 3.5%, significantly ahead of the second-quarter annual growth rate of 1.4% and the first-quarter growth rate of only 0.8%. The third-quarter estimate is the strongest quarterly growth rate in two years. The advance in the third-quarter estimate is related to stronger consumer spending and increased business investment. While significantly higher than the estimates for the first two quarters of the year, the third-quarter GDP estimate essentially brings the annual growth rate in line with the 2.0% annual growth rate that’s prevailed since 2009. The price index, an indicator of inflation, increased 1.5% in the third quarter, compared with an increase of 2.1% in the second quarter. Corporate profits increased $117.8 billion in the third quarter, in contrast to a decrease of $12.5 billion in the second quarter.
• Personal income increased $1.6 billion (less than 0.1%) in November, according to the latest estimates released by the Bureau of Economic Analysis. Disposable personal income (income less personal taxes) decreased $1.3 billion (less than 0.1%) and personal consumption expenditures (PCE), which measures the value of goods and services purchased by consumers, increased $24.0 billion (0.2%). Excluding food and energy, the PCE price index increased less than 0.1%. November’s report shows that increasing consumer income and spending, which spurred economic growth through the third quarter, may be subsiding in the fourth quarter of 2016. Nevertheless, the PCE price index is up 1.4% from a year earlier, which, while still below the Fed’s target inflation rate of 2.0%, is the best year-over-year increase in two years.
• A big surge in the Northeast helped push sales of existing homes up in November, according to the National Association of Realtors®. Total existing home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, rose 0.7% to a seasonally adjusted annual rate of 5.61 million in November from a downwardly revised 5.57 million in October. November’s sales pace is now the highest since February 2007 (5.79 million) and is 15.4% higher than a year ago (4.86 million). The median existing home price for all housing types in November was $234,900, up 6.8% from November 2015 ($220,000). Total housing inventory fell for the eighteenth straight month by the end of November, dropping 8.0% to 1.85 million existing homes available for sale, and is now 9.3% lower than a year ago (2.04 million). Unsold inventory is at a 4.0-month supply at the current sales pace, which is down from 4.3 months in October.
• New home sales surged in November, according to the latest report from the Census Bureau. Sales of new single-family homes were at an annual rate of 592,000 — 5.2% above the October rate of 563,000 and 16.5% above the November 2015 estimate of 508,000. The median sales price of new houses sold in November 2016 was $305,400; the average sales price was $359,900. The seasonally adjusted estimate of new houses for sale at the end of November was 250,000. This represents a supply of 5.1 months at the current sales rate.
• The advance report from the Census Bureau on the manufacturing sector in November was a mixed bag of information. New orders for durable goods (products expected to last at least three years) decreased $11.0 billion, or 4.6%, following four consecutive monthly increases. Excluding transportation, new orders increased 0.5%. Year-to-date, new orders are down 0.3%. Unfilled orders — down five of the last six months — fell 0.2%. On the plus side of the report, manufacturers’ shipments and inventories increased 0.1%, respectively.
• Consumers’ confidence in the economy expanded in December. The University of Michigan’s Surveys of Consumers Index of Consumer Sentiment rose from 93.8 in November to 98.2 in December. This marked the highest index level since January 2004. Consumers also were more positive in their opinions on current and future economic conditions.
• In the week ended December 17, the advance figure for seasonally adjusted initial unemployment insurance claims was 275,000, an increase of 21,000 from the previous week’s unrevised level of 254,000. The advance seasonally adjusted insured unemployment rate remained at 1.5%. The advance number for seasonally adjusted insured unemployment during the week ended December 10 was 2,036,000, an increase of 15,000 from the previous week’s revised level.

Eye on the Week Ahead

The week between Christmas and New Year’s Day is customarily slow for economic news and market activity. Trading volumes are likely to be light, as many investors will be off toasting the 2016 string of record highs while hoping 2017 brings more of the same.

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

The fallout from the increase in the federal funds rate saw bond yields rise, with the yield on 10-year Treasuries hitting a 2-year high. Bond prices tend to fall (and yields rise) when interest rates increase. Lender rates from financial institutions are also expected to climb, pushing consumer loans (e.g., credit card rates) higher. Interest rates on bank deposits may not rise as quickly, however. Equities closed last week with little change in value from the week before. Of the indexes listed here, only the Dow posted a gain, marking the sixth consecutive week of gains for that index. The remaining indexes fell marginally, except for the Russell 2000, which dropped 1.71%.

The price of crude oil (WTI) increased last week, closing at $52.03 per barrel, up from the prior week’s closing price of $51.48 per barrel. Gold (COMEX) remained volatile as its price fell again last week, closing at $1,136.80 by late Friday afternoon, down from the prior week’s price of $1,161.40. The national average retail regular gasoline price increased to $2.236 per gallon on December 12, 2016, $0.028 more than the prior week’s price and $0.199 higher than a year ago.

Market/Index	2015 Close	Prior Week	As of 12/16	Weekly Change	YTD Change
DJIA	17425.03	19756.85	19843.41	0.44%	13.88%
Nasdaq	5007.41	5444.50	5437.16	-0.13%	8.58%
S&P 500	2043.94	2259.53	2258.07	-0.06%	10.48%
Russell 2000	1135.89	1388.07	1364.40	-1.71%	20.12%
Global Dow	2336.45	2551.65	2542.35	-0.36%	8.81%
Fed. Funds target rate	0.25%-0.50%	0.25%-0.50%	0.50%-0.75%	25 bps	25 bps
10-year Treasuries	2.26%	2.46%	2.59%	13 bps	33 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

• As expected, the Federal Open Market Committee raised the target range for the federal funds rate to 0.50%-0.75%. This is an increase of 0.25% — the first such increase since last December. In its press release, the Committee cited continued strengthening of the labor market and expanding economic activity as reasons for increasing the federal funds rate. The Committee noted that job gains are solid and the unemployment rate has declined. Household spending has been rising moderately, but business fixed investment has remained soft. While inflation has increased since earlier in the year, it remains below the Committee’s 2.0% longer-run objective, partly reflecting earlier declines in energy prices and in the prices of non-energy imports. FOMC forecasts project three rate increases in 2017, with the median federal funds rate anticipated to be 1.4% by the end of 2017, 2.1% by the end of 2018, and 2.9% by the end of 2019. Ultimately, as Chair Janet Yellen noted, “In making our policy decisions, we will continue — as always — to assess economic conditions relative to our objectives of maximum employment and 2 percent inflation. As I have noted on previous occasions, policy is not on a pre-set course.”
• Pushed by increases in housing and gasoline, the Consumer Price Index rose 0.2% in November over the prior month. Over the last 12 months, the CPI has risen 1.7%. The gasoline index increased 2.7% in November following a 7.0% jump in October. The index for all items less food and energy increased 0.2% in November and has increased 2.1% over the past 12 months. Indexes that rose faster over the last year included motor vehicle insurance (6.7%), medical care (4.0%), and shelter (3.6%).
• Consumer retail purchases slowed in November, despite Black Friday and the stock market surge. Some have suggested that slow sales in the early part of the month were due to cautious consumers who were awaiting the results of the presidential election. Advance estimates of U.S. retail and food services sales for November were $465.5 billion, an increase of 0.1% from the previous month, and 3.8% above November 2015. Retail trade sales were virtually unchanged from October 2016, but are up 3.6% from last year. Nonstore (online) retail sales were up 11.9% from November 2015, while health and personal care store retailers were up 6.2% from last year. Department store sales fell 6.4% from last November, and appliance and electronic store sales dropped 3.8% over the same period. The latest figures also suggest that online retailers are snagging more of the holiday purchases.
• Producer prices increased 0.4% in November, according to the Bureau of Labor Statistics’ Producer Price Index. The index is up 1.3% for the last 12 months — the largest gain since the 1.3% increase over the 12 months ended November 2014. Prices less foods, energy, and trade services moved up 0.2% in November after edging down 0.1% in October. For the 12 months ended in November, the index less foods, energy, and trade services climbed 1.8% — the largest rise since advancing 1.8% for the 12 months ended August 2014. Over 80% of the November increase is attributable to a 0.5% increase in services. A quarter of the November increase in prices for services can be traced to apparel, jewelry, footwear, and accessories retailing, which advanced 4.2%.
• New home construction retreated in November. According to the latest Census Bureau report, housing starts fell 18.7% from October’s revised estimates. The number of building permits decreased 4.7%. Compared to November 2015, both housing starts and building permits are down 6.9% and 6.6%, respectively. Privately owned housing completions in November were 15.4% above the revised October estimate, with single-family housing completions up 3.3%.
• The latest report from the Federal Reserve shows that industrial production declined 0.4% in November after edging up 0.1% in October. In November, manufacturing output moved down 0.1% and mining posted a gain of 1.1%. The index for utilities dropped 4.4%, as warmer-than-normal temperatures reduced the demand for heating. Total industrial production in November was 0.6% lower than its year-earlier level. The output of consumer goods decreased 0.5% in November. The production of consumer durable goods dropped 1.6%, with all of its major components recording decreases. Both consumer durable goods and its largest major category, automotive products, posted their first declines since May. Falling industrial output may signal slower consumer and business spending down the road.
• The government deficit expanded by over 200% in November from October — although much of the difference relates to the timing of payments and receipts. At $136.651 billion, the November deficit exceeded October’s deficit figure by $92.459 billion. Through the first two months of fiscal year 2017, the deficit sits at $180.843 billion. Compared to the first two months of fiscal year 2016, the deficit actually is down about $20 billion. November receipts were $199.875 billion and outlays were $336.526 billion.
• S. import prices fell 0.3% in November, the U.S. Bureau of Labor Statistics reported last week, following increases of 0.4% and 0.1% the two previous months. This is the largest monthly decrease in import prices since the index fell 0.5% in February. The drop in November was primarily led by decreasing fuel prices (-4.7%). U.S. export prices also declined in November, edging down 0.1%, after a 0.2% increase the previous month.
• In the week ended December 10, the advance figure for seasonally adjusted initial unemployment insurance claims was 254,000, a decrease of 4,000 from the previous week’s unrevised level of 258,000. The advance seasonally adjusted insured unemployment rate increased to 1.5%. The advance number for seasonally adjusted insured unemployment during the week ended December 3 was 2,018,000, an increase of 11,000 from the previous week’s revised level.

Eye on the Week Ahead

Following the Fed’s decision to raise interest rates for the first time in a year, several key economic reports are out this week that may shed some light on the direction of the economy moving forward. This week includes reports on the gross domestic product, durable goods orders, and consumer personal income and spending.

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

Following a week of tepid movement in the major stock market indexes, equities picked up the pace last week, reaching new record highs. Growth in financial company and bank stocks led the way as both the large-cap Dow and S&P 500 rose over 3.0%. Some analysts suggest that financial stocks could climb further next week if the Fed raises interest rates as anticipated. The small-cap Russell 2000 surged once again last week, jumping almost 6.0% over its prior week’s value. As money pours into equities, long-term bond prices continue to fall. The yield on 10-year Treasuries climbed 8.0 basis points, marking the third consecutive week of rising yields.

The price of crude oil (WTI) maintained its value, closing last week at $51.48 per barrel, down just $0.48 from the prior week’s closing price of $51.96 per barrel. Gold (COMEX) remained volatile as its price fell again last week, closing at $1,161.40 by late Friday afternoon, down from the prior week’s price of $1,179.20. The national average retail regular gasoline price increased to $2.208 per gallon on December 5, 2016, $0.054 more than the prior week’s price and $0.155 higher than a year ago.

Market/Index	2015 Close	Prior Week	As of 12/9	Weekly Change	YTD Change
DJIA	17425.03	19170.42	19756.85	3.06%	13.38%
Nasdaq	5007.41	5255.65	5444.50	3.59%	8.73%
S&P 500	2043.94	2191.95	2259.53	3.08%	10.55%
Russell 2000	1135.89	1314.25	1388.07	5.62%	22.20%
Global Dow	2336.45	2461.61	2551.65	3.66%	9.21%
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%	2.38%	2.46%	8 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 November 2016 Non-Manufacturing ISM® Report On Business® revealed that economic activity in the services sector expanded in November. The Non-Manufacturing Index came in at 57.2% compared to October’s 54.8%. This is the highest reading since the 58.3% NMI® in October 2015. The Non-Manufacturing Business Activity Index increased to 61.7%, 4.0 percentage points higher than the October reading. The Employment Index increased 5.1 percentage points in November to 58.2%. However, the New Orders Index and the Prices Index fell in November by 0.7 percentage point and 0.3 percentage point, respectively. Some of the non-manufacturing industries included in this survey are Agriculture, Mining, Utilities, Construction, Retail Trade, Transportation & Warehousing, Finance & Insurance, Entertainment & Recreation, Accommodation & Food Services, and Real Estate.
• While it’s a bit dated, the Bureau of Economic Analysis October report on international trade in goods and services was released last week. According to the report, the goods and services deficit widened by over 17% in October over the prior month. The trade deficit was $42.6 billion in October, up $6.4 billion from $36.2 billion in September, revised. October exports were $186.4 billion, $3.4 billion less than September exports. October imports were $229.0 billion, $3.0 billion more than September imports. Year-over-year, the goods and services deficit has decreased $8.8 billion, or 2.1%, from the same period in 2015. Exports decreased $58.7 billion, or 3.1%. Imports decreased $67.5 billion, or 2.9%.
• According to the Job Openings and Labor Turnover (JOLTS) report from the Bureau of Labor Statistics, the number of job openings fell about 1.7% in October from September. There were 5.534 million job openings in October compared to an upwardly revised 5.631 million job openings in September. Job openings increased in health care and social assistance, but decreased in professional and business services, federal government, and mining and logging. The number of hires and separations also dropped in October. There were 5.099 million hires in October, down about 22,000 from September’s hires. Total separations in October were 4.875 million — a decrease of about 61,000 compared to September. Year-over-year job openings are up 2.1%, while hires are down 2.2%.
• The preliminary results from the University of Michigan’s Surveys of Consumers show the Index of Consumer Sentiment up 6.2 percentage points from November. According to the report, the surge is due to consumers’ initial reactions to the results of the presidential election. Consumers were more upbeat about the economy as the Current Economic Conditions Index rose almost 5.0 percentage points, while the Index of Consumer Expectations climbed from 85.2% in November to 88.9%.
• In the week ended December 3, the advance figure for seasonally adjusted initial unemployment insurance claims was 258,000, a decrease of 10,000 from the previous week’s unrevised level. The advance seasonally adjusted insured unemployment rate fell to 1.4%. The advance number for seasonally adjusted insured unemployment during the week ended November 26 was 2,005,000, a decrease of 79,000 from the previous week’s revised level.

Eye on the Week Ahead

The Federal Open Market Committee meets next week and it is expected to raise the federal funds rate for the first time since last December. Reports available next week are from three indicators of inflationary trends — the Producer Price Index, retail sales, and the Consumer Price Index.

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

The economy picked up the pace in November, as did the stock market. After getting off to a sluggish start during the early part of the month, equities soared following the results of the presidential election. Each of the indexes listed here reached record highs during the month. The Russell 2000 posted the largest monthly gain, reaching double digits. Energy stocks jumped at the end of the month following OPEC’s agreement to cut production. Investors seemed willing to sell bonds and buy stocks as evidenced by the yield on 10-year Treasuries, which jumped 56 basis points by the end of the month and now exceeds their 2015 closing yield. Gold lost value, closing November at $1,174.80, down $103 from its October closing value of $1,277.80.

Market/Index	2015 Close	Prior Month	As of November 30	Month Change	YTD Change
DJIA	17425.03	18142.42	19123.58	5.41%	9.75%
NASDAQ	5007.41	5189.13	5323.68	2.59%	6.32%
S&P 500	2043.94	2126.15	2198.81	3.42%	7.58%
Russell 2000	1135.89	1191.39	1322.34	10.99%	16.41%
Global Dow	2336.45	2445.57	2454.12	0.35%	5.04%
Fed. Funds	0.25%-0.50%	0.25%-0.50%	0.25%-0.50%	0 bps	0 bps
10-year Treasuries	2.26%	1.82%	2.38%	56 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.

October’s Economy in Review

• Employment: Once again, the employment sector remained steady during October. According to the Bureau of Labor Statistics, there were 161,000 new jobs added in October, down from a revised September total of 191,000. In October, employment continued to trend up in health care, professional and business services, and financial activities. Thus far this year, job growth has averaged 181,000 per month, compared with an average of 229,000 per month in 2015. The unemployment rate was unchanged at 4.9%. There were 7.8 million unemployed persons in October. Both the unemployment rate and the number of unemployed persons have changed little since August of last year. The labor force participation rate was 62.8% and the employment/population ratio came in at 59.7%. The average workweek was unchanged at 34.4 hours (the workweek in manufacturing was 40.8 hours compared to 33.6 workweek hours for private service-providing employees). Average hourly earnings rose by $0.10 to $25.92 following an $0.08 increase in September. Over the year, average hourly earnings have risen by 2.8%.
• FOMC/interest rates:The FOMC did not raise interest rates in November, keeping the federal funds target rate at the 0.25%-0.50% range. However, minutes from its November meeting indicate several Committee members are of the opinion that the time is right for another rate hike, which is likely to occur when the Committee next convenes in December.
• Oil: Oil prices soared on the last day of the month following OPEC’s agreement to cut production significantly. In an apparent effort to boost the sagging economies of small, petroleum-dependent nations, oil prices could reach $60 per barrel soon. Prices for the year have remained below $50 per barrel for the most part. But by the close of trading on November 30, the price of crude oil (WTI) had reached $48.98 per barrel. The national average retail regular gasoline price was $2.154 per gallon on November 28, down from the October 31 selling price of $2.230. It is expected that retail gas prices will surge in the coming weeks as the prices of oil and petroleum products increase.
• GDP/budget: According to the “second” estimate of the GDP from the Bureau of Economic Analysis, the third-quarter 2016 gross domestic product grew at an annualized rate of 3.2% (the first estimate of the third-quarter growth rate was 2.9%). The growth rate for the second-quarter GDP was 1.4%. Factors driving the upward movement of the GDP include increases in consumer spending (personal consumption expenditures), government spending, exports, and nonresidential (e.g., business) fixed investment. Corporate profits increased $133.8 billion in the third quarter, in contrast to a decrease of $12.5 billion in the second quarter. As to the government’s budget, October marks the start of the government’s 2017 fiscal year. The federal deficit for the first month of FY 2017 was $44.19 billion following September’s budget surplus of $33.45 billion. Total receipts for October were $221.7 billion (down from September’s $356.6 billion), while total outlays were $265.9 billion (down from $323.2 billion in September). Comparatively, the budget deficit for October 2015 was $136.6 billion.
• Inflation/consumer spending: Consumer spending increased in October as inflation continues to slowly, but discernibly, trend upward. Personal income (pre-tax earnings) and disposable personal income (income less taxes) each rose 0.6%, while personal spending, as measured by personal consumption expenditures, increased 0.3% for the month. The personal consumption expenditures price index increased 0.2% for the month, and is up 1.4% for the year. Core personal consumption expenditures (personal spending excluding volatile food and energy costs) rose 0.1% in October, the same increase as in September. The core PCE index is up 1.7% year-over-year. The Producer Price Index, which measures the prices companies receive for goods and services, was unchanged in October from September, but is up 0.8% year-over-year — the largest 12-month increase since December 2014. Excluding food, trade services, and energy, prices fell 0.1% for the month, following a 0.3% gain in September. For the 12 months ended in October, the index for final demand less foods, energy, and trade services decreased 0.1%. The Consumer Price Index, which measures what consumers pay for both goods and services, increased 0.4% in October after climbing 0.3% in September. Over the last 12 months, the CPI has risen 1.6%. As in September, increases in the shelter and gasoline indexes were the main causes for the rise in the CPI. The gasoline index rose 7.0% in October, while the shelter index increased 0.4% for the second straight month. Retail and food services sales jumped 0.8% in October from the previous month. Retail trade sales were up 1.0% from September and 4.3% from last October. Sales for nonstore (online) retailers were up 12.9% from October 2015.
• Housing: Sales of existing homes increased in October, while new home sales fell. Existing home sales increased for the second consecutive month, growing 2.0% to an annual rate of 5.60 million, up from 5.49 million homes for sale in September. October’s sales pace is 5.9% above October 2015 and is at its highest annual rate since February 2007. The median sales price for existing homes in October was $232,200, down slightly from the $235,200 median sales price in September but up 6.0% from last October. Total housing inventory at the end of October decreased 0.5% to 2.02 million existing homes available for sale, which is 4.3% lower than a year ago (2.11 million). The Census Bureau’s latest report reveals sales of new single-family homes dropped 1.9% in October to an annual rate of 563,000 — down from September’s rate of 574,000. The median sales price of new houses sold in October was $304,500, while the average sales price was $354,900. The seasonally adjusted estimate of new houses for sale at the end of October was 246,000. This represents a supply of 5.2 months at the current sales rate.
• Manufacturing:The Federal Reserve’s monthly index of industrial production (which includes factories, mines, and utilities) was unchanged in October after decreasing 0.2% in September. On the plus side, manufacturing output increased 0.2% and mining posted a gain of 2.1%. However, production was pulled down by a drop in utilities (2.6%). At 104.3% of its 2012 average, total industrial production in October was 0.9% lower than its year-earlier level. Capacity utilization for the industrial sector edged down 0.1 percentage point in September to 75.3%, a rate that is 4.7 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) climbed $11.8 billion, or 4.8%, in October from the prior month. Excluding the volatile transportation segment, new orders increased 1.0%. Orders for capital goods increased $10.2 billion, or 14.5%, and shipments rose 0.1%.
• Imports and exports:Reversing course from the prior month, the advance report on international trade in goods for October revealed that the trade gap widened by 9.6% to $62.0 billion in October, up from $56.5 billion in September. Exports of goods fell $3.4 billion, while imports rose $2.1 billion. Dragging down exports was a nearly 12.0% drop in foods, feeds, and beverages. Both wholesale and retail inventories fell by 0.4%. According to the Bureau of Labor Statistics, import prices advanced 0.5% in October, following a 0.2% increase the previous month. Export prices increased 0.2% for the month. The price increase in imports was driven by higher fuel prices (7.2%), which more than offset declining nonfuel prices (0.1%). Despite the price increase for exports, overall export prices are down 1.1% over the past year.
• International markets:European stock markets had a good month in November, possibly feeding off of the strong U.S. market performance and OPEC’s agreement to cut back oil production. China’s currency has declined to its lowest level in eight years. Japan and China, along with other Asian countries, are waiting for President-elect Trump’s trade proposals, particularly as to whether he holds to his proposal to withdraw from the Trans-Pacific Partnership.
• Consumer sentiment:Consumers’ confidence in the economy weakened in October. The Conference Board Consumer Confidence Index® for October dropped 4.9 points to 98.6 from September’s revised reading of 103.5. The Surveys of Consumers of the University of Michigan Index of Consumer Sentiment fell from 87.9 in September to 87.2 in October. Both reports show consumers are pessimistic about current and future business conditions and future job prospects.

Eye on the Month Ahead

The stock market climbed following the presidential election. Interest rates remained unchanged in November. However, much could change in December as President-elect Trump rounds out his cabinet and offers more details on his economic and foreign policies moving forward. All indications are that the Fed will relax stimulus measures by increasing the federal funds interest rate when the Committee meets in mid December.

The Markets (as of market close November 25, 2016)

Based on the performance of stock market indexes, it was another banner week for equities amidst slow trading volume. The Dow, S&P 500, Russell 2000, and Nasdaq each reached record highs, with the Dow eclipsing 19000 for the first time ever. Some analysts suggest the market surge is based on expectations that the new administration will reduce taxes and spend more on infrastructure. Money continues to move from long-term bonds and gold into equities. Also, investors may view the likelihood of the Fed raising interest rates next month with more certainty, which could lead to money fleeing from long-term bonds and gold.

The price of crude oil (WTI) increased by last week’s end, closing at $45.96 per barrel, up from the prior week’s price of $45.58 per barrel. The price of gold (COMEX) fell again last week closing at $1,186.10 by late Friday afternoon, down from the prior week’s price of $1,207.30. The national average retail regular gasoline price decreased to $2.155 per gallon on November 21, 2016, $0.029 less than the prior week’s price but $0.061 more than a year ago.

Market/Index	2015 Close	Prior Week	As of 11/25	Weekly Change	YTD Change
DJIA	17425.03	18867.93	19152.14	1.51%	9.91%
Nasdaq	5007.41	5321.51	5398.92	1.45%	7.82%
S&P 500	2043.94	2181.90	2213.35	1.44%	8.29%
Russell 2000	1135.89	1315.64	1347.20	2.40%	18.60%
Global Dow	2336.45	2428.04	2466.14	1.57%	5.55%
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%	2.35%	2.35%	0 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

• For the second consecutive month, the number of existing home sales increased in October. According to the National Association of Realtors®, total existing home sales grew 2.0% in October to an annual rate of 5.60 million from 5.49 million in September. October’s sales pace is 5.9% above a year ago and is the highest annual rate since February 2007. The median existing-home price for all housing types in October was $232,200, up 6.0% from October 2015 ($219,100). Total housing inventory at the end of October declined 0.5% to 2.02 million, and is now 4.3% lower than a year ago (2.11 million). Unsold inventory is at a 4.3-month supply at the current sales pace, which is down from 4.4 months in September. According to Lawrence Yun of the NAR, “As a result of the anticipated economic stimulus in early 2017, mortgage rates post-election have now surged to around 4% as investors expect a strengthening economy and higher inflation. In the short-term, some prospective buyers may rush to lock in their rate and buy now, while others — especially those in higher-priced markets — may be forced to delay as a larger monthly payment outstretches their budget.”
• While existing home sales increased in October, new home sales lagged a bit compared to the prior month. According to the Census Bureau, sales of new single family houses in October were at a rate of 563,000, 1.9% below the revised September rate, but still 17.8% above October 2015. The median sales price of new houses sold in October 2016 was $304,500; the average sales price was $354,900. The seasonally adjusted estimate of new houses for sale at the end of October was 246,000. This represents a supply of 5.2 months at the current sales rate.
• The advance report on durable goods orders for October was generally favorable, according to the Census Bureau. New orders for manufactured durable goods (items expected to last at least three years) increased 4.8% to $239.4 billion, up $11 billion from September. Shipments of durable goods increased 0.1%. Unfilled orders, following four consecutive monthly decreases, gained 0.7% in October, while inventories remained relatively the same as the prior month. Year-to-date, shipments of durable goods are down 0.9%, while new orders for durable goods are lagging by 0.2%.
• The minutes of the last Federal Open Market Committee meeting held on November 2 revealed that, by an 8-2 vote, members agreed to maintain the current Fed funds rate range of 0.25%-0.50%. A couple of points to note: members generally agreed that the case for an interest rate hike has strengthened, but several members wanted more evidence that inflationary trends are gaining momentum; and this meeting occurred before the results from the presidential election, the results of which could impact the Committee’s decision on interest rates when it next meets in December.
• The international trade deficit widened to $62.0 billion in October, up $5.5 billion from September, according to the monthly advance report from the Census Bureau. Exports of goods were $122.1 billion, $3.4 billion less than September exports. Imports for goods for October were $184.1 billion, $2.1 billion more than September imports. Exports of foods, feed & beverages declined 11.8%, while exports of industrial supplies, including petroleum, fell 4.1%.
• According to the University of Michigan’s Surveys of Consumers chief economist, Richard Curtin, “The initial reaction of consumers to Trump’s victory was to express greater optimism about their personal finances as well as improved prospects for the national economy.” The Index of Consumer Sentiment jumped 6.6 points to 93.8, the Current Economic Conditions Index increased from 103.2 in September to 107.3 for October, and the Index of Consumer Expectations climbed 8.4 points to 85.2.
• In the week ended November 19, the advance figure for seasonally adjusted initial unemployment insurance claims was 251,000, an increase of 18,000 from the previous week’s revised level. The advance seasonally adjusted insured unemployment rate increased 0.1 percentage point to 1.5%. The advance number for seasonally adjusted insured unemployment during the week ended November 12 was 2,043,000, an increase of 60,000 from the previous week’s revised level.

Eye on the Week Ahead

Important economic indicators relied upon by the FOMC are posted this week ahead of the Committee’s meeting during the second full week of December. The latest reports on the third-quarter GDP, personal income and outlays, and the employment situation are on tap this week.

The Markets (as of market close November 18, 2016)

Treasury yields continue to climb as the 10-year rate jumped 20 basis points for the week while exceeding last year’s closing yield for the first time in 2016. The dollar has been keeping pace with rising bond yields, which is good for imports but not so good for exports. Equities have apparently benefitted from money moving from Treasuries as each of the indexes listed here posted week-over-week gains, except for the Global Dow. The Russell 2000 small-cap index has been on a roll of late, climbing over 10% by the end of election week and gaining another 2.60% last week.

The price of crude oil (WTI) increased by last week’s end, closing at $45.58 per barrel, up from the prior week’s price of $43.17 per barrel. The price of gold (COMEX) continued its downward trend, closing last week at $1,207.30 by late Friday afternoon, down from the prior week’s price of $1,225.50. The national average retail regular gasoline price decreased to $2.184 per gallon on November 14, 2016, $0.049 less than the prior week’s price but $0.006 more than a year ago.

Market/Index	2015 Close	Prior Week	As of 11/18	Weekly Change	YTD Change
DJIA	17425.03	18847.66	18867.93	0.11%	8.28%
Nasdaq	5007.41	5237.11	5321.51	1.61%	6.27%
S&P 500	2043.94	2164.45	2181.90	0.81%	6.75%
Russell 2000	1135.89	1282.38	1315.64	2.59%	15.82%
Global Dow	2336.45	2441.96	2428.04	-0.57%	3.92%
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%	2.15%	2.35%	20 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 prices consumers pay for goods and services increased 0.4% in October and 1.6% over the last 12 months, according to the latest Consumer Price Index (CPI). Components of the CPI that saw price increases include the energy index (3.5%) and the indexes for fuel oil (5.9%) and gasoline (7.0%). The index for food was unchanged for the fourth consecutive month. The index for all items less food and energy (core prices) rose 0.1% for the second straight month, but is up 2.1% over the last 12 months. The increase in the CPI over the past year is closing in on the Fed’s 2.0% inflation target, which could further strengthen the argument for an interest rate increase next month.
• Food and services sales at the retail level increased last month. The Census Bureau announced last week that advance estimates of U.S. retail and food services sales for October were $465.9 billion, an increase of 0.8% from the previous month, and 4.3% above October 2015. Total sales for the August 2016 through October 2016 period were up 3.3% from the same period a year ago. Retail trade sales were up 1.0% from September 2016, and up 4.3% from last year. Nonstore (online) retailer sales were up 12.9% from October 2015, while miscellaneous store retailer sales were up 9.5% from last year. This retail sales report bodes well for the fourth-quarter GDP.
• The prices producers received for goods and services in October did not change compared to the prior month. Year-over-year, producer prices are up 0.8%. Prices for goods edged up 0.4% in October, but the increase was offset by a 0.3% reduction in the prices for services. Prices less foods, energy, and trade services edged down 0.1% in October after rising 0.3% in both August and September. Food prices dropped 0.8% in October, while energy prices climbed 2.5% with gas jumping 9.7%.
• October was a banner month for new home construction. According to the Census Bureau, privately owned housing starts increased 25.5% above September and are 23.3% ahead of last October. Housing completions were up 5.5% for the month and 7.2% year-over-year. And the new home-building boom should continue as the number of building permits issued in October was 0.3% ahead of the number of permits pulled in September. Across the country, housing starts experienced substantial gains in the Northeast (44.8%) and Midwest (44.1%) in October.
• Speaking before the Joint Economic Committee, FOMC chair Janet Yellen indicated that economic conditions may be sufficiently improved to prompt the Committee to raise short-term interest rates soon. The Committee has held off raising interest rates this year in anticipation of continued improvement in the labor market and a return of inflation to 2.0%. Nevertheless, Yellen warned that, “were the FOMC to delay increases in the federal funds rate for too long, it could end up having to tighten policy relatively abruptly to keep the economy from significantly overshooting both of the Committee’s longer-run policy goals.”
• According to the latest report from the Federal Reserve, industrial production was unchanged in October after decreasing 0.2% in September. On the positive side, manufacturing output increased 0.2%, and mining posted a gain of 2.1% for its largest increase since March 2014. Overall production was pulled down by the index for utilities, which dropped 2.6%, as warmer-than-normal temperatures reduced the demand for heating. Total industrial production in October was 0.9% lower than its year-earlier level. Capacity utilization for the industrial sector edged down 0.1 percentage point in October to 75.3%.
• We’re still paying a little more for products purchased abroad (imports) compared to the prices we’re receiving for products sold overseas (exports). According to the latest figures from the Bureau of Labor Statistics, U.S. import prices grew by 0.5% in October, following a 0.2% increase in September. The October increase was driven by higher fuel prices (7.5%), which more than offset declining nonfuel prices. Import prices, excluding fuel, actually fell 0.1% for the second consecutive month. The price index for U.S. exports increased 0.2% in October following a 0.3% advance the previous month. Despite the recent increases, prices for U.S. exports fell over the past year, declining 1.1%.
• The National Association of Home Builders Housing Market Index (HMI®) is based on a survey of association members concerning their opinions on the economy in general and single-family housing market conditions in particular. The HMI® for November was 63 — unchanged from October. An index reading above 50 is considered positive. Most members responded before the presidential election, which may explain why levels remained unchanged pending the election results. The index for single-family home sales over the next six months dropped from 71 to 69 in November, while the index for traffic of prospective buyers gained a bit, moving from October’s reading of 46 to 47 for November.
• In the week ended November 12, the advance figure for seasonally adjusted initial unemployment insurance claims was 235,000, a decrease of 19,000 from the previous week’s unrevised level. The advance seasonally adjusted insured unemployment rate fell 0.1 percentage point to 1.4%. The advance number for seasonally adjusted insured unemployment during the week ended November 5 was 1,977,000, a decrease of 66,000 from the previous week’s revised level.

Eye on the Week Ahead

Trading may be light during Thanksgiving week, which could exaggerate any market movements during the holiday-shortened week. Nevertheless, the latest reports on existing and new home sales for October are out as is the Census Bureau’s report on international trade in goods, which closed September with a trade balance deficit of $56.1 billion.