What I’m Watching This Week – 8 April 2019

The Markets (as of market close April 5, 2019)

Stocks marked a second consecutive week of solid gains, led by the small caps of the Russell 2000 and the tech-heavy Nasdaq. The S&P 500 recorded seven consecutive days of gains through last Friday — the longest such streak since 2017. Once again, investors heard positive rhetoric relative to a trade deal with China. This time, President Trump announced that an “epic” deal could be in the not-too-distant future. Long-term bond prices slipped, evidenced by the rise in the yield of 10-year Treasuries (bond prices move in the opposite direction of bond yields). Following the last two weeks of trading, each of the benchmark indexes listed here have reached year-to-date gains comfortably exceeding their 2018 closing values.

Oil prices continue to surge, closing at $63.26 per barrel by late Friday, up from the prior week’s closing price of $60.19 per barrel. The price of gold (COMEX) fell again last week, closing at $1,295.90 by Friday evening, down from the prior week’s price of $1,297.00. The national average retail regular gasoline price was $2.691 per gallon on April 1, 2019, $0.068 higher than the prior week’s price but $0.009 less than a year ago.

Market/Index 2018 Close Prior Week As of 4/5 Weekly Change YTD Change
DJIA 23327.46 25928.68 26424.99 1.91% 13.28%
Nasdaq 6635.28 7729.32 7938.69 2.71% 19.64%
S&P 500 2506.85 2834.40 2892.74 2.06% 15.39%
Russell 2000 1348.56 1539.74 1582.56 2.78% 17.35%
Global Dow 2736.74 3000.81 3072.23 2.38% 12.26%
Fed. Funds target rate 2.25%-2.50% 2.25%-2.50% 2.25%-2.50% 0 bps 0 bps
10-year Treasuries 2.68% 2.40% 2.49% 9 bps -19 bps

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

Last Week’s Economic Headlines

  • March saw 196,000 new jobs added, according to the latest information from the Bureau of Labor Statistics. Employment growth averaged 180,000 per month in the first quarter of 2019, compared with 223,000 per month in 2018. The unemployment rate remained at 3.8%. Notable job gains occurred in health care (49,000), professional and technical services (34,000), food services and drinking places (27,000), and construction (16,000). There were approximately 6.2 million unemployed in March, roughly the same total as February. The labor force participation rate was 63.0% in March (63.2% in February), and has changed very little over the prior 12 months. The employment-population ratio was 60.6% in March and has been either 60.6% or 60.7% since October 2018. The average workweek for all employees increased by 0.1 hour to 34.5 hours in March, offsetting a decline of 0.1 hour in February. In March, average hourly earnings for all employees rose by $0.04 to $27.70, following a $0.10 gain in February. Over the past 12 months, average hourly earnings have increased by 3.2%.
  • In February, consumers tightened their wallets, possibly due to rising gas prices at the pumps. After climbing 0.7% in January, retail sales fell 0.2% in February, according to the latest report from the Census Bureau. Sales are up 2.2% from February 2018. Keeping overall sales afloat were strength in auto sales (0.7%) and gas stations (1.0%). Retail sales excluding auto and gas stations fell 0.6% in February.
  • February was not a banner month for manufacturing. According to the latest report from the Census Bureau, durable goods orders decreased 1.6% for the month after three consecutive monthly increases. Transportation equipment, particularly aircraft orders, drove the decrease, falling 4.8% in February. Excluding transportation, durable goods orders inched up 0.1%. Shipments of manufactured durable goods, up three of the last four months, increased 0.2%, as did inventories, which increased 0.3%. Nondefense new orders for capital goods plummeted in February, dropping 6.3%.
  • Purchasing managers reported marginal growth in the manufacturing sector, according to the Manufacturing ISM® Report On Business® for March. The PMI registered 55.3%, an increase of 1.1 percentage points over February’s reading. New orders, production, employment, and prices all increased in March. Deliveries and inventories decreased.
  • The IHS Markit US Manufacturing PMI™ fell in March to its lowest level since June 2017. The PMI™ posted 52.4 in March, down 0.6 percentage point from February’s rate. According to survey respondents, slower output kept manufacturing growth down. Total new orders expanded at a modest pace that was the slowest since June 2017. On the price front, input price inflation softened further to the slowest since August 2017.
  • Economic activity in the non-manufacturing (services) sector slowed in March, according to the latest report from the Institute for Supply Management®. Survey respondents indicated that growth in business activity and new orders slowed in March. On the other hand, employment and prices increased last month.
  • For the week ended March 30, there were 202,000 new claims for unemployment insurance, a decrease of 10,000 from the previous week’s level, which was revised up by 1,000. This is the lowest level for initial claims since December 6, 1969, when it was 202,000. According to the Department of Labor, the advance rate for insured unemployment claims remained at 1.2% for the week ended March 23. The advance number of those receiving unemployment insurance benefits during the week ended March 23 was 1,717,000, a decrease of 38,000 from the prior week’s level, which was revised down by 1,000.

Eye on the Week Ahead

The latest information on inflationary trends is out this week with the release of the March reports on the Consumer Price Index and Producer Price Index. The CPI advanced 0.2% in February, while producer prices rose a mere 0.1%. Neither index is expected to advance significantly as inflationary pressures remain lukewarm through the first quarter of 2019.

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

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Quarterly Market Review – January – March 2019

The Markets (first quarter through March 29, 2019)

Following a tumultuous close to 2018, stocks enjoyed a robust January. Positive feedback from ongoing negotiations between the United States and China, coupled with strong job growth, low inflation, and stable interest rates, helped fuel investor confidence that pushed the major benchmark indexes to levels not seen in 30 years — despite a partial government work stoppage. Each of the indexes listed here posted notable gains, led by the small-cap Russell 2000, followed by the Nasdaq, S&P 500, Global Dow, and the Dow.

Stocks continued to climb in February, albeit not at the breakneck pace of the previous month. Corporate earnings reports were generally positive, and trade talks between the United States and China continued with no deal being reached, but signs of a favorable resolution in sight. The partial government shutdown ended at the end of January. The Federal Open Market Committee indicated that it was inclined to refrain from increasing the federal funds target interest rate range for the foreseeable future. Investors continued to push stocks higher. The Russell 2000 again led the way for February, increasing its value by over 16% over the first two months of 2019. Of the indexes listed here, only the Global Dow failed to gain at least 3.0% (or very close to it) by the end of February.

March saw stock values fluctuate on a fairly regular basis throughout the month. The large caps of the Dow posted minimal end-of-month gains, while the Russell 2000, which had been riding a solid wave of gains during the first two months of the year, took a bit of a dive in March, falling over 2.20% from its February closing value. The Global Dow moved ever so slightly down by the end of March. Only the Nasdaq and S&P 500 posted notable gains for the month.

Nevertheless, the first quarter of 2019 proved to be a positive one for stocks. Each of the benchmark indexes listed here closed the quarter with gains of more than 10% (except for the Global Dow), kicking the year off on very solid footing. Despite signs of a weakening global economy and low inflation, news that the Fed is backing off its plan to increase interest rates helped quell investors’ concerns. Both the technology and energy sectors enjoyed a strong first quarter. By the close of trading on February 28, the price of crude oil (WTI) was $57.26 per barrel, up from the January 31 price of $53.95 per barrel. The national average retail regular gasoline price was $2.623 per gallon on March 25, up from the February 25 selling price of $2.390 but $0.025 lower than a year ago. The price of gold dipped by the end of February, falling to $1,314.40 by close of business on the 28th, down from $1,325.70 at the end of January.

Market/Index 2018 Close As of March 29 Monthly Change Quarterly Change YTD Change
DJIA 23327.46 25928.68 0.05% 11.15% 11.15%
NASDAQ 6635.28 7729.32 2.61% 16.49% 16.49%
S&P 500 2506.85 2834.40 1.79% 13.07% 13.07%
Russell 2000 1348.56 1539.74 -2.27% 14.18% 14.18%
Global Dow 2736.74 3000.81 -0.01% 9.65% 9.65%
Fed. Funds 2.25%-2.50% 2.25%-2.50% 0 bps 0 bps 0 bps
10-year Treasuries 2.68% 2.40% -31 bps -28 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.

Latest Economic Reports

  • Employment: Total employment rose by only 20,000 in February after adding 311,000 new jobs (revised) in January. The average monthly job gain in 2018 was 223,000. Notable employment increases for February occurred in professional and business services (42,000) and health care (21,000). Employment in construction declined by 31,000 in February, partially offsetting an increase of 53,000 in January. The unemployment rate declined by 0.2 percentage point to 3.8% in February, and the number of unemployed persons decreased 300,000 to 6.2 million. Among the unemployed, the number of job losers and persons who completed temporary jobs (including people on temporary layoff) declined by 225,000. This decline reflects, in part, the return of federal workers who were furloughed in January due to the partial government shutdown. The labor participation rate was unchanged at 63.2% in February, as was the employment-population ratio (60.7%). The average workweek fell by 0.1 hour to 34.4 hours for February. Average hourly earnings increased by $0.11 to $27.66. Over the last 12 months ended in February, average hourly earnings have risen 3.4%.
  • FOMC/interest rates: Following its last meeting in March, the Federal Open Market Committee did not increase the federal funds target rate. The Committee’s report was dovish, noting that economic growth appeared to be slowing, as were business and consumer spending. No rate increases are projected for the year, although that could change. The FOMC does not meet again until the end of April, with its report issued on May 1.
  • GDP/budget: The third and final estimate of the fourth-quarter gross domestic product showed the economy grew at an annualized rate of 2.2%. The GDP expanded at a rate of 3.4% in the third quarter. For 2018, the GDP advanced at a rate of 2.9%. Of note, consumer spending (personal consumption expenditures) rose by 2.5% in the fourth quarter, and 2.6% for the year. Also of note, business investment rose 5.4% for nonresidential fixed investment. On the other hand, residential investment was weak, falling by 4.7%. The federal budget deficit was $234 billion in February after enjoying an $8.7 billion surplus in January. Through the first four months of fiscal year 2019, the government deficit is $544.2 billion. Over the same period for fiscal year 2018, the deficit was $391.0 billion.
  • Inflation/consumer spending: The report on consumer income and spending, one that is favored by the Federal Reserve as an inflation indicator, showed personal income decreased 0.1% in January but increased 0.2% in February, while it decreased 0.1% in January (the latest report has income and expenditures for January and only income for February). Disposable (after-tax) income fell 0.2% in January, but increased 0.2% in February. Consumer spending (personal consumption expenditures) decreased 0.1% in January, after plummeting 0.5% the previous month.
  • The Consumer Price Index increased 0.2% in February after being unchanged in January. Over the previous 12 months, the CPI rose 1.5%. Core prices, which exclude food and energy, climbed 0.1% for the month after advancing 0.2% in January. Core prices were up 2.1% over the previous 12 months.
  • According to the Producer Price Index, the prices companies received for goods and services inched up 0.1% in February after falling 0.1% in January. A 1.8% increase in energy prices pushed goods prices 0.4% higher in February. Producer prices increased 1.9% over the 12 months ended in February.
  • Housing: Following a mundane 2018, it’s taken the housing sector some time to pick up steam in 2019. Fortunately, February may be the month where sales pick up the pace. Sales of existing homes vaulted 11.8% in February after plunging 1.2% in January. Year-over-year, existing home sales remain down 1.8%. The February median price for existing homes was $249,500, up from $247,500 in January. Existing home prices were up 3.6% from February 2018. Total housing inventory for existing homes for sale in February increased to 1.63 million, up from 1.59 million existing homes available for sale the prior month. Sales of new homes also improved in February. Sales of new single-family houses in February were 4.9% higher than January’s rate, and 0.6% above the February 2018 estimate. The median sales price of new houses sold in February was $315,300 ($303,900 in January). The average sales price was $379,600 ($358,000 in January). Inventory was at a supply of 6.1 months (6.5 months in January).
  • Manufacturing: The manufacturing sector remained somewhat stagnant in February, as industrial production edged up 0.1% after falling 0.4% in January. In February, manufacturing production dropped 0.4% for its second monthly decline, although manufacturing output is 1.0% above its year-earlier level. Orders for durable goods increased 0.4% in January — the latest figures from the Census Bureau (again, due to the government shutdown). Transportation led much of the increase, as new orders excluding transportation fell 0.1% in January. Shipments of manufactured durable goods decreased for the third consecutive month in January, falling 0.5% from the prior month.
  • Imports and exports: The latest information on international trade in goods and services, out March 27, is for January. For that month, the goods and services deficit was $51.1 billion, down $8.8 billion from December’s figures. January’s exports were $1.9 billion more than December exports. Imports were $6.8 billion less than December imports. Compared to January 2018, the goods and services deficit decreased $1.9 billion, or 3.7%.
  • International markets: In Great Britain, Prime Minister Theresa May was unable to gain parliamentary approval of the exit deal she negotiated with the European Union. Parliament could do no better as it failed to find consensus on any kind of Brexit plan. The European Union agreed to extend the deadline for a deal to April 12, with the proviso that a further extension would be possible only if the United Kingdom agreed to hold European election on May 23, which Prime Minister May does not wish to do. The eurozone’s fourth-quarter GDP advanced at an annual rate of 0.2%, dragged down by sluggish consumer spending. The negotiations between the United States and China continue to drag on. Apparently, the two sides are trying to come up with a plan that provides increased U.S. exports to China, greater access to American companies, and added protection of intellectual property.
  • Consumer confidence: The Conference Board Consumer Confidence Index® dropped from 131.4 in February to 124.1 in March. Consumers expressed growing doubt over the labor market following the latest jobs report (see above). The Present Situation Index, which gauges how consumers feel about current business and labor market conditions, declined in March from 172.8 to 160.6. Consumers’ outlook for income, business, and labor market conditions over the short term also fell.

Eye on the Month Ahead

At the close of February, there was guarded optimism that a trade accord between the United States and China would come to fruition. As we leave March, negotiations are still ongoing with no real signs of progress being made. In any case, April may bring with it a heartier employment report while there’s hope that the residential sector will continue to advance. A big unknown heading into April is the aftermath of the Brexit saga and its impact on the global economy.

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What I’m Watching This Week – 1 April 2019

The Markets (as of market close March 29, 2019)

Stocks rebounded last week to close the final week of March and the first quarter of 2019 in the black. Each of the benchmark indexes listed here gained over 1.0% for the week, except the Global Dow, which inched ahead less than 0.2%. Year-to-date, the tech-heavy Nasdaq leads the way, followed by the small caps of the Russell 2000, the S&P 500, the Dow, and the Global Dow. Technology shares jumped, as did energy stocks, on the heels of rising oil prices. While stock prices rose, long-term bond yields fell (yields fall as bond prices rise) as investors’ demand pushed bond prices higher.

Oil prices climbed higher last week, closing at $60.19 per barrel by late Friday, up from the prior week’s closing price of $58.97 per barrel. The price of gold (COMEX) fell for the first time in several weeks, closing at $1,297.00 by last Friday evening, down from the prior week’s price of $1,313.40. The national average retail regular gasoline price was $2.623 per gallon on March 25, 2019, $0.075 higher than the prior week’s price but $0.025 less than a year ago.

Market/Index 2018 Close Prior Week As of 3/29 Weekly Change YTD Change
DJIA 23327.46 25502.32 25928.68 1.67% 11.15%
Nasdaq 6635.28 7642.67 7729.32 1.13% 16.49%
S&P 500 2506.85 2800.71 2834.40 1.20% 13.07%
Russell 2000 1348.56 1505.92 1539.74 2.25% 14.18%
Global Dow 2736.74 2995.76 3000.81 0.17% 9.65%
Fed. Funds target rate 2.25%-2.50% 2.25%-2.50% 2.25%-2.50% 0 bps 0 bps
10-year Treasuries 2.68% 2.44% 2.40% -4 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 Economic Headlines

  • The economy slowed at the end of last year. The third and final estimate of the gross domestic product for the fourth quarter of 2018 showed the economy grew at an annual rate of 2.2%. The third-quarter GDP advanced by 3.4%. Consumer spending, business investment, and state and local government spending all slowed during the fourth quarter. Net income generated in the production of goods and services, as measured by gross domestic income, increased 1.7% in the fourth quarter, compared with an increase of 4.6% in the third quarter. The average of GDP and GDI, a supplemental measure of U.S. economic activity that equally weights GDP and GDI, increased 1.9% in the fourth quarter, compared with an increase of 4.0% in the third quarter. After-tax corporate profits fell 1.7% in the fourth quarter — the first such decline since 2017. For 2018, the GDP increased 2.9% (2.2% in 2017).
  • The latest report on consumer income and spending (personal income and outlays) combines estimates for January and February, due to the partial government shutdown. February’s estimates account only for income — information on outlays will be available with April’s report. That said, for January, consumer income fell 0.1% and disposable (after-tax) income dropped 0.2%. Consumer spending increased only 0.1%. The prices consumers paid for goods and services (personal consumption price index) fell 0.1%. In February, personal income increased 0.2%, as did disposable personal income.
  • New home sales advanced in February, climbing 4.9% over January’s estimate. The median sales price of new houses sold in February was $315,300. The average sales price was $379,600. The estimate of new houses for sale at the end of February was 340,000. This represents a supply of 6.1 months at the current sales rate.
  • Still trying to catch up from the temporary government shutdown, the latest information on housing starts is for February. According to the Census Bureau, housing starts fell by 8.7% in February from January. Building permits were also down, falling 1.6%, although new home completions were up a solid 4.5% in February. Cold and stormy weather played a part in February’s figures, which are expected to improve in March.
  • The latest information from the Bureau of Economic Analysis on international trade is also a bit dated. Nevertheless, for January, the trade deficit for goods and services was $51.1 billion — down $8.8 billion, or 14.6%, from the December deficit. Year-over-year, the goods and services deficit decreased $1.9 billion, or 3.7%, from January 2018. Of interest, the trade-in-goods deficit with China decreased $5.5 billion to $33.2 billion; the balance with Canada had a $1.4 billion surplus; and the deficit with the European Union was $13.1 billion.
  • For the week ended March 23, there were 211,000 new claims for unemployment insurance, a decrease of 5,000 from the previous week’s level, which was revised down by 5,000. According to the Department of Labor, the advance rate for insured unemployment claims remained at 1.2% for the week ended March 16. The advance number of those receiving unemployment insurance benefits during the week ended March 16 was 1,756,000, an increase of 13,000 from the prior week’s level, which was revised down by 7,000.

Eye on the Week Ahead

There are plenty of important economic reports on tap this week, led by March’s employment figures. Job gains were moderate in February, and some experts expect March to show a sizable boost in new hires. Also, manufacturing and industrial production reports are available this week, particularly the February figures for durable goods orders.

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What I’m Watching This Week – 25 March 2019

The Markets (as of market close March 22, 2019)

Last week started well for investors as stock indexes continued to climb on the heels of the prior week’s robust performance. However, reports of a weakening global economy prompted a sell-off last Friday, plunging each of the benchmark indexes listed here lower. With a pronouncement from the Federal Reserve that it is hesitant to raise interest rates for fear of slowing domestic economic growth further, investors sold stocks and sought long-term bonds, pushing yields lower (as bond prices rise, yields fall). Last Friday’s manufacturing report for the eurozone showed industrial output sank, particularly in Germany, as its purchasing manager’s index fell to its lowest rate in several years. Each of the indexes listed here posted losses, led by the small caps of the Russell 2000, which fell more than 3.0%. Year-to-date, the Nasdaq is comfortably in the black at over 15%, ahead of the S&P 500, Russell 2000, Global Dow, and the Dow.

Oil prices inched higher last week, closing at $58.97 per barrel by late Friday, up from the prior week’s closing price of $58.38 per barrel. The price of gold (COMEX) rose again last week, closing at $1,313.40 by last Friday evening, up from the prior week’s price of $1,302.20. The national average retail regular gasoline price was $2.548 per gallon on March 18, 2019, $0.077 higher than the prior week’s price but $0.050 less than a year ago.

Market/Index 2018 Close Prior Week As of 3/22 Weekly Change YTD Change
DJIA 23327.46 25848.87 25502.32 -1.34% 9.32%
Nasdaq 6635.28 7688.53 7642.67 -0.60% 15.18%
S&P 500 2506.85 2822.48 2800.71 -0.77% 11.72%
Russell 2000 1348.56 1553.54 1505.92 -3.07% 11.67%
Global Dow 2736.74 3022.78 2995.76 -0.89% 9.46%
Fed. Funds target rate 2.25%-2.50% 2.25%-2.50% 2.25%-2.50% 0 bps 0 bps
10-year Treasuries 2.68% 2.58% 2.44% -14 bps -24 bps

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

Last Week’s Economic Headlines

  • The Federal Open Market Committee maintained the federal funds rate at its current range of 2.25%-2.50%, following the Committee’s meeting last week. According to the FOMC statement, the labor market remains strong, but growth of economic activity has slowed in the fourth quarter. In addition, recent indicators point to slower growth of household spending and business fixed investment in the first quarter of 2019. On a 12-month basis, overall inflation has declined, largely as a result of lower energy prices; inflation for items other than food and energy remains near the Committee’s 2% objective. As to the timing of future interest rate increases, the Committee will be patient in light of global economic and financial developments and muted inflation pressures. There are no rate hikes projected this year unless circumstances change dramatically enough to warrant an increase.
  • Finally, good news from the housing sector as the National Association of Realtors® reported that existing home sales enjoyed their largest month-over-month gain since December 2015, when sales expanded by 11.8% in February. Sales of single-family existing homes rose by 13.3% for the month. The median existing-home price in February was $249,500, up 3.6% from February 2018 ($240,800). Sales cut into the inventory of available existing homes for sale, which fell from a 3.9-month supply in January to a supply of 3.5 months in February.
  • The government deficit jumped to $234 billion in February. January saw a government budget surplus of $8.7 billion. Government receipts were significantly lower in February compared to January ($167.3 billion to $340 billion), while government outlays rose from $331 billion in January to $401 billion last month. Through the first five months of the fiscal year, the deficit sits at $544 billion — $153 billion higher than the comparable period last fiscal year.
  • For the week ended March 16, there were 221,000 new claims for unemployment insurance, a decrease of 9,000 from the previous week’s level, which was revised up by 1,000. According to the Department of Labor, the advance rate for insured unemployment claims remained at 1.2% for the week ended March 9. The advance number of those receiving unemployment insurance benefits during the week ended March 9 was 1,750,000, a decrease of 27,000 from the prior week’s level, which was revised up 1,000.

Eye on the Week Ahead

The end of the month and first quarter of 2019 is upon us. The second estimate of the fourth-quarter gross domestic product isn’t expected to change much from its initial estimate, which had the GDP increase by 2.6%. The housing sector is also front and center with the latest reports on housing starts and new home sales.

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What I’m Watching This Week – 18 March 2019

The Markets (as of market close March 15, 2019)

Tech shares were bullish last week, leading the way for what turned out to be a very strong performance in the market. The tech-heavy Nasdaq outperformed each of the other benchmark indexes listed here and leads in overall year-to-date performance. Bond yields sank to their lowest level since January as prices soared on weak inflation reports (bond yields fall as bond prices rise). Signs that global and domestic economic growth may be slowing, coupled with lagging inflation, may be giving investors confidence that U.S. and foreign central banks will temper a push to increase interest rates.

Oil prices climbed higher last week, closing at $58.38 per barrel by late Friday, up from the prior week’s closing price of $55.99 per barrel. The price of gold (COMEX) rose again last week, closing at $1,302.20 by last Friday evening, up from the prior week’s price of $1,298.70. The national average retail regular gasoline price was $2.471 per gallon on March 11, 2019, $0.049 higher than the prior week’s price but $0.088 less than a year ago.

Market/Index 2018 Close Prior Week As of 3/15 Weekly Change YTD Change
DJIA 23327.46 25450.24 25848.87 1.57% 10.81%
Nasdaq 6635.28 7408.14 7688.53 3.78% 15.87%
S&P 500 2506.85 2743.07 2822.48 2.89% 12.59%
Russell 2000 1348.56 1521.88 1553.54 2.08% 15.20%
Global Dow 2736.74 2940.82 3022.78 2.79% 10.45%
Fed. Funds target rate 2.25%-2.50% 2.25%-2.50% 2.25%-2.50% 0 bps 0 bps
10-year Treasuries 2.68% 2.63% 2.58% -5 bps -10 bps

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

Last Week’s Economic Headlines

  • Is economic growth slowing? Some indicators may be pointing in that direction. The Consumer Price Index increased only 0.2% in February after being unchanged the prior month. Excluding the volatile food and energy groups, consumer prices advanced just 0.1%. Over the last 12 months, the CPI has increased a relatively scant 1.5%. The index less food and energy rose 2.1% over the last 12 months, a slightly smaller figure than the 2.2% increase for the period ended in January. The latest CPI, coupled with the February producer price report and the January retail sales figures, suggest inflationary pressures are back to being relatively flat.
  • Prices for goods at the retail level increased 0.2% in January following a 1.6% drop in December. For the 12 months ended in January, retail prices are up 2.3%. Excluding auto sales, which were very weak in January, retail sales advanced 0.9% over December. Sales, excluding motor vehicles and gas stations, experienced a monthly gain of 1.2% in January. Online trade climbed 2.6% in January and is up 7.3% from a year ago. While January’s data is positive, it doesn’t come close to recouping December’s drop in retail prices — the largest in almost 10 years.
  • The Producer Price Index edged up 0.1% in February after falling 0.1% in both January and December. For the 12 months ended in February, producer prices are up 1.9%. Prices producers received for goods increased 0.4% in February, led by energy prices, which rose 1.8%. Prices for goods, less food, and energy, inched up 0.1%. Prices for services were unchanged in February after a 0.3% hike in January.
  • Sales of newly constructed homes continue to lag. According to the latest report from the Census Bureau, sales of new single-family homes in January were 6.9% below December’s rate and 4.1% under the January 2018 estimate. The median sales price of new houses sold in January was $317,200. The average sales price was $373,100. There was a 6.6-month supply of new houses for sale across the country in January.
  • The manufacturing sector posted some positive data in January. New orders for durable goods increased 0.4% over December’s figures. This is the third consecutive increase in new orders, following a 1.3% jump in December. A 1.2% advance in transportation equipment, which has been up five of the last six months, drove the increase. Excluding transportation, new orders for durable goods slipped 0.1%. Shipments of durable goods fell 0.5% in January. This increase, up three consecutive months, followed a 1.3% December increase. Inventories of manufactured durable goods in January, up 24 of the last 25 months, increased 0.4%. This followed a 0.3% December advance. Nondefense new orders for capital goods in January increased 2.5%, shipments declined 1.6%, and inventories increased 0.5%.
  • The number of job openings increased by roughly 100,000 in January compared to December. Job openings increased in a number of industries, with the largest increases in wholesale trade (91,000), real estate and rental and leasing (60,000), and information (42,000). The job openings level decreased in other services (98,000), retail trade (97,000), and arts, entertainment, and recreation (40,000). January saw about 5.8 million new hires and 5.6 million total separations (including quits and layoffs).
  • Industrial production edged up 0.1% in February, according to the Federal Reserve. Manufacturing production fell 0.4% in February for its second consecutive monthly decline. Pushing the industrial production index higher were utilities, which rose 3.7%, and mining, which increased 0.3%. Overall, industrial production was 3.5% higher in February than it was a year earlier.
  • Prices for both imports and exports rose 0.6%, respectively, in February. The rise in import prices was largely driven by higher fuel prices. Despite the February increase, import prices declined 1.3% from February 2018 to February 2019. Over the same 12-month period, export prices have risen 0.3%.
  • For the week ended March 9, there were 229,000 new claims for unemployment insurance, an increase of 6,000 from the previous week’s level. According to the Department of Labor, the advance rate for insured unemployment claims remained at 1.2% for the week ended March 2. The advance number of those receiving unemployment insurance benefits during the week ended March 2 was 1,776,000, an increase of 18,000 from the prior week’s level.

Eye on the Week Ahead

The Federal Open Market Committee meets this week for the first time since January. Interest rates haven’t changed since last December, so it’s possible the Committee hikes rates 25 basis points following its meeting.

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What I’m Watching This Week – 11 March 2019

The Markets (as of market close March 8, 2019)

The benchmark indexes listed here suffered their worst showing last week since December. Hardest hit was the Russell 2000, which fell over 4.0%. Unsettling global economic news had investors scrambling for cover from stocks. The prospects of a trade deal with China suddenly took a turn for the worse after several weeks of promising rhetoric. Adding to the turmoil was last Thursday’s decision by the European Central Bank to offer additional stimulus to spur economic activity in the European Union. In addition, Chinese exports fell and U.S. job growth was marginal at best in February. All of these factors led to a fear that the economy may be slowing. While stock prices dropped, long-term bond prices rose, as did the price of gold.

Oil prices inched higher last week, closing at $55.99 per barrel by late Friday, up from the prior week’s closing price of $55.74 per barrel. The price of gold (COMEX) climbed higher last week, closing at $1,298.70 by last Friday evening, up from the prior week’s price of $1,294.20. The national average retail regular gasoline price was $2.422 per gallon on March 4, 2019, $0.032 higher than the prior week’s price but $0.138 less than a year ago.

Market/Index 2018 Close Prior Week As of 3/8 Weekly Change YTD Change
DJIA 23327.46 26026.32 25450.24 -2.21% 9.10%
Nasdaq 6635.28 7595.35 7408.14 -2.46% 11.65%
S&P 500 2506.85 2803.69 2743.07 -2.16% 9.42%
Russell 2000 1348.56 1589.64 1521.88 -4.26% 12.85%
Global Dow 2736.74 3006.41 2940.82 -2.18% 7.46%
Fed. Funds target rate 2.25%-2.50% 2.25%-2.50% 2.25%-2.50% 0 bps 0 bps
10-year Treasuries 2.68% 2.75% 2.63% -12 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 Economic Headlines

Note: Due to the government shutdown, some affected federal agencies are providing reports for December, while others have information available for January. These monthly reporting differences are noted below.

  • Total employment gained only 20,000 new hires in February, according to the latest report from the Bureau of Labor Statistics. There were 311,000 new hires in January. The unemployment rate fell 0.2 percentage point to 3.8% as the number of unemployed persons decreased by 300,000 to 6.2 million. Notable job gains occurred in health care (21,000) and wholesale trade (11,000), while construction lost 31,000 workers. The labor force participation rate held at 63.2% in February, the same as January. The employment-population ratio, at 60.7%, was unchanged over the month. The average workweek decreased by 0.1 hour to 34.4 hours in February. Average hourly earnings rose by $0.11 to $27.66, following a $0.02 gain in January. Over the year, average hourly earnings have increased by 3.4%.
  • For January, the government budget enjoyed an $8.7 billion surplus. For the first four months of the fiscal year, the government is running at a $310.3 billion deficit ($175.7 billion over the same period last fiscal year). Government receipts totaled just shy of $340 billion in January. Individual income taxes provided the bulk of receipts for the month. January expenditures were $331 billion, led by Social Security payments ($86 billion) and national defense outlays ($52 billion). Also of note, for the current fiscal year to date, the government has received about $570 billion in individual income taxes ($603 billion in fiscal 2018) compared to $60 billion in corporation income taxes ($76 billion in fiscal year 2018).
  • Housing starts gained some ground in January, jumping up 18.6% over December’s paltry total. Home completions climbed 27.6% from December and building permits increased by 1.4% in January.
  • This week’s report from the Census Bureau on new residential sales covers December. Next week’s report will be for January. In December, sales of new single-family homes increased by 3.7% over November’s total. New home sales are still 2.4% below their December 2017 rate. The median sales price of new houses sold in December 2018 was $318,600 ($303,500 in November). The average sales price was $377,000 ($357,600 in November). Available inventory increased to a supply of 6.6 months — about the same as November.
  • The international trade deficit for goods and services was $59.8 billion in December, up $9.5 billion from November. December exports were $3.9 billion less than November exports, and imports in December were $5.5 billion more than the prior month. For 2018, the goods and services deficit increased $68.8 billion, or 12.5%, from 2017. Exports increased $148.9 billion, or 6.3%. Imports increased $217.7 billion, or 7.5%. Final figures for 2018 showed trade surpluses with some countries, including Hong Kong ($31.1 billion), Netherlands ($24.8 billion), Australia ($15.2 billion), and Belgium ($14.2 billion). Trade deficits were recorded with other trade partners, with the largest including China ($419.2 billion), European Union ($169.3 billion), Mexico ($81.5 billion), Germany ($68.3 billion), and Japan ($67.6 billion).
  • Economic activity in the non-manufacturing (services) sector expanded in February, according to the latest Non-Manufacturing ISM® Report On Business®. Business activity and new orders grew over January. However, survey respondents noted that employment and prices fell in February.
  • For the week ended March 2, there were 223,000 new claims for unemployment insurance, a decrease of 3,000 from the previous week’s level, which was revised up by 1,000. According to the Department of Labor, the advance rate for insured unemployment claims dropped back to 1.2% for the week ended February 23. The advance number of those receiving unemployment insurance benefits during the week ended February 23 was 1,755,000, a decrease of 50,000 from the prior week’s level.

Eye on the Week Ahead

Government reporting agencies are playing a bit of “catch-up” with economic data following the partial government shutdown. The Consumer Price Index is for February (current), while the retail sales report is for January (delayed). As such, it’s a bit harder to compare current consumer spending with retail sales. Also available this week is the first of two reports on new home sales. This week’s report covers December, while next week’s information will be for January.

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What I’m Watching This Week – 4 March 2019

The Markets (as of market close March 1, 2019)

The momentum stocks have enjoyed since the beginning of the year waned some last week as investors took time to consider economic and trade developments. The tech-heavy Nasdaq gained the most, up almost 1.0%. At the other end of the spectrum was the Global Dow, which fell 0.15%. In between, the Dow and the Russell 2000 almost broke even, while the S&P 500 pushed ahead by about 0.4%. For the year, the major indexes listed here are still doing quite well. The Dow and S&P 500 are off to their best start to a year in over 30 years, while the Nasdaq has enjoyed 10 straight weeks of positive returns.

Oil prices fell for the first time in several weeks, closing at $55.74 per barrel by late Friday, down from the prior week’s closing price of $57.16 per barrel. The price of gold (COMEX) dove last week, sinking to $1,294.20 by last Friday evening, down from the prior week’s price of $1,330.20. The national average retail regular gasoline price was $2.390 per gallon on February 25, 2019, $0.073 higher than the prior week’s price but $0.158 less than a year ago.

Market/Index 2018 Close Prior Week As of 3/1 Weekly Change YTD Change
DJIA 23327.46 26031.81 26026.32 -0.02% 11.57%
Nasdaq 6635.28 7527.54 7595.35 0.90% 14.47%
S&P 500 2506.85 2792.67 2803.69 0.39% 11.84%
Russell 2000 1348.56 1590.06 1589.64 -0.03% 17.88%
Global Dow 2736.74 3010.94 3006.41 -0.15% 9.85%
Fed. Funds target rate 2.25%-2.50% 2.25%-2.50% 2.25%-2.50% 0 bps 0 bps
10-year Treasuries 2.68% 2.65% 2.75% 10 bps 7 bps

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

Last Week’s Economic Headlines

Note: Due to the government shutdown, some affected federal agencies are providing reports for December, while others have information available for January. These monthly reporting differences are noted below.

  • According to the initial estimate, the gross domestic product increased at an annual rate of 2.6% in the fourth quarter of 2018. The third-quarter GDP increased 3.4%. Pulling the GDP lower in the fourth quarter were decelerations in private inventory investment, personal consumption expenditures, and federal, state, and local government spending. On the plus side, exports and nonresidential (business) fixed investment increased from the third quarter. Imports, a negative in the calculation of GDP, fell in the fourth quarter, which helped push the GDP rate higher.
  • The personal income and outlays report is favored by the Federal Reserve as an inflation indicator. Due to the recent partial government shutdown, the current report combines estimates for income and outlays for December, but only income estimates for January. Consumer income rose 1.0% in December but fell 0.1% in January. Disposable, or after-tax, income dropped 0.2% in January after vaulting 1.1% in December. Wages and salaries climbed 0.5% in December and 0.3% in January. On the other hand, personal interest income advanced 0.6% in December but plummeted 1.3% in January. Dividend income rose 7.2% in December but fell 6.3% in January. Consumer spending decreased 0.5% in December. Consumers spent less on both goods and services in December. Within goods, recreational goods and vehicles was the leading contributor to the decrease. Within services, the largest contributor to the decrease was spending for household electricity and gas.
  • The latest report on new home construction from the Census Bureau is for December. Building permits were 0.3% higher over the last month of 2018 compared to November. However, single-family permits in December were 2.2% below the November figure. Home construction was also lagging in December. Housing starts for the month were 11.2% lower than November’s total. Single-family starts were 6.7% below November’s rate. Housing completions were 2.7% off in December, and single-family home completions were only 0.1% higher than in November.
  • To facilitate a faster return to the normal processing and release schedule following the lapse in funding, there will not be an advance report on international trade in goods issued for January or February 2019. The latest report is for December. The international trade deficit was $79.5 billion in December, up $9.0 billion from $70.5 billion in November. Exports of goods for December were $135.7 billion, $4.0 billion less than November exports. Imports of goods for December were $215.2 billion, $5.0 billion more than November imports.
  • Survey respondents to the IHS Markit final U.S. Manufacturing Purchasing Managers’ Index™ (PMI™) survey indicated that manufacturing slowed noticeably in February. The index was 53.0 for the month, down from 54.9 in January, slipping to the lowest rate since August 2017. While production remained steady, new orders fell to their lowest rate since last June.
  • Following the Markit report, the Institute for Supply Management® (ISM®) also noted activity slowed in the manufacturing sector in February with its PMI® falling 2.4 percentage points from the January reading. New orders, production, employment, and prices all decreased in February.
  • For the week ended February 23, there were 225,000 new claims for unemployment insurance, an increase of 8,000 from the previous week’s level, which was revised up by 1,000. According to the Department of Labor, the advance rate for insured unemployment claims rose 0.1% to 1.3% for the week ended February 16. The advance number of those receiving unemployment insurance benefits during the week ended February 16 was 1,805,000, an increase of 79,000 from the prior week’s level, which was revised up by 1,000.

Eye on the Week Ahead

The employment figures for February are out this week. Over 300,000 new jobs were added in January, so a reduction is expected for February. Wage inflation has been tepid for the most part, rising a little over 3.0% in 2018.

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