Tag: market volatility

The Markets (as of market close March 6, 2020)

While it apparently took a day to take effect, the Fed’s decision to reduce the target range for the federal funds rate by 50 basis points quelled the massive rush to sell stocks and brought some investors back to the market. Following losses earlier in the week, the benchmark indexes surged with the Dow gaining more than 700 points last Wednesday. Unfortunately, the wild ride continued into Thursday with stocks losing most of the prior day’s gains. A final rally just before the close of the market on Friday was enough to push a few of the benchmark indexes listed here moderately higher. The Dow, S&P 500, and Nasdaq were the only indexes to post gains over their respective prior week’s closing values. The Russell 2000 and Global Dow couldn’t rally enough to finish in the black.

Money poured from stocks to long-term bonds, pushing prices higher and sending yields plummeting. The yield on 10-year Treasuries dropped below 1.0% for the first time ever last Tuesday, only to continue to fall to record lows each day thereafter until reaching 0.70% by the close of trading on Friday.

Oil prices fell to their lowest point in many years last week, closing at $41.56 per barrel by late Friday afternoon, down from the prior week’s price of $45.19. Russia’s apparent refusal to cut production greatly contributed to the drop in oil prices. The price of gold (COMEX) shot higher last week, closing at $1,674.30 by late Friday afternoon, up from the prior week’s price of $1,585.80. The national average retail regular gasoline price was $2.423 per gallon on March 2, 2020, $0.043 lower than the prior week’s price but $0.001 more than a year ago.

Market/Index	2019 Close	Prior Week	As of 3/6	Weekly Change	YTD Change
DJIA	28,538.44	25,409.36	25,864.78	1.79%	-9.37%
Nasdaq	8,972.60	8,567.37	8,575.62	0.10%	-4.42%
S&P 500	3,230.78	2,954.22	2,972.37	0.61%	-8.00%
Russell 2000	1,668.47	1,476.43	1,449.22	-1.84%	-13.14%
Global Dow	3,251.24	2,900.01	2,883.29	-0.58%	-11.32%
Fed. Funds target rate	1.50%-1.75%	1.50%-1.75%	1.00%-1.25%	-50 bps	-50 bps
10-year Treasuries	1.91%	1.12%	0.70%	-42 bps	-121 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 News

• The Federal Reserve cut interest rates by half a percent last Tuesday in an emergency move. In making the adjustment, the Federal Open Market Committee indicated that while the economy remains strong, the coronavirus poses evolving risks to economic activity. The Committee indicated that it is closely monitoring developments and will consider further actions to support the economy. The Committee is not scheduled to meet until March 17. This emergency meeting and resulting rate cut are the first such actions since the financial crisis of 2008.
• Employment rose by a whopping 273,000 in February, with notable job gains occurring in health care and social assistance, food services and drinking places, government, construction, professional and technical services, and financial activities. The unemployment rate fell 0.1 percentage point to 3.5%. That rate has been either 3.6% or 3.5% since last October. The number of unemployed marginally decreased by 105,000 to 5.787 million. The employment participation rate remained at 63.4%. The employment-population ratio fell 0.1 percentage point to 61.1%. In February, average hourly earnings increased by $0.09 to $28.52. Over the past 12 months, average hourly earnings have increased by 3.0%. The average workweek rose by 0.1 hour to 34.4 hours in February.
• The goods and services trade deficit was $45.3 billion in January, down $3.3 billion from December’s revised figure. January exports were $208.6 billion, $0.9 billion less than December exports. January imports were $253.9 billion, $4.2 billion less than December imports. Of note, the goods trade deficit with Canada decreased $3.7 billion to $0.7 billion, the deficit with China shrunk $2.1 billion to $23.7 billion, and the deficit with Japan dropped $0.9 billion to $5.3 billion.
• According to the Manufacturing ISM® Report On Business®, manufacturing slowed in February. The purchasing managers’ index dropped 0.8 percentage point to 50.1% (a reading over 50% indicates growth, but at a slower rate) last month. New orders declined 2.2%, production fell 4 percentage points, new export orders decreased 2.1 percentage points, imports plummeted 8.7 percentage points, and inventories and prices receded 2.3 percentage points and 7.4 percentage points, respectively. On the other hand, backlog of orders rose 4.6 percentage points, employment marginally increased by 0.3 percentage point, and deliveries ramped up 4.4 percentage points.
• While not always the case, the IHS Markit final U.S. Manufacturing Purchasing Managers’ Index™ mirrored the ISM® survey with its purchasing managers’ index falling to 50.7 in February, down from January’s 51.9. According to the report, the health of the manufacturing sector was the weakest since last August.
• Although manufacturing slowed in February the services industry picked up steam, according to the Non-Manufacturing ISM® Report On Business®. The non-manufacturing index increased 1.8 percentage points in February, with new orders (+6.9 percentage points) driving the improvement. Employment increased 2.5 percentage points while prices and business activity fell 4.7 percentage points and 3.1 percentage points, respectively.
• For the week ended February 29, there were 216,000 claims for unemployment insurance, a decrease of 3,000 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 February 22. The advance number of those receiving unemployment insurance benefits during the week ended February 22 was 1,729,000, an increase of 7,000 from the prior week’s level, which was revised down by 2,000.

Eye on the Week Ahead

As the stock market continues to reel from the coronavirus, economic indicators bear watching as February’s information should begin to reflect the impact of the virus on the economy. Both consumer prices and producer prices are not expected to change much from their January totals, which edged marginally higher. Import and export prices in February could begin to show the effects of trade with China and other countries influenced by the virus.

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The Markets (as of market close February 28, 2020)

With a growing number of countries reporting new cases of the coronavirus, the obvious spread of this dreaded virus prompted a massive panic sell-off, the likes of which haven’t been seen since 2008. Investors’ fears of widespread economic tumult caused by the coronavirus were too much to ignore, despite last Friday’s statement from Fed chairman Jerome Powell that the central bank was prepared to cut rates if necessary when it meets in March. Crude oil prices fell by over $6 per barrel since the end of January. The 10-year Treasury note fell to a record low as money flowed into long-term bonds, pushing prices higher and yields lower.

By the close of trading on the last day of February, each of the benchmark indexes listed here sustained major losses, led by the Dow, which fell by more than 10.0%. The small-cap Russell 2000 dropped more than 8.50% for the month, followed by the S&P 500, the Global Dow, and the tech stocks of the Nasdaq. Year-to-date gains achieved in January and the first part of February were wiped out, with three of the benchmark indexes listed here trailing their 2019 closing values by double digits. The Russell 2000 fell by nearly 12.0%, followed by the Dow and the Global Dow, which lost close to 11.0%, respectively.

By the close of trading on February 28, the price of crude oil (WTI) was $45.19 per barrel, well below the January 31 price of $51.61 per barrel. The national average retail regular gasoline price was $2.466 per gallon on February 24, down from the January 27 selling price of $2.506 but $0.076 more than a year ago. The price of gold finished February at $1,585.80, slightly lower than its January closing value of $1,592.70.

Market/Index	2019 Close	Prior Month	As of February 28	Month Change	YTD Change
DJIA	28,538.44	28,256.03	25,409.36	-10.07%	-10.96%
Nasdaq	8,972.60	9,150.94	8,567.37	-6.38%	-4.52%
S&P 500	3,230.78	3,225.52	2,954.22	-8.41%	-8.56%
Russell 2000	1,668.47	1,614.06	1,476.43	-8.53%	-11.51%
Global Dow	3,251.24	3,161.86	2,900.01	-8.28%	-10.80%
Fed. Funds	1.50%-1.75%	1.50%-1.75%	1.50%-1.75%	0 bps	0 bps
10-year Treasuries	1.91%	1.52%	1.12%	-40 bps	-79 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: There were 225,000 new jobs added in January after gaining 145,000 in December. Notable job gains in January occurred in construction, transportation, and health care. The unemployment rate inched up 0.01 percentage point to 3.6% for the month as the number of unemployed persons rose by 140,000 to 5.9 million. In December, average hourly earnings for all employees rose by $0.07 to $28.44. Average hourly earnings increased by 3.1% over the last 12 months ended in January. The average workweek was unchanged at 34.3 hours in January. The labor participation rate for January was 63.4% (63.2% in December), while the employment-population ratio was 61.2% last month (61.0% in December).
• FOMC/interest rates: The Federal Open Market Committee did not meet in February. The next time the Committee meets is mid-March. Following its latest meeting in January, the FOMC decided to maintain the target range for the federal funds rate at 1.50%-1.75%. The rate hasn’t changed since it was decreased last October.
• GDP/budget: According to the second estimate for the fourth-quarter gross domestic product, the economy accelerated at an annualized rate of 2.1%, the same rate as in the third quarter. Consumer spending grew at a rate of 1.7% (3.2% in the third quarter), fixed investment fell 0.5% in the fourth quarter (-0.8% in the third quarter), and nonresidential fixed investment dropped 2.3% in the fourth quarter, the same rate as in the prior quarter. Consumer prices advanced at a rate of 1.3% in the fourth quarter, comparable to the third quarter (1.5%). The Treasury budget posted a deficit of $32.6 billion in January ($13.3 billion in December). Last January saw a budget surplus of $8.7 billion. Through the first four months of the 2020 fiscal year, the deficit sits at $389.2 billion, 25.4% greater than the deficit over the same period last fiscal year. Compared to the same period last year, government spending climbed 10.3%, far exceeding receipts, which rose 6.1%. Medicare expenditures jumped 23.3%, national defense outlays advanced 8.9%, and Social Security expenditures climbed 5.6%. On the income side of the ledger, income tax receipts are up 5.5% compared to the same four months last year, followed by employment and general retirement, which rose 5.7%.
• Inflation/consumer spending: According to the Personal Income and Outlays report for January, both pre- and post-tax personal income rose 0.6% for the month. Consumer spending also climbed 0.2% over December’s totals. Price inflation remained low, however, inching ahead 0.1% in January and 1.7% over the last 12 months. Consumer prices less food and energy also advanced 0.1% for the month and 1.6% since January 2018.
• The Consumer Price Index inched ahead 0.1% in January following a 0.2% bump in December. Year to date, consumer prices are up 2.5%. Increases in prices for shelter (which makes up the largest portion of overall consumer costs) climbed 0.3% in January. Energy prices, which increased 1.4% in December, receded 0.7% in January, reflecting a drop in gas prices.
• Prices producers receive for goods and services advanced 0.5% in January after edging up 0.2% in December. The index has increased 2.1% since last January. Producer prices less foods, energy, and trade services rose 0.5% in January (0.2% in December). Since January 2019, prices less foods, energy, and trade services moved up 1.7%. A drop in energy prices was more than offset by an advance in services.
• Housing: After climbing 3.6% in December, existing home sales fell 1.3% in January. Year over year, existing home sales are up 9.6% (10.8% for the 12 months ended in December). The median sales price for existing homes was $266,300 in January compared to $274,500 in December. Existing home prices were up 6.8% from January 2019. Total housing inventory at the end of January was 1.42 million, an increase from the December rate of 1.40 million units for sale. Sales of new single-family homes spiked in January, climbing 7.9% over December’s totals. Sales are 18.6% above the January 2019 estimate. The median sales price of new houses sold in January was $348,200 ($324,100 in December). The average sales price was $402,300 in January ($373,300 in December). Available inventory, at a 5.1-month supply, was slightly lower than December’s 5.5-month supply.
• Manufacturing: For the second consecutive month, industrial production declined, dropping 0.3% in January after falling 0.4% the prior month. Unseasonably warm weather held down the output of utilities and a major manufacturer significantly slowed production of civilian aircraft, both of which were prime factors in pushing industrial production downward. The index for manufacturing edged down 0.1% in January; excluding the production of aircraft and parts, factory output advanced 0.3%. The index for mining rose 1.2%. Following a spike in December, new orders for durable goods dropped 0.2% in January, declining for the second time over the last three months. For the year, new orders for durable goods are down 2.3%. Transportation equipment, down four of the last five months, drove the decrease, falling 2.2% in January. However, excluding transportation, new orders rose 0.9%. New orders for capital goods (manufactured assets used by businesses to produce consumer goods) jumped ahead 12.4% in January following a 6.2% tumble in December.
• Imports and exports: Import prices were unchanged in January after increasing 0.3% in December. In January, falling fuel prices offset increasing prices for nonfuel imports. Import prices advanced on a 12-month basis for the second consecutive month after not recording an over-the-year increase since the 12-month period ended in March 2019. Prices for import fuel declined 2.2% last month, marking the largest drop since fuel prices fell 4.2% in August. Excluding fuel, import prices rose 0.2% in January but are down 0.9% over the past year. Prices for exports advanced 0.7% in January, the largest monthly advance since export prices increased 0.7% in March. Prices for exports also advanced on a 12-month basis, increasing 0.5% in January. The rise in January was the first 12-month advance since export prices increased 0.2% for the year ended in April.
• The international trade in goods deficit was $65.5 billion in January, down from the $68.7 billion in December. Exports of goods for January fell 1.0% to $135.7 billion, $1.4 billion less than December exports. Imports of goods dropped 2.2% to $201.2 billion, $4.6 billion less than December imports.
• The latest information on international trade in goods and services, out February 5, is for December and shows that the goods and services trade deficit widened from $43.7 billion in November to $48.9 billion. December exports were $209.6 billion, $1.6 billion more than November exports. December imports were $258.5 billion, $6.8 billion more than November imports. The December increase in the goods and services deficit reflected an increase in the goods deficit of $5.1 billion and a decrease in the services surplus of $0.1 billion. For 2019, the goods and services deficit decreased $10.9 billion, or 1.7%, from 2018. Exports decreased $1.5 billion, or 0.1%. Imports decreased $12.5 billion, or 0.4%.
• International markets: Growing concerns over the spread of the coronavirus have rattled investors at home and abroad. European stock markets plunged on fears of negative economic impacts. Europe has seen outbreaks of the illness in Italy, Germany, France, Spain, and Great Britain. South Korea and Iran experienced a growing number of cases. Benchmark indexes such as the STOXX Europe 600, FTSE 100, and the DAX Performance Index (Germany’s benchmark index) have fallen noticeably since the end of January. Purchasing managers from several countries’ industries are warning of a slowdown in manufacturing. Japan’s gross domestic product showed that the economy contracted in the fourth quarter of 2019, with declines in consumer spending and investment. China’s GDP expanded at a rate of 6.0% in the fourth quarter and 6.1% for 2019 — the lowest figures in 29 years.
• Consumer confidence: The Conference Board Consumer Confidence Index® increased slightly in February following a moderate increase in January. The Present Situation Index — based on consumers’ assessment of current business and labor market conditions — decreased last month. However, the Expectations Index, which is based on consumers’ short-term outlook for income, business, and labor market conditions, increased in February.

Eye on the Month Ahead

The impact of the coronavirus has been reflected in some economic reports and definitely in the stock market. March marks the first meeting of the Federal Open Market Committee since the end of January. Interest rates were unchanged at that time,. However, the Fed has stated a willingness to cut rates if necessary due to the economic tumult caused by the coronavirus.

The Markets (as of market close February 28, 2020)

Panicked investors continued a major sell-off last week, pushing stocks to double-digit losses. Fears of a major global economic impact increased as the coronavirus continued to spread across multiple countries. By the end of last week, each of the major benchmark indexes listed here fell by more than 10%, headed by the Dow, which lost close to 12.5%. Following the Dow were the small caps of the Russell 2000, the S&P 500, the Nasdaq, and the Global Dow. Money flowed from stocks and into long-term bonds. The yield on 10-year Treasuries plummeted 35 basis points to 1.12% as bond prices soared. The price of oil was also hit hard, falling more than $8 per barrel by the end of last week.

Oil prices plunged last week, closing at $45.19 per barrel by late Friday afternoon, down from the prior week’s price of $53.35. The price of gold (COMEX) fell back last week, closing at $1,585.80 by late Friday afternoon, down from the prior week’s price of $1,646.10. The national average retail regular gasoline price was $2.466 per gallon on February 24, 2020, $0.038 higher than the prior week’s price and $0.076 more than a year ago.

Market/Index	2019 Close	Prior Week	As of 2/28	Weekly Change	YTD Change
DJIA	28,538.44	28,992.41	25,409.36	-12.36%	-10.96%
Nasdaq	8,972.60	9,576.59	8,567.37	-10.54%	-4.52%
S&P 500	3,230.78	3,337.75	2,954.22	-11.49%	-8.56%
Russell 2000	1,668.47	1,678.61	1,476.43	-12.04%	-11.51%
Global Dow	3,251.24	3,238.97	2,900.01	-10.47%	-10.80%
Fed. Funds target rate	1.50%-1.75%	1.50%-1.75%	1.50%-1.75%	0 bps	0 bps
10-year Treasuries	1.91%	1.47%	1.12%	-35 bps	-79 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 News

• There was no change in the growth of the economy in the fourth quarter as the second estimate mirrored the first, with the economy expanding at an annual rate of 2.1%. The third-quarter GDP also advanced 2.1%. The price index for gross domestic purchases increased 1.4% in the fourth quarter, the same increase as in the third quarter. The personal consumption price index increased 1.3%, compared with a third-quarter increase of 1.5%. Excluding food and energy prices, the PCE price index increased 1.2%, compared with an increase of 2.1% in the prior quarter.
• Inflationary pressures remained muted in January as prices for consumer goods and services inched up 0.1%. Over the last 12 months, the personal consumption price index is up 1.7%, well below the Fed’s target of 2.0%. Prices less food and energy also rose 0.1% in January and 1.6% for the year. Personal income advanced 0.6% in January (after-tax personal income also advanced 0.6%) and consumer spending climbed 0.2% for the month.
• Manufacturing continues to slide, down two of the last three months. New orders for durable goods fell 0.2% in January and are- rf down 2.2% over the last 12 months. Excluding transportation, new orders increased 0.9%. Excluding defense, new orders increased 3.6%. Transportation equipment, down four of the last five months, drove the decrease, falling 2.2%. Shipments of manufactured durable goods in January, down seven consecutive months, decreased 0.2%. On the plus side of this latest report, new orders for nondefense capital goods in January increased 12.4%. Capital goods are tangible assets produced by one manufacturer and used by another manufacturer or business to produce consumer goods.
• While sales of existing homes may have fallen in January, the same didn’t hold true for new home sales. According to the Census Bureau, sales of new single-family homes were 7.9% above the December rate and 18.6% higher than January 2019. The median sales price of new houses sold in January 2020 was $348,200, and the average sales price was $402,300 — both of which were higher than December’s respective sales prices. The estimate of new houses for sale at the end of January was 324,000, which represents a supply of 5.1 months at the current sales rate.
• The international trade in goods deficit was a little smaller in January compared to the prior month. At $65.5 billion, the deficit was $3.2 billion below December’s deficit figure. Exports were $1.4 billion less than December’s exports. Imports were $4.6 billion less than December’s imports.
• For the week ended February 22, there were 219,000 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 remained at 1.2% for the week ended February 15. The advance number of those receiving unemployment insurance benefits during the week ended February 15 was 1,724,000, a decrease of 9,000 from the prior week’s level, which was revised up by 7,000.

Eye on the Week Ahead

Reports on the manufacturing sector kick off the week. Purchasing managers reported some growth in new orders and production in January, but manufacturing has been generally weak for quite some time. On the other hand, employment has been solid with 225,000 new jobs added in January. It will be hard to top that total in February. Average weekly wages grew 3.1% over the 12 months ended in January. Investors will no doubt be watching the coronavirus to see if it continues to spread and its effect on global supply chains.

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The Markets (as of market close February 21, 2020)

The run of positive weekly market gains ended last week as each of the benchmark indexes listed here lost value. The spread of the coronavirus from China to other countries has investors worried about the impact on global economies. Tech stocks were hit hard as the Nasdaq dropped 1.59%, followed by the Dow, which lost close to 1.40%. The large-cap S&P 500 fell 1.25%, followed by the Global Dow and the small caps of the Russell 2000. Money seemed to flow from stocks to long-term bonds and gold, pushing prices higher. The 10-year Treasuries saw yields fall 11 basis points (prices and yields move in opposite directions) while the price of gold jumped almost 4.00% over the prior week’s closing price.

Oil prices rose higher last week, closing at $53.35 per barrel by late Friday afternoon, up from the prior week’s price of $52.09. The price of gold (COMEX) soared last week, closing at $1,646.10 by late Friday afternoon, up from the prior week’s price of $1,587.20. The national average retail regular gasoline price was $2.428 per gallon on February 17, 2020, $0.009 higher than the prior week’s price and $0.111 more than a year ago.

Market/Index	2019 Close	Prior Week	As of 2/21	Weekly Change	YTD Change
DJIA	28,538.44	29,398.08	28,992.41	-1.38%	1.59%
Nasdaq	8,972.60	9,731.18	9,576.59	-1.59%	6.73%
S&P 500	3,230.78	3,380.16	3,337.75	-1.25%	3.31%
Russell 2000	1,668.47	1,687.58	1,678.61	-0.53%	0.61%
Global Dow	3,251.24	3,276.89	3,238.97	-1.16%	-0.38%
Fed. Funds target rate	1.50%-1.75%	1.50%-1.75%	1.50%-1.75%	0 bps	0 bps
10-year Treasuries	1.91%	1.58%	1.47%	-11 bps	-44 bps

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

Last Week’s Economic News

• The first quarter of the year should be a good one in the new home market, according to the latest information on housing starts. Building permits jumped 9.2% in January and are up 17.9% above the January 2019 rate. Building permits issued for single-family homes rose 6.4% in January. Housing starts fell 3.6% in January but are 21.4% above the January 2019 rate. Housing completions also dropped 3.3% last month and single-family housing completions in January fell 3.5%.
• Following a strong December, sales of existing homes fell 1.3% in January. However, year-over-year, existing home sales are up 9.6%. Single-family existing home sales dropped 1.2% in January from December’s total. The median existing-home price in January was $266,300 ($274,500 in December), up 6.8% from January 2019 ($249,400). The median existing single-family home price was $268,600 in January 2020 ($276,900 in December), up 6.9% from January 2019. Total inventory rose 2.2% in January from the prior month.
• Prices for producers advanced 0.5% in January after climbing 0.2% in December. Producer prices are up 2.1% for the 12 months ended in January, the largest advance since moving up 2.1% for the 12 months ended May 2019. In January, 90.0% of the increase in the Producer Price Index is attributable to prices for final demand services, which climbed 0.7%. The index for final demand goods inched up 0.1%. Producer prices less foods, energy, and trade services advanced 0.4% in January, the largest increase since a 0.4% rise in April 2019. For the 12 months ended in January, the index for final demand less foods, energy, and trade services moved up 1.5%.
• For the week ended February 15, there were 210,000 claims for unemployment insurance, an increase of 4,000 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 February 8. The advance number of those receiving unemployment insurance benefits during the week ended February 8 was 1,726,000, an increase of 25,000 from the prior week’s level, which was revised up by 3,000.

Eye on the Week Ahead

A busy week is ahead for important economic and market-moving reports. January’s figures on new home sales are available early in the week. December saw sales of new, single-family homes dip below November’s totals. Also out this week are reports on durable goods orders and the gross domestic product. December’s new orders for durable goods rebounded following a poor November. The fourth-quarter GDP increased 2.1%, according to the advance estimate. January’s figures will be based on more economic data, but are expected to reveal a comparable growth rate for the economy during the last quarter of 2019.

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The Markets (as of market close February 14, 2020)
Despite the ongoing battle against the coronavirus, stocks reached record highs last week. Solid economic data, strong retail sales, and favorable corporate earnings reports helped quell investors’ fears that the spread of the dreaded coronavirus would impact global economies. Each of the benchmark indexes listed here posted weekly gains, led by the Nasdaq, which advanced 2.21%, followed by an almost 2.0% bump in the small caps of the Russell 2000. Both large-cap indexes climbed higher, with the S&P 500 gaining 1.58% and the Dow pushing just past 1.0%.

Oil prices inched higher last week, closing at $52.09 per barrel by late Friday afternoon, up slightly from the prior week’s price of $50.47. The price of gold (COMEX) recovered last week, closing at $1,587.20 by late Friday afternoon, up from the prior week’s price of $1,573.90. The national average retail regular gasoline price was $2.419 per gallon on February 10, 2020, $0.036 lower than the prior week’s price but $0.143 more than a year ago.

The Markets (as of market close February 7, 2020)

Stocks rebounded and long-term bond yields rose last week amid reports of China’s plans to cut tariffs on some American imports. The S&P 500, Dow, and Nasdaq reached all-time highs during the week, and global stocks soared. Also helping push stocks higher was a round of favorable fourth-quarter corporate earnings figures and a strong labor report. Investors seemed intent on locking in gains by last week’s end as stocks fell somewhat. Nevertheless, each of the benchmark indexes listed here posted solid gains, led by the Nasdaq, which gained more than 4.0%. The large caps of both the Dow and S&P 500 advanced by 3.0% and 3.17%, respectively. The small caps of the Russell 2000, which had been reeling for the past several weeks, climbed 2.65%. Year-to-date, the Nasdaq is more than 6.0% ahead of its 2019 closing value. Only the Russell 2000 is slightly behind last year’s mark.

Oil prices dropped again last week, closing at $50.47 per barrel by late Friday afternoon, down from the prior week’s price of $51.61. The price of gold (COMEX) plunged last week, closing at $1,573.90 by late Friday afternoon, down from the prior week’s price of $1,592.70. The national average retail regular gasoline price was $2.455 per gallon on February 1, 2020, $0.051 lower than the prior week’s price but $0.201 more than a year ago.

Market/Index	2019 Close	Prior Week	As of 2/7	Weekly Change	YTD Change
DJIA	28538.44	28256.03	29102.51	3.00%	1.98%
Nasdaq	8972.60	9150.94	9520.51	4.04%	6.11%
S&P 500	3230.78	3225.52	3327.71	3.17%	3.00%
Russell 2000	1668.47	1614.06	1656.78	2.65%	-0.70%
Global Dow	3251.24	3161.86	3252.04	2.85%	0.02%
Fed. Funds target rate	1.50%-1.75%	1.50%-1.75%	1.50%-1.75%	0 bps	0 bps
10-year Treasuries	1.91%	1.52%	1.57%	5 bps	-34 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 News

• Job growth soared in January with the addition of 225,000 new jobs. The average monthly gain of new jobs added in 2019 was 175,000. Notable job gains last month occurred in construction, health care, and transportation and warehousing. The unemployment rate inched up 0.1 percentage point to 3.6%, representing 5.9 million unemployed persons (5.8 million unemployed in December). The labor force participation rate edged up by 0.2 percentage point to 63.4%. The employment-population ratio, at 61.2%, changed little over the month but was up by 0.5 percentage point over the year. In January, average hourly earnings rose by $0.07 to $28.44. Over the past 12 months, average hourly earnings have increased by 3.1%. The average workweek was unchanged at 34.3 hours in January.
• January has gotten off to a slow start in the manufacturing sector, at least according to one purchasing managers’ survey. The latest IHS Markit U.S. Manufacturing PMI™ fell in January on the heels of a drop in export orders. At the same time, the pace of growth for new orders was the softest in three months, prompting firms to exercise greater hesitancy in relation to hiring additional staff, with workforce numbers rising only slightly and at the slowest pace in four months.
• It is not uncommon for the leading manufacturing surveys to post conflicting results, as was the case in January. According to the Manufacturing ISM® Report On Business®, purchasing managers were more upbeat relative to the manufacturing sector in January, evidenced by a 3.1 percentage point increase in the purchasing managers’ index. Survey respondents also reported an increase in new orders, production, hiring, new export orders, and prices — not entirely in line with the survey results from Markit’s report.
• The services sector continued to expand in January, according to the latest Non-Manufacturing ISM® Report On Business®. Survey respondents reported growth in business activity and new orders. On the other hand, hirings and prices each fell in January compared to December.
• The goods and services deficit was $48.9 billion in December, up $5.2 billion (11.9%) from $43.7 billion in November, revised. Exports ($209.6 billion) were up 0.8%, and imports ($258.5 billion) increased 2.7%. For 2019, the goods and services deficit decreased $10.9 billion, or 1.7%, from 2018. Exports decreased $1.5 billion, or 0.1%. Imports decreased $12.5 billion, or 0.4%. Reflective of the trade war, the United States deficit with China in 2019 decreased $73.9 billion to $345.6 billion.
• For the week ended February 1, there were 202,000 claims for unemployment insurance, a decrease of 15,000 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 January 25. The advance number of those receiving unemployment insurance benefits during the week ended January 25 was 1,751,000, an increase of 48,000 from the prior week’s level.

Eye on the Week Ahead

The latest inflationary indicators are available this week, including January’s Consumer Price Index. The retail sales report will provide last month’s figures on consumer spending at retail and food services stores. The Federal Reserve releases its report on the government’s budget for January. The December government budget deficit was $13.3 billion.

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The Markets (as of market close January 31, 2020)

January was full of ups and downs as investors rode a wave of uncertainty. The month began with many of the benchmark indexes listed here losing value (except for the Nasdaq) only to surge ahead during the middle of the month. However, fears that a widespread outbreak of the coronavirus would impact global economic growth pushed investors away from stocks, which lost significant value by the end of the month.

By the close of trading on the last day of January, only the tech-heavy Nasdaq gained value, as each of the remaining benchmark indexes listed here fell, led by the small caps of the Russell 2000, which plummeted by more than 3.25%. The Global Dow dropped 2.75%, followed by the Dow and the S&P 500. Unfortunately, the momentum enjoyed in December didn’t carry over to January for stock investors.

By the close of trading on January 31, the price of crude oil (WTI) was $51.61 per barrel, well below the December 31 price of $61.21 per barrel. The national average retail regular gasoline price was $2.506 per gallon on January 27, down from the December 30 selling price of $2.571 but $0.250 more than a year ago. The price of gold rose by the end of January, climbing to $1,592.70 by close of business on the 31st, up from its $1,520.00 price at the end of December.

Market/Index	2019 Close	Prior Month	As of January 31	Month Change	YTD Change
DJIA	28538.44	28538.44	28256.03	-0.99%	-0.99%
Nasdaq	8972.60	8972.60	9150.94	1.99%	1.99%
S&P 500	3230.78	3230.78	3225.52	-0.16%	-0.16%
Russell 2000	1668.47	1668.47	1614.06	-3.26%	-3.26%
Global Dow	3251.24	3251.24	3161.86	-2.75%	-2.75%
Fed. Funds	1.50%-1.75%	1.50%-1.75%	1.50%-1.75%	0 bps	0 bps
10-year Treasuries	1.91%	1.91%	1.52%	-39 bps	-39 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: December saw 145,000 new jobs added, with notable job gains occurring in retail trade and health care. In 2019, employment rose by 2.1 million, down from a gain of 2.7 million in 2018. The unemployment rate remained at 3.5% for the month and the number of unemployed persons stood at 5.8 million. A year earlier, the unemployment rate was 3.9% with 6.3 million unemployed. In December, average hourly earnings for all employees rose by $0.03 to $28.32. Average hourly earnings increased by 2.9% in 2019. The average workweek was unchanged at 34.3 hours in December. The labor participation rate for December remained at 63.2% (63.0% last December), while the employment-population ratio closed 2019 at 61.0% for the fourth consecutive month (60.6% in December 2018).
• FOMC/interest rates: Following its latest meeting in January, the Federal Open Market Committee decided to maintain the target range for the federal funds rate at 1.50%-1.75%. The rate hasn’t changed since it was decreased last October. While the Committee noted positive economic growth, increased consumer spending, and a strong labor market, fixed business investment, and exports remain weak, and inflation continues to run below the Fed’s 2.0% target. The Committee meets again in March.
• GDP/budget: According to the advance estimate for the fourth-quarter gross domestic product, the economy accelerated at an annualized rate of 2.1%. This is the same rate of growth as in the third quarter. Consumer spending grew at a rate of 1.8% (3.2% in the third quarter), fixed investment inched up 0.1% in the fourth quarter (-0.8% in the third quarter), and although nonresidential fixed investment fell 1.5% in the fourth quarter, it was an improvement over the 2.3% drop in the prior quarter. Consumer prices advanced at a rate of 1.6% in the fourth quarter, comparable to the third quarter (1.5%). Disposable personal income increased 3.1% in the fourth quarter, compared with an increase of 4.5% in the third quarter. December, the third month of the government’s fiscal year, saw the federal budget deficit hit $13.3 billion ($13.5 billion in December 2019). Through the first quarter of the 2020 fiscal year, the deficit sits at $356.6 billion, 11.8% greater than the deficit over the same period last fiscal year. Government spending over the first three months of the fiscal year outpaced receipts 6.7% to 4.6%. Comparing the first quarter of FY 2020 to the first three months of FY 2019, defense spending is up 9.2%, Medicare expenditures increased 8.0%, and Social Security payments rose 5.8%. Receipts over the same period saw individual income taxes climb 3.2%, employment, and general retirement receipts rise 5.9%, and corporate taxes jumped 23.2%, while receipts from customs duties, impacted by the tariffs on Chinese goods, vaulted 18.6%.
• Inflation/consumer spending: According to the Personal Income and Outlays report, inflationary pressures remain weak, as prices for consumer goods and services rose 0.3% in December after inching up 0.1% in November. Prices are up 1.6% over the last 12 months. Consumer prices excluding food and energy rose 0.2% in December (0.1% in November) and are up 1.6% year-over-year. Personal income and disposable (after-tax) personal income each advanced 0.2% in December. Consumers continued to spend, as personal consumption expenditures increased 0.3% in December after expanding 0.4% the previous month.
• The Consumer Price Index inched ahead 0.2% in December following a 0.3% increase in November. For 2019, the CPI has risen 2.3%. Increases in shelter and energy were major factors in the CPI increase. Energy prices increased 1.4% in December (3.4% for the year), and medical care commodities increased 1.5% for December and 2.5% for 2019. The CPI less food and energy inched up 0.1% for the month and 2.3% for 2019.
• Prices producers receive for goods and services edged up 0.1% in December (no change in November, revised). The index increased 1.3% in 2019 after a 2.6% advance in 2018. Producer prices less foods, energy, and trade services rose 0.1% in December following no change in November. For 2019, prices less foods, energy, and trade services moved up 1.5% after advancing 2.8% in 2018. A 1.5% increase in energy prices pushed goods prices up 0.3% in December, and gasoline prices jumped 3.7%.
• Housing: The housing sector has been anything but consistent this year. After falling 1.7% in November, existing home sales rose 3.6% in December and are up 10.8% over last December. Year-over-year, sales of existing homes were at the same pace as in 2018. The median sales price for existing homes was $274,500 in December, compared to $271,300 in November. Existing home prices were up 7.8% from December 2018. Total housing inventory at the end of December sat at 1.40 million units (representing a 3.0-month supply), down from November’s 3.7-month supply. Sales of new single-family homes fell in December, down 0.4% from November’s totals. However, sales are 23.0% above the December 2018 estimate. There were about 10.3% more homes sold in 2019 compared to the previous year. The median sales price of new houses sold in December was $331,400 ($330,800 in November). The average sales price was $384,500 ($388,200 in November). Available inventory, at a 5.7-month supply, was slightly higher than November’s 5.4-month supply.
• Manufacturing: After rebounding in November, industrial production declined 0.3% in December, driven by a 5.6% decrease in utilities. The drop for utilities resulted from a large decrease in demand for heating, as unseasonably warm weather in December followed an unseasonably cold November. Manufacturing output advanced 0.2% in December, despite a 4.6% decrease in manufacturing of motor vehicles and parts. Utilities increased 1.3% in December. Total industrial production was 1.0% lower in December than it was a year earlier. Following a November decrease, new orders for durable goods rose 2.4% in December. However, excluding transportation, new orders fell 0.1%. Transportation equipment, up following three consecutive monthly decreases, drove the increase, climbing $5.9 billion, or 7.6%. New orders for capital goods (used by businesses to produce consumer goods) dropped 6.5% in December following a 7.8% tumble in November.
• Imports and exports: Import prices rose 0.3% in December after ticking up 0.1% the prior month. The gain in import prices was the largest monthly advance since the index increased 0.6% in March. Prices for imports rose 0.5% in 2019, after decreasing 0.9% in 2018. The 12-month advance in December for import prices was the largest over-the-year increase since the index rose 0.7% between November 2017 and November 2018. Export prices fell 0.2% in December following a 0.2% increase in November. Prices for exports declined 0.7% in 2019 following a 1.1% increase in 2018. The 2019 drop was the first calendar-year fall in export prices since the index declined 6.6% in 2015. The international trade in goods deficit was $68.3 billion in December, up $5.3 billion from $63.0 billion in November. Exports of goods for December rose 0.3% to $137.0 billion, $0.4 billion more than November exports. Imports of goods for December climbed 2.9% to $205.3 billion, $5.8 billion more than November imports. The latest information on international trade in goods and services, out January 7, is for November and shows that the goods and services deficit was $43.1 billion, down $3.9 billion from the $46.9 billion deficit in October. The narrowing deficit resulted from a 0.7% rise in exports to $208.6 billion and a 1.0% drop in imports to $251.7 billion. October exports were $0.4 billion less than September exports. October imports were $4.3 billion under September imports. Year-to-date, the goods, and services deficit decreased $3.9 billion, or 0.7%, from the same period in 2018.
• International markets: Four major international banks refrained from lowering interest rates in a move aimed at bolstering their respective economies. The Bank of England, the European Central Bank, the Bank of Japan, and the Bank of Canada each maintained their respective monetary policies last month. At the World Economic Forum in Davos, Switzerland, the United States gave notice that it was ready to address trade relations with the European Union. President Trump threatened to impose significant tariffs on European cars if a more favorable trade agreement between the United States and European Union could not be reached. Ongoing trade uncertainties have impacted Japan, which has seen its exports decline for thirteen consecutive months.
• Consumer confidence: The Conference Board Consumer Confidence Index® increased in January following a moderate increase in December. The Present Situation Index — based on consumers’ assessment of current business and labor market conditions — increased last month, as did the Expectations Index, which is based on consumers’ short-term outlook for income, business, and labor market conditions.

Eye on the Month Ahead

Aside from the impeachment trial, investors will be watching the employment figures for January and news from the industrial sector. Job growth slowed a bit toward the end of 2019, although numbers remained relatively strong. Manufacturing and industrial production were generally weak for most of last year, impacted by the trade war between the United States and China. It will be interesting to see if the first phase of an agreement between the world’s largest economies is enough to help the manufacturing sector.

The Markets (as of market close January 31, 2020)

Investors continue to be rattled by the growing concern over the spread of the coronavirus, pulling money from stocks for the second week in a row. Each of the benchmark indexes listed here fell, led by the small caps of the Russell 2000, which lost close to 3.0% for the week. The Dow closed the week down more than 600 points while the S&P 500 dropped by more than 2.0%. The Global Dow also gave back almost 3.0% in value by last week’s end. Only the Nasdaq lost less than 2.0% — but not by much, closing the week down by 1.76%. As stock values plummeted, long-term bond prices soared, pushing yields significantly lower.

Oil prices dropped again last week, closing at $51.61 per barrel by late Friday afternoon, down from the prior week’s price of $54.21. The price of gold (COMEX) surged higher last week, closing at $1,592.70 by late Friday afternoon, up from the prior week’s price of $1,570.70. The national average retail regular gasoline price was $2.506 per gallon on January 27, 2020, $0.031 lower than the prior week’s price but $0.250 more than a year ago.

Market/Index	2019 Close	Prior Week	As of 1/31	Weekly Change	YTD Change
DJIA	28538.44	28989.73	28256.03	-2.53%	-0.99%
Nasdaq	8972.60	9314.91	9150.94	-1.76%	1.99%
S&P 500	3230.78	3295.47	3225.52	-2.12%	-0.16%
Russell 2000	1668.47	1662.23	1614.06	-2.90%	-3.26%
Global Dow	3251.24	3254.21	3161.86	-2.84%	-2.75%
Fed. Funds target rate	1.50%-1.75%	1.50%-1.75%	1.50%-1.75%	0 bps	0 bps
10-year Treasuries	1.91%	1.68%	1.52%	-16 bps	-39 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 News

• The initial, or advance, estimate of the gross domestic product showed the economy grew at an annual rate of 2.1% — the same as in the third quarter. In the fourth quarter, a downturn in imports, an acceleration in government spending, and a smaller decrease in nonresidential (business fixed) investment were offset by a larger decrease in private inventory investment and a slowdown in consumer spending. The price index for gross domestic purchases increased 1.5% in the fourth quarter, compared with an increase of 1.4% in the third quarter. The personal consumption expenditures price index increased 1.6%, compared with an increase of 1.5% in the third quarter. Excluding food and energy prices, the personal consumption expenditures price index increased 1.3%, compared with an increase of 2.1% in the prior quarter. Personal consumption expenditures (consumer spending) rose by 1.8% in the fourth quarter, compared with a 3.2% jump in the third quarter.
• Following its meeting last week, the Federal Open Market Committee voted to maintain the target range for the federal funds rate at 1.50%-1.75%. In support of its decision, the Committee noted that the labor market remains strong and that economic activity has been rising at a moderate rate. Although consumer spending has been rising at a moderate pace, business fixed investment and exports remain weak, and inflation continues to run below the Fed’s 2.0% target rate. The FOMC does not meet again until mid-March.
• Consumers saw their personal income (pre- and post-tax) grow by 0.2% in December (0.4% in November). Consumer spending increased by 0.3% in December (0.4% in November) while prices for consumer goods and services advanced by 0.3% (0.1% in November). Excluding food and energy, consumer prices increased 0.2%. For the year, consumer prices advanced 1.6%, well below the Fed’s 2.0% target for inflation.
• While sales of existing homes enjoyed robust gains in December, new home sales didn’t fare quite so well. Sales of new single-family homes dropped 0.4% in December from the prior month. Nevertheless, new home sales finished 2019 23% above the December 2018 totals. The median sales price of new homes sold in December was $331,400. The average sales price was $384,500. Inventory in December was at a 5.7-month supply (5.5 months in November).
• At first blush, December looked like a strong month for long-lasting, durable goods as new orders increased by 2.4% following a 3.1% slide in November. However, a closer look reveals that most of the gain was driven by a surge in defense aircraft. Excluding transportation, new orders for durable goods actually fell 0.1% in December. New orders for nondefense capital goods decreased 6.5% last month while core capital goods (excluding defense and aircraft) dropped 0.9%. Shipments of manufactured durable goods, down six consecutive months, decreased 0.2% in December. Not surprisingly, unfilled orders (-0.1%) fell while inventories (+0.5%) increased for the seventeenth of the last eighteen months.
• The international trade in goods deficit was $68.3 billion in December, up $5.3 billion from $63.0 billion in November. Exports of goods for December were $137.0 billion, $0.4 billion more than November exports. Imports of goods for December were $205.3 billion, $5.8 billion more than November imports. The trade in goods deficit this past December was $11.5 billion under the deficit in December 2018 ($79.8 billion).
• For the week ended January 25, there were 216,000 claims for unemployment insurance, a decrease of 7,000 from the previous week’s level, which was revised up by 12,000. According to the Department of Labor, the advance rate for insured unemployment claims remained at 1.2% for the week ended January 18. The advance number of those receiving unemployment insurance benefits during the week ended January 18 was 1,703,000, a decrease of 44,000 from the prior week’s level, which was revised up by 16,000.

Eye on the Week Ahead

Industrial production and labor data headline this week’s economic reports. Purchasing managers’ surveys on the state of manufacturing for January are out at the beginning of the week. Industrial production in general, and manufacturing specifically, have been relatively weak for quite some time. On the other hand, employment has been strong. December saw 145,000 new jobs added, although wage growth for 2019 was less than 3.0%.

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

The Markets (as of market close January 24, 2020)

Last week proved to be a tough one for the market as each of the benchmark indexes listed here lost value. Concern over the possible spread of the coronavirus from China apparently provided the impetus for investors to pull away from stocks. Long-term bond prices soared, pushing yields 15 basis points lower. The price of gold also climbed after falling the week prior. The small caps of the Russell 2000 were hit the hardest, down over 2.0% for the week, which pushed that index below its 2019 closing value. The Global Dow, Dow, and S&P 500 each lost more than 1.0%, while the tech-heavy Nasdaq dropped over three-quarters of a percent.

Oil prices plummeted last week, closing at $54.21 per barrel by late Friday afternoon, down from the prior week’s price of $58.73. The price of gold (COMEX) jumped higher last week, closing at $1,570.70 by late Friday afternoon, up from the prior week’s price of $1,556.80. The national average retail regular gasoline price was $2.537 per gallon on January 20, 2020, $0.033 lower than the prior week’s price but $0.286 more than a year ago.

Market/Index	2019 Close	Prior Week	As of 1/24	Weekly Change	YTD Change
DJIA	28538.44	29348.10	28989.73	-1.22%	1.58%
Nasdaq	8972.60	9388.94	9314.91	-0.79%	3.82%
S&P 500	3230.78	3329.62	3295.47	-1.03%	2.00%
Russell 2000	1668.47	1699.64	1662.23	-2.20%	-0.37%
Global Dow	3251.24	3299.82	3254.21	-1.38%	0.09%
Fed. Funds target rate	1.50%-1.75%	1.50%-1.75%	1.50%-1.75%	0 bps	0 bps
10-year Treasuries	1.91%	1.83%	1.68%	-15 bps	-23 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 News

• After falling in November, sales of existing homes advanced in December, climbing 3.6% ahead of November’s totals. Existing home sales finished 2019 at about the same level as in 2018. The median sales price for all housing types in December was $274,500, 7.8% above the December 2018 median sales price ($254,700). Unsold inventory sits at a 3.0-month supply at the current sales pace, down from the 3.7-month figure recorded in November. Sales of existing single-family homes in December were 2.7% greater than sales in November and 10.6% ahead of December 2018. The median sales price for existing single-family homes was $276,900 in December, up 8.0% from the previous December.
• For the week ended January 18, there were 211,000 claims for unemployment insurance, an increase of 6,000 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 January 11. The advance number of those receiving unemployment insurance benefits during the week ended January 11 was 1,731,000, a decrease of 37,000 from the prior week’s level, which was revised up by 1,000.

Eye on the Week Ahead

The last week of the month offers several important economic reports for December. Sales of new single-family homes have surged during the fourth quarter. November’s sales figures were robust and well ahead of the pace set in November 2018. Indicative of a waning manufacturing sector, new orders for durable goods were 1.3% lower through November 2019 compared to the previous year. December’s totals may provide a boost to that downward trend. The Federal Open Market Committee meets for the first time in 2020. Interest rates are not expected to be adjusted at this time. The first report on the gross domestic product for the fourth quarter is out this week. The third-quarter GDP advanced at an annualized rate of 2.1%.

The Markets (as of market close January 17, 2020)

Each of the benchmark indexes listed here enjoyed strong gains last week, led by the Russell 2000, which climbed 2.53% to push its year-to-date gains to nearly 2.0%. The Dow has posted weekly gains for five of the last six weeks, the S&P 500 advanced for the second consecutive week, and the Nasdaq has risen for six straight weeks. A strong housing starts report helped push stocks higher. But investors were most encouraged by advances on the trade front with Congress passing a revised trade deal between the United States, Canada, and Mexico, which was followed by last Thursday’s signing of the first phase of a trade agreement between the United States and China.

Oil prices dropped again last week, closing at $58.73 per barrel by late Friday afternoon, down from the prior week’s price of $59.14. The price of gold (COMEX) fell for the first time in several weeks, closing at $1,556.80 by late Friday afternoon, off from the prior week’s price of $1,561.60. The national average retail regular gasoline price was $2.570 per gallon on January 13, 2020, $0.008 lower than the prior week’s price but $0.323 more than a year ago.

Market/Index	2019 Close	Prior Week	As of 1/17	Weekly Change	YTD Change
DJIA	28538.44	28823.77	29348.10	1.82%	2.84%
Nasdaq	8972.60	9178.86	9388.94	2.29%	4.64%
S&P 500	3230.78	3265.35	3329.62	1.97%	3.06%
Russell 2000	1668.47	1657.64	1699.64	2.53%	1.87%
Global Dow	3251.24	3260.65	3299.82	1.20%	1.49%
Fed. Funds target rate	1.50%-1.75%	1.50%-1.75%	1.50%-1.75%	0 bps	0 bps
10-year Treasuries	1.91%	1.82%	1.83%	1 bps	-8 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 News

• The federal government incurred a $13 billion deficit in December, effectively the same shortfall as in December 2018. Year-to-date, the federal deficit sits at $357 billion, 12% higher than the deficit over the same period a year earlier. Total government receipts through December were $806 billion ($771 billion last fiscal year) and total government expenditures were $1.163 billion ($1.090 billion last year). There are some important budgetary line items to note through the first three months of the government’s fiscal year (FY 2020 started in October 2019). Individual income taxes ($385 billion) accounted for 47.7% of total government receipts, followed by social insurance ($290 billion) at 35.9%. Those two line items combined represent 83.6% of the government’s total receipts. The government spent $266 billion on Social Security, which accounted for almost 22.8% of total government expenditures. This expense was followed closely by the $196 billion spent on national defense (16.8%) and the $166 billion outlay for Medicare (14.2%). Lastly, customs duties provided $21 billion in receipts, or 2.6% of total receipts. However, customs duties are up 18.6% over last year, likely a reflection of the increased tariffs on Chinese imports.
• Consumer prices rose 0.2% in December following a 0.3% jump in November. Over the last 12 months, consumer prices have increased 2.3%, the largest 12-month increase since the period ended October 2018. Driving the monthly price increase was a 2.8% hike in gasoline prices (up 7.9% since December 2018). Consumer prices less food and energy crept up 0.1% last month and are up 2.3% over the last 12 months.
• Producer prices edged up 0.1% in December, the first increase since jumping ahead 0.4% in October. Overall, producer prices rose 1.3% in 2019 after climbing 2.6% in 2018. Prices less foods, energy, and trade services inched up 0.1% in December following no change in November. In 2019, the index for final demand less foods, energy, and trade services climbed 1.5% after advancing 2.8% in 2018. For December, much of the increase in producer prices was driven by a 1.5% increase in energy prices (gas prices advanced 3.7% in December), while prices for goods fell 0.2%.
• Consumers ramped up their purchases at the retail level in December as sales increased by 0.3% from November’s total. Retail sales are up 5.8% over December 2018, and total sales for 2019 are 3.6% ahead of sales for the previous year. Retail trade sales (resales of consumer items) were up 0.4% from November 2019 and 6.0% above last year. Nonstore (online) retail sales were up 19.2% from December 2018, and gasoline station sales were up 11.3% from last year.
• Import prices rose 0.3% in December after ticking up 0.1% in November. The December increase in import prices (the biggest monthly gain since March) was largely driven by increasing fuel prices. Prices for imports rose 0.5% in 2019 after decreasing 0.9% in 2018. The 12-month advance in December was the largest over-the-year increase since the index rose 0.7% between November 2017 and November 2018. Prices for import fuel increased 19.3% in 2019 following a 13.1% drop the previous year. Export prices fell 0.2% last month following a 0.2% advance in November. Prices for exports declined 0.7% in 2019 following a 1.1% increase in 2018. The 2019 drop was the first calendar-year fall since the index declined 6.6% in 2015.
• December’s building permits were 3.9% below November’s totals, but are 5.8% over December 2018. The last month of the year saw plenty of new construction as housing starts rose 16.9% above November’s estimate and finished 2019 40.8% over the December 2018 rate. Single-family housing starts in December were 11.2% above the November totals. The inventory for new homes for sale to start 2020 should increase as housing completions in December were 5.1% over November’s estimate, and 19.6% above the December 2018 rate.
• Industrial production declined 0.3% in December, as a decrease of 5.6% for utilities outweighed increases of 0.2% for manufacturing and 1.3% for mining. The drop for utilities resulted from a large decrease in demand for heating, as unseasonably warm weather in December followed unseasonably cold weather in November. Total industrial production was 1.0% lower in December than it was a year earlier.
• According to the latest Job Openings and Labor Turnover report, the number of job openings fell to 6.8 million (-561,000) on the last business day of November. The job openings rate decreased to 4.3%. The largest decreases in job openings were in retail trade (-139,000) and construction (-112,000). Over the month, hires and separations were little changed at 5.8 million and 5.6 million, respectively. Over the 12 months ended in November, hires totaled 69.8 million and separations totaled 67.5 million, yielding a net employment gain of 2.3 million.
• For the week ended January 11, there were 204,000 claims for unemployment insurance, a decrease of 10,000 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 January 4. The advance number of those receiving unemployment insurance benefits during the week ended January 4 was 1,767,000, a decrease of 37,000 from the prior week’s level, which was revised up by 1,000.

Eye on the Week Ahead

The holiday-shortened week comes with a dearth of major economic reports. December’s existing-home sales information is available this week. November’s sales were down 1.7% from the prior month. Another drop in sales in December could pull 2019 total sales back to their 2018 levels.

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