Tag: news

The Markets (as of market close November 29, 2024)

Stocks posted strong gains for November, which saw the S&P and the Dow have their best months of the year. The gains likely reflected investor optimism that a second Trump administration will favor businesses, with the hope that the President-elect will take a more moderate stance on trade tariffs. All 11 market sectors ended November higher, led by consumer discretionary and financials. Year to date, financials and information technology increased by more than 36.0%.

The latest data showed inflation has stubbornly resisted falling lower. For the 12 months ended in October, the Consumer Price Index (CPI) ticked up 0.2 percentage point to 2.6%, while the annual rate for the personal consumption expenditures (PCE) price index came in at 2.3%, 0.2 percentage point above the rate for the same period ended in September. Over the last three months, inflation has moved away from the Federal Reserve’s target of 2.0%, making it less likely that December will see another cut in the fed funds rate.

Growth of the U.S. economy continued at a modest pace. The gross domestic product (GDP) met expectations after increasing 2.8% in the third quarter following a 3.0% increase in the second quarter (see below). Personal consumption expenditures, the largest contributor in the calculation of GDP, rose 3.5%, with spending rising in durable goods and nondurable goods. Government expenditures rose 5.0%, imports grew more than exports, while gross domestic investment increased 1.1%.

Job growth rose by a mere 12,000 in October following a downward revision of 112,000 in the prior two months. The unemployment rate was unchanged at 4.1%, while the number of unemployed increased marginally. Wage growth rose 0.4% in October and 4.0% over the past 12 months. The employment data may have been skewed due to Hurricanes Milton and Helene. As a result, the Fed will likely wait until more information is available before assessing whether the labor sector has suddenly decelerated. The latest unemployment data may encourage tempering the pace of further rate cuts. While new weekly unemployment claims were unchanged from a year ago, total claims paid increased by over 90,000 (see below).

The S&P reported earnings growth of 5.8% in the third quarter. Roughly 75% of companies reported earnings per share above estimates, which is below the five-year average of 77% but equal to the 10-year average. Seven of the 11 sectors reported year-over-year growth, led by the communication services and health care sectors.

The real estate sector reversed course in October from September. Sales of existing homes increased in October after falling in September. New-home sales, which increased in September, plunged in October (see below). Mortgage rates have shown little downward movement, which has impacted sales. According to Freddie Mac, the 30-year fixed-rate mortgage averaged 6.78% as of November 14. That’s down from 6.79% one week ago and 7.44% one year ago.

Industrial production retracted for the second consecutive month in October (see below). Manufacturing output and mining decreased, while utilities increased. Purchasing managers reported manufacturing continued to slow in October as new orders decreased for the fourth month running. On the other hand, the services sector grew modestly higher in October.

Ten-year Treasury yields closed the month down by nearly 10.0 basis points as the probability of an interest rate cut in December waned. The two-year note closed November at 4.25%, down 3.0 basis points from a month earlier. The dollar strengthened, closing up nearly 2.0%. Gold prices declined in November after hitting a record high in October. Crude oil prices decreased by the end of the month as investors awaited further insights into production plans from OPEC+. The retail price of regular gasoline was $3.044 per gallon on November 25, $0.053 below the price a month earlier and $0.194 less than the price a year ago.

Stock Market Indexes

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

Latest Economic Reports

• Employment: Total employment increased by 12,000 in October, well below the consensus of 125,500 and lower than the 12-month average gain of 194,000. The October estimate followed downward revisions in August and September, which, combined, were 112,000 lower than previously reported. According to the Bureau of Labor Statistics, Hurricanes Helene and Milton affected labor data collection. In October, job gains occurred in health care and government. Temporary help services lost jobs, as did manufacturing, due to strike activity. The unemployment rate for October was unchanged at 4.1% but was 0.3 percentage point above the rate from a year earlier. The number of unemployed persons, at 7.0 million, was 150,000 above the September figure and 541,000 above the October 2023 estimate. The number of long-term unemployed (those jobless for 27 weeks or more) at 1.6 million, was relatively unchanged from the prior month’s total and accounted for 22.9% of all unemployed people. The labor force participation rate, at 62.6%, was 0.1 percentage point lower than September’s rate, while the employment-population ratio declined 0.2 percentage point to 60.0%. In October, average hourly earnings increased by $0.13, or 0.4%, to $35.46. Since October 2023, average hourly earnings rose 4.0%. The average workweek remained at 34.3 hours.
• There were 213,000 initial claims for unemployment insurance for the week ended November 23, 2024. During the same period, the total number of workers receiving unemployment insurance was 1,907,000. A year ago, there were 213,000 initial claims, while the total number of workers receiving unemployment insurance was 1,813,000.
• FOMC/interest rates: The Federal Open Market Committee met in November, which resulted in a 25.0-basis-point reduction in the fed funds target rate range to 4.50%-4.75%. The Committee noted that the economy had experienced a solid pace of expansion and inflation progressed toward the Committee’s 2.0% objective but remained somewhat elevated. The Committee will remain responsive to economic data in making future policy decisions.
• GDP/budget: According to the second estimate from the Bureau of Economic Analysis, the economy, as measured by gross domestic product, accelerated at an annualized rate of 2.8% in the third quarter of 2024. GDP increased 3.0% in the second quarter. Compared to the second quarter, the deceleration in GDP in the third quarter primarily reflected a downturn in private inventory investment (8.3% to 1.1%) and a larger decrease in residential fixed investment (-2.8% to -5.0%). These movements were partly offset by accelerations in exports (1.0% to 7.5%), personal consumption expenditures (2.8% to 3.5%), and federal government spending (4.3% to 8.9%). Imports, which are a negative in the calculation of GDP, accelerated 10.2%. Personal consumption expenditures (2.37%) contributed the most to overall economic growth. Consumer prices, as measured by the PCE index, increased 1.5%, compared with an increase of 2.5% in the second quarter. Excluding food and energy prices, the PCE price index increased 2.1%, compared with an increase of 2.8% in the prior quarter.
• October was the first month of fiscal year 2025 for the federal government. In October, the federal budget statement showed a deficit of $257 billion versus a deficit of $67 billion a year ago. In October, government receipts totaled $327 billion, with the majority coming from collection of individual income taxes ($168 billion) and social insurance and retirement receipts ($122 billion). Government outlays were $584 billion, the largest of which came from payments for Social Security ($125 billion) and national defense ($103 billion).
• Inflation/consumer spending: The PCE price index ticked up 0.2% in October, the same increase as in September. Prices for goods decreased 0.1%, while prices for services rose 0.4%. Food prices were unchanged in October from September, while energy prices decreased 0.1%. Excluding food and energy, the PCE price index increased 0.3% in October. The 12-month PCE price index for October increased 2.3%. Prices excluding food and energy rose 2.8% from one year ago. Also in October, personal income rose 0.6% and disposable (after-tax) personal income increased 0.7%. Personal consumption expenditures, a measure of consumer spending, increased 0.4% in October, down from a 0.6% advance in the previous month.
• The Consumer Price Index rose 0.2% in October, the same increase as in each of the previous three months. Over the 12 months ended in October, the CPI rose 2.6%, up 0.2 percentage point from the 12-month period ended in September. Prices for shelter rose 0.4% in October, accounting for over one-third of the overall monthly increase. In addition to shelter prices, the October CPI also saw prices increase in used cars and trucks, airline fares, medical care, and recreation. Prices for apparel, communication, and household furnishings and operations were among those that decreased over the month. Excluding food and energy (core prices), the CPI rose 0.3% in October, unchanged from September and August. Core prices advanced 3.3% from October 2023.
• The Producer Price Index rose 0.2% in October after ticking up 0.1% (revised) in September. In October, prices for services increased 0.3%, while prices for goods inched up 0.1%. For the 12 months ended in October, producer prices advanced 2.4%. Producer prices less foods, energy, and trade services increased 0.3% in October after moving up 0.1% in September. For the 12 months ended in October, prices for final demand less foods, energy, and trade services rose 3.5%.
• Housing: Sales of existing homes rose 3.4% in October after falling 1.0% in September. Existing-home prices increased 2.9% over the past 12 months. According to the National Association of Realtors® (NAR), increasing inventory, additional job gains, and continued economic growth helped drive existing-home sales. Unsold inventory of existing homes in October represented a 4.2-month supply at the current sales pace, down from 4.3 months in September but up from 3.6 months in October 2023. The median existing-home price in October was $407,200 ($406,700 in September) and 4.0% above the October 2023 price of $391,600. Sales of existing single-family homes increased 3.5% in October and 4.1% from a year ago. The median existing single-family home price was $412,200 in October, up from $411,400 in September and above the October 2023 estimate of $396,000.
• New single-family home sales decreased 17.3% in October and were 9.4% lower than the October 2023 rate. The median sales price of new single-family houses sold in October was $437,300 ($426,800 in September). The October average sales price was $545,800 ($509,900 in September). The inventory of new single-family homes for sale in October represented a supply of 9.5 months at the current sales pace, up from 7.7 months in September.
• Manufacturing: Industrial production decreased 0.3% in October after declining 0.5% in the prior month. A strike at a major producer of civilian aircraft held down total growth by an estimated 0.2% in October, and the effects of two hurricanes subtracted an estimated 0.1%. Manufacturing output declined 0.5% in October. Mining output increased 0.3% and utilities rose 0.7%. For the 12 months ended in October, total industrial production moved down 0.3% from its year-earlier level. Over the same period, manufacturing decreased 0.3%, mining declined 1.5%, while utilities advanced 1.5%.
• New orders for durable goods increased 0.2% in October, following two consecutive monthly decreases. Excluding transportation, new orders increased 0.1%. Excluding defense, new orders increased 0.4%. Transportation equipment, down three consecutive months, advanced 0.5%. New orders for nondefense capital goods in October increased 1.4%. New orders for defense capital goods in October declined 4.0%.
• Imports and exports: U.S. import prices rose 0.3% in October following a 0.4% decrease in September. The October advance in import prices was the largest monthly increase since April 2024. Prices for import fuel increased 1.5% in October after declining 7.5% in September. Excluding fuel, import prices ticked up 0.2% in October for the second straight month. Import prices edged up 0.8% over the past year. Prices for U.S. exports increased 0.8% in October after declining 0.6% the previous month. The October advance was the largest monthly rise since August 2023. Higher prices for nonagricultural and agricultural exports in October contributed to the monthly increase. Export prices declined 0.1% over the past year.
• The international trade in goods deficit was $99.1 billion in October, down 8.8%, or $9.6 billion, from the September estimate. Exports of goods for October were $168.7 billion, $5.6 billion, or 3.2%, less than September exports. Imports of goods for October were $267.8 billion, $15.2 billion, or 5.4%, less than September imports.
• The latest information on international trade in goods and services, released November 5, was for September and revealed that the goods and services trade deficit was $84.4 billion, up 19.2% from the August deficit. September exports were $267.9 billion, 1.2% lower than August exports. September imports were $352.3 billion, 3.0% more than August imports. Year to date, the goods and services deficit increased $69.6 billion, or 11.8%, from the same period in 2023. Exports increased $784.7 billion, or 3.7%. Imports increased $154.4 billion, or 5.3%.
• International markets: Eurozone inflation in November rose 2.3%, in line with expectations. Lackluster economic growth in Canada dampened hopes for continued monetary policy easing by the Bank of Canada. Third-quarter Canadian GDP grew at an annualized rate of 1.0%, falling short of the central bank’s 1.5% projection. As a result, the yield on Canada’s 10-year Treasury bond fell to 3.17%, its lowest level in over a month, while the Canadian dollar neared its mid-2020 low. Elsewhere, China’s economy grew by 0.9% in the third quarter of 2024. In September, The People’s Bank of China introduced the biggest stimulus package for the economy since the pandemic, including significant cuts to interest and mortgage rates. The plans also included help for the struggling stock market and measures to encourage banks to lend more to individuals and businesses. For November, the STOXX Europe 600 Index dipped 0.1%; the United Kingdom’s FTSE rose 1.4%; Japan’s Nikkei 225 Index gained 0.4%; while China’s Shanghai Composite Index increased 1.7%.
• Consumer confidence: Consumer confidence rose in November to 111.7, up from 109.6 in October, according to the Conference Board Consumer Confidence Index®. The Present Situation Index, based on consumers’ assessment of current business and labor market conditions, increased by 4.8 points to 140.9 in November. The Expectations Index, based on consumers’ short-term outlook for income, business, and labor market conditions, ticked up to 92.3 in November, up from 91.9 in October.

Eye on the Month Ahead

The Federal Reserve meets in December for the final time this year. Comments from Fed Chair Jerome Powell and other voting members seem to indicate that there is a slim chance that interest rates will be lowered in December. Recent data has shown relative strength in the economy, and the job market appears to be nearing full employment. However, inflationary pressures, while somewhat muted, continued to inch higher in October and November, which will heighten interest in the inflation indicators released in December.

The Markets (as of market close October 31, 2024)

Stocks closed lower in October as Wall Street couldn’t maintain the momentum from September’s strong showing after the Fed lowered interest rates. Equities began October on an upswing on the heels of a better-than-expected jobs report. In fact, during the first half of the month, the Dow and the S&P 500 reached record highs. However, investors began moving away from risk as the unrest in the Middle East intensified and sentiment grew that the Fed may not cut rates in November. Toward the end of the month, disappointing earnings data from big tech companies raised concerns about rising AI costs and the potential for profit pressures. Among the market sectors, only communication services, financials, and energy managed to outperform. Health care, materials, real estate, and consumer staples lagged.

Inflationary data showed price pressures edged higher but came within expectations. For the 12 months ended in September, the Consumer Price Index (CPI) dipped lower, while the annual rate for the personal consumption expenditures (PCE) price index came in at 2.1%, the lowest rate since early 2021 as each indicator moved closer to the Federal Reserve’s 2.0% target rate range.

Growth of the U.S. economy continued at a modest pace. The gross domestic product (GDP) met expectations after increasing 2.8% in the third quarter following a 3.0% increase in the second quarter (see below). Personal consumption expenditures, the largest contributor in the calculation of GDP, rose 3.7%, with spending rising in durable goods and nondurable goods. Government expenditures, up 5.0%, were the second largest contributor to GDP.

Job growth in September far exceeded expectations after adding 254,000 jobs, which followed upward revisions in both July and August. The unemployment rate slid 0.1 percentage point to 4.1%, while the number of unemployed declined. Wage growth rose 0.4% in September and 4.0% over the past 12 months. The Fed’s 50-basis-point decrease in interest rates probably played a large part in the spurt in job growth in September. However, the latest jobs data also will likely encourage tempering the pace of further rate cuts. New weekly unemployment claims decreased from a year ago, while total claims paid increased (see below).

With about 37% of the S&P 500 companies reporting, third-quarter earnings results have been mixed. While the S&P 500 reported earnings growth for the fifth straight quarter, it was the lowest growth rate since the second quarter of 2023. Of the companies reporting thus far, roughly 75% have indicated actual earnings per share (EPS) above estimates, which is below the 5-year average of 77% but equal to the 10-year average of 75%. Companies in the financials and consumer discretionary sectors were the largest contributors to the increase in overall earnings growth thus far. On the other hand, earnings lagged from companies in the industrials, health care, and energy sectors.

Rising mortgage rates cooled real estate sales over the past few months. However, with rates gradually falling and inventory increasing, the home sector is expected to bounce back. In September sales of existing homes declined, while new home sales increased. According to Freddie Mac, the 30-year fixed-rate mortgage averaged 6.44% as of October 17, up from 6.32% one week earlier, but down from 7.63% from one year ago.

Industrial production retracted in September from August, which saw a 0.3% decline. Manufacturing output decreased 0.4% in September and was 0.5% below its year-earlier level. This trend was further endorsed by purchasing managers, who reported manufacturing continued to slow in September. On the other hand, the services sector rose modestly higher.

November proved to be a rocky month for bonds. Ten-year Treasury yields closed the month up, reaching the highest level in over three months. as favorable economic data supported the notion that the U.S. economy could withstand higher interest rates. The two-year note closed November at 4.18%, a monthly gain of 5.7 basis points. The dollar strengthened, marking its strongest monthly gain in more than two years. Gold prices hit a record high of $2,790.00 during the month, only to slip lower, but well into the black for November. Crude oil prices rose higher by the end of the month, but remained somewhat subdued, as investors anticipated a supply increase by OPEC+ in October and decreased demand in China. The retail price of regular gasoline was $3.097 per gallon on October 28, $0.082 below the price a month earlier and $0.376 less than the price a year ago.

Stock Market Indexes

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

Latest Economic Reports

• Employment: Total employment increased by 254,000 in September, well above the consensus of 132,500 and higher than the 12-month average gain of 203,000. The September estimate followed upward revisions in both July and August, which, combined, were 72,000 higher than previously reported. In September, job gains occurred in food services and drinking places, health care, government, social assistance, and construction. The unemployment rate for September ticked down 0.1 percentage point to 4.1% but was 0.3 percentage point above the rate from a year earlier (3.8%). The number of unemployed persons, at 6.8 million, was 281,000 below the August figure, but 487,000 above the September 2023 estimate. The number of long-term unemployed (those jobless for 27 weeks or more) at 1.6 million, was 97,000 above the August total and accounted for 23.7% of all unemployed people. The labor force participation rate, at 62.7%, was unchanged from August, while the employment-population ratio rose 0.2 percentage point to 60.2%. In September, average hourly earnings increased by $0.13, or 0.4%, to $35.36. Since September 2023, average hourly earnings rose by 4.0%. The average workweek edged down 0.1 hour to 34.2 hours.
• There were 216,000 initial claims for unemployment insurance for the week ended October 26, 2024. During the same period, the total number of workers receiving unemployment insurance was 1,862,000. A year ago, there were 216,000 initial claims, while the total number of workers receiving unemployment insurance was 1,816,000.
• FOMC/interest rates: The Federal Open Market Committee did not meet in October. It next meets during the week of November 8. While the PCE price index continued to move closer to the Fed’s 2.0% target, the core annual rate (2.7%) remained relatively elevated. The Fed is not likely to reverse course and raise interest rates based on this information (in addition to moderate economic and job growth). By the same token, Fed governors may be hesitant to lower rates in November.
• GDP/budget: According to the initial estimate from the Bureau of Economic Analysis, the economy, as measured by gross domestic product, accelerated at an annualized rate of 2.8% in the third quarter of 2024. GDP increased 3.0% in the second quarter. Personal consumption expenditures rose 3.7% in the third quarter compared to a 2.8% increase in the previous quarter. Consumer spending on goods rose 6.0%, while spending on services advanced 2.6%. Personal consumption expenditures (2.46%) contributed the most to overall economic growth. Gross domestic investment advanced 0.3% in the third quarter, well below the 8.3% increase in the second quarter. Nonresidential (business) fixed investment advanced 3.3% in the third quarter (3.9% in the second quarter), while residential fixed investment declined 5.1%, compared to a 2.8% decrease in the second quarter. Exports climbed 8.9%, while imports, which are a negative in the calculation of GDP, increased 11.2%. Consumer prices, as measured by the personal consumption expenditures price index, increased 1.5%, compared with an increase of 2.5% in the second quarter. Excluding food and energy prices, the PCE price index increased 2.2%, compared with an increase of 2.8% in the prior quarter.
• September was the last month of the fiscal year for the federal government. In September, the federal budget statement showed a surplus $64.3 billion versus a deficit of $170.7 billion a year ago. In September, government receipts totaled $527.6 billion, while government outlays were $463.4 billion. For fiscal year 2024, the total deficit $1,832.8 trillion, which was roughly $137.6 billion more than the deficit from the previous fiscal year. For FY24, total receipts were $4,918.7 trillion and total expenditures were $6,751.6 trillion. Individual income tax receipts for FY 24 totaled $2,426.1 trillion, while corporate income tax receipts were $529.9 billion. Social Security payments were estimated at $1,461.0 trillion, accounted for the largest outlays for the fiscal year.
• Inflation/consumer spending: The PCE price index ticked up 0.2% in September after increasing 0.1% in August and was in line with expectations. Prices for goods decreased 0.1%, while prices for services increased 0.3%. Food prices increased 0.4%, while energy prices decreased 2.0%. Excluding food and energy, the PCE price index increased 0.3%. The 12-month PCE price index for September increased 2.1%, the lowest annual rate since February 2021. Prices for goods decreased 1.2% although prices for services increased 3.7%. Food prices increased 1.2%, while energy prices decreased 8.1%. Excluding food and energy, the PCE price index increased 2.7% from one year ago. Also in September, both personal income and disposable (after-tax) personal income rose 0.3%. Personal consumption expenditures, a measure of consumer spending, increased 0.5%.
• The Consumer Price Index rose 0.2% in September, the same increase as in August and July. Over the 12 months ended in September, the CPI rose 2.4%, down 0.1 percentage point from the 12-month period ended in August. This was the smallest 12-month increase since February 2021. Excluding food and energy, the CPI rose 0.3% in September, unchanged from the previous month’s total, and 3.3% from September 2023. Shelter prices rose 0.2% in September and prices for food increased 0.4%. Together, these two components contributed over 75% of the monthly all items increase. Since September 2023, shelter prices have risen 4.9%, while food prices increased 2.3%. Energy prices were down 1.9% in September and 6.8% lower than a year ago. Much of the decrease in energy prices was from a 4.1% decline in gasoline prices.
• The Producer Price Index was flat in September after ticking up 0.2% in August. In September, a 0.2% increase in prices for services offset a 0.2% decline in prices for goods. For the 12 months ended in September, producer prices advanced 1.8%.
• Housing: Sales of existing homes declined 1.0% in September and 3.5% over the last 12 months. According to the National Association of Realtors® (NAR), the market for existing homes remained sluggish but lower mortgage rates and increased inventory should help spur sales moving forward. Unsold inventory of existing homes in September represented a 4.3-month supply at the current sales pace, up 1.5% from the August estimate. The median existing-home price fell 2.4% in September to $404,500, but was 3.0% above the September 2023 price of $392,700. Sales of existing single-family homes decreased 0.6% in September and were down 2.3% from a year ago. The median existing single-family home price was $409,000 in September, down from $419,000 in August but above the September 2023 estimate of $397,400.
• New single-family home sales increased 4.1% in September and were 6.3% higher than the September 2023 rate. The median sales price of new single-family houses sold in July was $426,300 ($410,900 in August). The September average sales price was $501,000 ($486,500 in August). The inventory of new single-family homes for sale in September represented a supply of 7.6 months at the current sales pace, down from 7.9 months in August.
• Manufacturing: Industrial production decreased 0.3% in September after advancing 0.3% in the prior month. A strike at a major producer of civilian aircraft held down total growth by an estimated 0.3% in September, and the effects of two hurricanes subtracted an estimated 0.3%. Manufacturing output declined 0.4% in September and was 0.5% below its year-earlier level. Mining output fell 0.6%, while utilities rose 0.7%. For the 12 months ended in September, total industrial production moved down 0.6% from its year-earlier level. Over the same period, manufacturing decreased 0.7%, mining declined 2.2%, while utilities advanced 0.6%.
• New orders for durable goods declined 0.8% in September, following a 0.8% decrease in August. Excluding transportation, new orders increased 0.4%. Excluding defense, new orders decreased 1.1%. Transportation equipment, down three of the last four months, drove the overall decrease, falling 3.1%. New orders for nondefense capital goods in September decreased 4.5%. New orders for defense capital goods in September rose 6.4%.
• Imports and exports: U.S. import prices receded 0.4% in September following a 0.2% decrease in August. The September decline in imports was the largest monthly drop since the index decreased 0.7% in December 2023. Prices for import fuel fell 7.0% in September, after declining 2.9% in August. Excluding fuel, import prices ticked up 0.1% in September. The August drop was the largest one-month decline since the index fell 8.0% in December 2023. Prices for nonfuel imports edged down 0.1% in August. Import prices edged down 0.1% over the past year, the first 12-month drop since February 2024. Prices for U.S. exports fell 0.7% in September, after advancing 0.9% the previous month. Lower prices for nonagricultural exports in September more than offset higher agricultural export prices. Export prices declined 2.1% over the past year, the largest 12-month decrease since January 2024.
• The international trade in goods deficit was $108.2 billion in September, up 14.9%, or $14.0 billion, from the August estimate. Exports of goods for September were $174.2 billion, $3.6 billion, or 2.9% more than August exports. Imports of goods for September were $258.4 billion, $10.4 billion, or 1.4% less than August imports.
• The latest information on international trade in goods and services, released October 8, was for August and revealed that the goods and services trade deficit was $70.4 billion, up $8.5 billion, or 10.8%, from the July deficit. August exports were $271.8 billion, $5.3 billion, or 2.0%, more than July exports. August imports were $342.2 billion, $3.2 billion, or 0.9% less than July imports. Year to date, the goods and services deficit increased $47.1 billion, or 8.9%, from the same period in 2023. Exports increased $79.0 billion, or 3.9%. Imports increased $126.1 billion, or 4.9%.
• International markets: Annual inflation in the eurozone grew to 2.0% in October, up from 1.7% in September. The marginal increase was expected as last year’s declines in energy prices are no longer factored into annual rates. In the United Kingdom, the annual inflation rate in September fell to 1.7%, the lowest since April 2021. China’s annual inflation rate was estimated at 0.4% in September, below expectations and under August’s figure of 0.6%. Canada’s GDP grew by 0.3% in September, ending the third quarter with a 0.2% increase. For October, the STOXX Europe 600 Index dipped 2.3%; the United Kingdom’s FTSE fell 2.3%; Japan’s Nikkei 225 Index gained 1.4%; while China’s Shanghai Composite Index declined 1.7%.
• Consumer confidence: Consumer confidence rose in October to 108.7, up from 99.2 in September, according to the Conference Board Consumer Confidence Index®. The Present Situation Index, based on consumers’ assessment of current business and labor market conditions, increased by 14.2 points to 138.0 in October. The Expectations Index, based on consumers’ short-term outlook for income, business, and labor market conditions, increased to 89.1 in October, up from 82.8 in September.

Eye on the Month Ahead

All attention will be focused on the results of the presidential and congressional elections in early November. In addition, the Federal Reserve meets this month. After lowering the federal funds target rate range by 50.0 basis points in September, it is questionable whether an additional decrease is in the offing in November. However, the Fed meets again in December and may consider an interest rate adjustment at that time.

The Markets (as of market close May 31, 2024)

Stocks rebounded from a sour April, closing higher in May. Investors spent the month focused on job gains, gross domestic product, corporate earnings reports, and inflation data in an attempt to determine when the Federal Reserve might cut interest rates. Each of the benchmark indexes listed here reversed the prior month’s losses with notable gains in May. The tech-heavy Nasdaq led the way, followed by the Russell 2000, the S&P 500, the Global Dow, and the Dow. Consumer confidence (see below) exceeded expectations in May, outpacing April’s reading. The labor market showed signs of slowing (see below), while wages inched lower since April 2023.

Inflationary data showed price pressures stabilized in April, with the Consumer Price Index and the Personal Consumption Expenditures Price Index each rising 0.3%. The CPI rose 3.4% for the 12 months ended in April (3.5% for the year ended in March), while the PCE price index was unchanged at 2.7% for the year ended in April. Growth slowed for the U.S. economy, as measured by gross domestic product, which increased 1.3% in the first quarter, following a 3.4% increase in the fourth quarter (see below). This is the weakest rate of growth since the second quarter of 2022. Consumer spending slowed more than expected, coming in at 2.0% in the first quarter compared to 3.3% in the fourth quarter. Spending on services rose 3.9% in the first quarter, following a 3.4% increase in the previous period. Spending on goods dipped 1.9%.

Job growth slowed notably in April (see below). In addition, a slight downward revision to the February estimate and an upward revision to January resulted in employment for those two months being 22,000 lower than previously reported. Wage growth slowed on an annual basis, increasing 3.9% over the last 12 months, down from 4.1% for the 12 months ended in March. New weekly unemployment claims decreased from a year ago, while total claims paid increased (see below).

Corporate profits declined for the first time in a year, falling 0.6%. Nevertheless, about halfway through first-quarter corporate earnings season, S&P 500 companies generally outperformed expectations. About 46% of the S&P 500 companies reported actual earnings, of which 77% have reported earnings per share above estimates. Several sectors have reported favorable earnings results, including communication services, financials, industrials, and information technology. Health care has lagged.

The housing market continued to be influenced by high mortgage rates. Sales of both existing homes and new homes declined in April. Selling prices for existing homes continued to climb, while prices for new homes declined.

Industrial production was flat in April, while manufacturing output declined (see below). According to the latest survey from the S&P Global US Manufacturing Purchasing Managers’ Index™, the manufacturing sector saw its first decline of the year in April. The services sector saw business accelerate but at slower pace than in March as new orders declined for the first time since October.

Among the market sectors in April, information technology, utilities, communication services, and real estate outperformed, while energy lagged.

Bond yields gained as bond prices declined in April. Ten-year Treasury yields generally closed the month higher. The two-year Treasury yield rose nearly 35.0 basis points to about 5.05% on the last day of April. The dollar surged against a basket of world currencies. Gold prices climbed higher. Crude oil prices dipped lower. The retail price of regular gasoline was $3.577 per gallon on May 27, $0.076 below the price a month earlier but $0.006 higher than the price a year ago.

Stock Market Indexes

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

Latest Economic Reports

• Employment: Total employment increased by 175,000 in April, following an upwardly revised March total of 315,000 new jobs. The April jobs increase was well below the average monthly gain of 242,000 over the prior 12 months. Employment trended up in health care, social assistance, and transportation and warehousing. In April, the unemployment rate increased 0.1 percentage point to 3.9% and was 0.5 percentage point higher than the rate a year earlier. The number of unemployed persons was relatively unchanged at 6.5 million. In April, the number of long-term unemployed (those jobless for 27 weeks or more), at 1.2 million, accounted for 19.6% of all unemployed people. The labor force participation rate, at 62.7%, was unchanged from the prior month, while the employment-population ratio, at 60.2%, decreased 0.1 percentage point from March. In April, average hourly earnings increased by $0.07 to $34.75. Since April 2023, average hourly earnings rose by 3.9%, which is down from the March figure of 4.1%. The average workweek edged down by 0.1 hour to 34.3 hours in April.
• There were 219,000 initial claims for unemployment insurance for the week ended May 25, 2024. During the same period, the total number of workers receiving unemployment insurance was 1,791,000. A year ago, there were 231,000 initial claims, while the total number of workers receiving unemployment insurance was 1,729,000.
• FOMC/interest rates: The Federal Open Market Committee met at the beginning of the month, the result of which was that interest rates remained unchanged. The Committee noted that there had been a lack of progress toward reaching its inflation goal of 2.0%. Overall, the FOMC maintained its hawkish stance toward lowering interest rates, with no date set for a reduction in the offing.
• GDP/budget: The economy, as measured by gross domestic product, accelerated at an annualized rate of 1.3% in the first quarter of 2024, according to the second estimate from the Bureau of Economic Analysis. GDP increased 3.4% in the fourth quarter. Personal consumption expenditures rose 2.0% in the first quarter compared to a 3.3% increase in the previous quarter. Consumer spending on goods dipped 1.9%, while spending on services rose 3.9%. Gross domestic investment rose 3.2% in the first quarter, well above the 0.7% increase in the fourth quarter. Nonresidential fixed investment advanced 3.3% in the first quarter (3.7% in the fourth quarter), while residential fixed investment increased 15.4% in the first quarter compared to a 2.8% increase in the fourth quarter. Exports inched up 1.2%, while imports, which are a negative in the calculation of GDP, increased 7.7%. Consumer prices increased 3.3% in the first quarter, compared with an increase of 1.8% in the previous quarter. Excluding food and energy prices, the PCE price index increased 3.6%, compared with an increase of 2.0% in the fourth quarter.
• April saw the federal budget enjoy a surplus of $236.0 billion, well below the $210.0 billion from a year earlier. This is up from the April 2023 surplus of $176.0 billion. Government receipts totaled $776.0 billion, of which individual income tax receipts and corporate tax receipts accounted for about $574.0 billion. Through the first seven months of fiscal year 2024, the total deficit sits at $855.0 billion, which is roughly $70.0 billion lower than the deficit through the first seven months of the previous fiscal year. So far in fiscal year 2024, total government receipts were $3.0 trillion ($2.7 trillion in 2023), while government outlays were $3.8 trillion, compared to $3.6 trillion over the same period in the previous fiscal year.
• Inflation/consumer spending: According to the latest Personal Income and Outlays report, personal income rose 0.3% in April (0.5% in March), while disposable personal income increased 0.2%, down from 0.5% in March. Consumer prices climbed 0.3% in April for the third straight month. Consumer prices excluding food and energy (core prices), rose 0.2% in April, 0.1 percentage point lower than the March increase. Consumer prices rose 2.7% since April 2023, unchanged from the advance for 12 months ended in March. Core prices increased 2.8% over the same period, unchanged from the 12 months ended in March. Consumer spending rose 0.2% in April, well below the 0.7% increase in both February and March.
• The Consumer Price Index rose 0.3% in April, 0.1 percentage point lower than the March increase. Over the 12 months ended in April, the CPI rose 3.4%, down 0.1 percentage point from the period ended in March. Excluding food and energy, the CPI rose 0.3% in April, (0.4% in March), and 3.6% from April 2023. Increases in prices for shelter (0.4%) and gasoline (2.8%) accounted for over 70.0% of the overall increase in the CPI. rose in March. Energy prices rose 1.1% over the month. Food prices were unchanged.
• Prices that producers received for goods and services rose 0.5% in April after falling 0.1% (revised) in March. Producer prices increased 2.2% for the 12 months ended in April, up from the 1.8% increase for the 12 months ended in March. Producer prices less foods, energy, and trade services advanced 0.4% in April (0.2% in March), while prices excluding food and energy increased 0.5%. For the 12 months ended in April, prices less foods, energy, and trade services moved up 3.1%., up from 2.8% for the 12 months ended in March. Prices less foods and energy increased 2.4% for the year ended in April, unchanged from the period ended in March.
• Housing: Sales of existing homes fell 1.9% in April and 1.9% over the last 12 months. According to the National Association of Realtors®, existing home sales have stagnated because interest rates have not moved lower. The median existing-home price was $407,600 in April, up from the March price of $392,900 and well above the April 2023 price of $385,800. Unsold inventory of existing homes represented a 3.5-month supply at the current sales pace, up slightly from 3.2 months in March. Sales of existing single-family homes decreased 2.1% in April and 1.3% from the prior year. The median existing single-family home price was $412,100 in April, up from $396,600 in March and up 5.6% from March 2023. According to Freddie Mac, the 30-year fixed-rate mortgage averaged 7.02% as of May 16, down from 7.09% the previous week and up from 6.39% one year ago.
• New single-family home sales also declined in April, falling 4.7% below the March pace and 7.7% under the April 2023 rate. The median sales price of new single-family houses sold in April was $433,500 ($439,500 in March). The April average sales price was $505,700 ($527,400 in March). The inventory of new single-family homes for sale in April represented a supply of 9.1 months at the current sales pace, up from 6.9 months in March.
• Manufacturing: Industrial production was unchanged in April, after inching up 0.1% in March. Manufacturing output decreased 0.3% in April. Mining decreased 0.6% in April, while utilities increased 2.8%. For the 12 months ended in April, total industrial production fell 0.4% from its year-earlier level. For the 12 months ended in April, manufacturing fell 0.5%, mining decreased 1.3%, while utilities increased 2.3%.
• New orders for durable goods rose 0.7% in April following a 0.8% March increase, marking the third consecutive monthly increase. Excluding transportation, new orders increased 0.4% in April. Excluding defense, new orders were flat. New orders for transportation equipment advanced 1.2% in April, contributing to the overall increase in new orders. New orders for nondefense capital goods in April decreased 1.5%, while new orders for defense capital goods increased 15.2%.
• Imports and exports: U.S. import prices advanced 0.9% in April following a 0.6% advance in the previous month. The April increase was the largest one-month jump since March 2022. Import prices last declined in December 2023. Import prices advanced 1.1% over the last 12 months, the largest yearly increase since December 2022. Import fuel prices rose 2.4% in April. Import prices excluding fuel ticked up 0.7% in April. Export prices rose 0.5% in April after advancing 0.1% in March. Export prices have not decreased since December 2023. Higher nonagricultural prices in April more than offset lower agricultural prices. Despite the recent increases, prices for exports declined 1.0% over the past year, the smallest one-year drop since February 2023.
• The international trade in goods deficit was $99.4 billion in April, up $7.1 billion, or 7.7%, from March. Exports of goods were $169.9 billion in April, $0.9 billion, or 0.5%, less than in March. Imports of goods were $269.3 billion in April, $8.0 billion, or 4.4%, under the March estimate. Since April 2023, exports increased 4.2%, while imports increased 3.2%.
• The latest information on international trade in goods and services, released May 2, is for March and revealed that the goods and services trade deficit was $69.4 billion, down $0.1 billion, or 0.1%, from the February deficit. March exports were $257.6 billion, 2.0% less than February exports. March imports were $327.0 billion, 1.6% under February imports. Year over year, the goods and services deficit increased $6.5 billion, or 3.2%, from the same period in 2023. Exports increased $9.1 billion, or 1.2%. Imports increased $15.6 billion, or 1.6%.
• International markets: Eurozone inflation rose for the first time in five months, climbing to 2.6% in May, up from 2.4% in each of the previous two months. Price advances for energy and services helped drive the overall increase. Prices rose more than expected in Germany (2.8%), France (2.7%), Spain (3.8%), and Italy (0.8%). Canada saw its economy expand by 0.4% in the first quarter of 2024, driven higher, in part, by a 0.7% increase in household spending. Since the first quarter of 2023, Canadian GDP expanded 1.7%. China’s manufacturing receded in May as new export orders declined. For May, the STOXX Europe 600 Index rose 2.6%; the United Kingdom’s FTSE gained 0.8%; Japan’s Nikkei 225 Index advanced 0.7%; and China’s Shanghai Composite Index fell 0.6%.
• Consumer confidence: Consumer confidence exceeded expectations in May. The Conference Board Consumer Confidence Index® was 102.0 in May, well above a slightly upwardly revised 97.5 in April. The Present Situation Index, based on consumers’ assessment of current business and labor market conditions, increased to 143.1 in May, up from 140.6 in the previous month. The Expectations Index, based on consumers’ short-term outlook for income, business, and labor market conditions, rose to 74.6 in May from 68.8 in April.

Eye on the Month Ahead

The Federal Open Market Committee meets for the second straight month in June. Job growth in April was notably slower. However, inflation remained elevated. Investors will focus on how the Fed assesses this information in determining its policy stance moving forward.

The Markets (as of market close April 12, 2024)

Stocks faltered for the second straight week as investors dealt with market-moving inflation data and a less-than-impressive start to first-quarter corporate earnings season. Both the Consumer Price Index and the Producer Price Index rose higher last week. Taken together, increases in the CPI and the PPI support a more cautious approach relative to the Federal Reserve’s current monetary policy. It is certainly not likely that the Fed will lower interest rates in June. Also, last Friday, earnings reports from some major banks fell short of expectations. Each of the benchmark indexes listed here ended the week in the red. Among the market sectors, only information technology and communication services gained. Financials, health care, real estate, and materials each lost at least 2.0%. The dollar and gold prices edged higher. Crude oil prices slipped lower.

Wall Street saw stocks open mixed last Monday, with the Russell 2000 (0.5%) and the Global Dow (0.4%) posting gains, while the S&P 500, the Dow, and the Nasdaq ended flat. Ten-year Treasuries closed at 4.42%, the highest yield in over four months. Investors seemed to be tempering expectations of an interest rate cut by the Federal Reserve, while bracing for the release of the Consumer Price Index later in the week. Real estate, consumer discretionary, and financials were the best performing sectors, while health care, industrials, and energy lagged. Crude oil prices fell for the first time in several sessions, dipping to $86.48 per barrel. The dollar slipped minimally, while gold prices rose 0.5%.

The Russell 2000 and the Nasdaq rose 0.3% last Tuesday to lead the benchmark indexes listed here. The S&P 500 gained 0.1%, while the Dow and the Global Dow were flat. Ten-year Treasury yields dipped to 4.36%. Crude oil prices fell $1.09 to settle at $85.34 per barrel. The dollar closed where it began. Gold prices gained 0.8%. Industrials and financials trended lower, while real estate outperformed the remaining sectors.

Stocks ended sharply lower last Wednesday following the release of the latest Consumer Price Index (see below), which dimmed hopes of an interest rate cut any time soon. Most now expect the federal funds target rate will remain at its 23-year high in June. Each of the benchmark indexes listed here declined. The Russell 2000 dropped 2.5%, the Dow fell 1.1%, the S&P 500 and the Global Dow lost 1.0%, and the Nasdaq slid 0.8%. The 10-year Treasury yield jumped 19.4 basis points to 4.56%, its highest since November 2023. Gold prices slipped from recent all-time highs, falling $11.20 per ounce. Crude oil prices rose $1.00 to $86.22 per barrel. The dollar gained 1.0%.

Wall Street moved generally higher by the close of trading last Thursday. The Nasdaq gained 1.7%, while the Russell 2000 and the S&P 500 advanced 0.7%. The Global Dow ticked 0.2% lower, while the Dow was flat. Ten-year Treasury yields ended the session at 4.57%. Crude oil prices dipped $0.60 to $85.86 per barrel. The dollar ended the day where it began, while gold prices rose $42.70 to $2,391.10 per ounce. A slightly lower-than-expected Producer Price Index (see below) gave some encouragement to investors following the release of a higher-than-expected Consumer Price Index.

Last Friday was not a good day for equities. Each of the benchmark indexes listed here fell by at least 1.0%, led by the Russell 2000 (-1.9%) and the Nasdaq (-1.6%). The large caps of the S&P 500 (-1.5%) and the Dow (-1.2%) also declined, while the Global Dow lost 1.0%. Ten-year Treasury yields fell 7.7 basis points to settle at 4.49%. Crude oil prices gained nearly $0.50. The dollar gained 0.7%, while gold prices fell 0.5%.

Stock Market Indexes

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

• Consumer prices rose 0.4% in March, the same increase as in February and slightly higher than expectations. Core prices, less food and energy, also rose 0.4%, unchanged from the February pace. For the year, the Consumer Price Index rose 3.5%, rising at the fastest rate since the 12-month period ended in September 2023. Core prices are up 3.8% since March 2023. In March, prices for shelter rose 0.4%, while gasoline prices advanced 1.7%. Combined, these two indexes contributed over half of the monthly increase in the March CPI. Energy prices rose 1.1% over the month, while prices for food ticked up 0.1% in March. While the preferred inflation indicator for the Federal Reserve is the personal consumption expenditures price index, the increase in the CPI over the past few months certainly supports the notion that getting inflation down to the Fed’s 2.0% objective is going to take time and patience.
• The Producer Price Index increased 0.2% in March after advancing 0.6% in February. For the 12 months ended in March, producer prices rose 2.1%, the largest advance since rising 2.3% for the 12 months ended April 2023. In March, prices for services increased 0.3%, while prices for goods edged down 0.1%. In March, producer prices excluding food and energy rose 0.2%, down from the 0.3% increase in February.
• Prices for both imports and exports advanced in March for the third straight month. Import prices rose 0.4% last month and 1.4% over the first quarter of 2024, the largest three-month increase since the February-May 2022 period. Imports advanced 0.4% for the year ended in March. Rising fuel prices contributed to the increase in import prices. Fuel import prices rose 4.7% in March after increasing 1.3% the previous month. The March advance was the largest increase since September 2023. Nonfuel imports rose 0.1% in March and have not declined since October 2023. Prices for exports advanced 0.3% in March, after rising 0.7% in February and 0.8% in January. Higher nonagricultural prices in March more than offset lower agricultural prices. Despite the recent increases, export prices fell 1.4% from March 2023 to March 2024, the smallest 12-month drop since the 12 months ended February 2023.
• The Federal Treasury budget deficit was $236.0 billion in March, roughly $60.0 billion less than the February monthly deficit. In March, government receipts were $332.0 billion, while outlays totaled $569.0 billion. Thus far in fiscal year 2024, the deficit sits at $1,065 billion compared to $1,101 billion over the same period in fiscal year 2023.
• The national average retail price for regular gasoline was $3.591 per gallon on April 8, $0.074 per gallon more than the prior week’s price but $0.005 per gallon less than a year ago. Also, as of April 8, the East Coast price increased $0.009 to $3.391 per gallon; the Midwest price rose $0.094 to $3.460 per gallon; the Gulf Coast price increased $0.099 to $3.215 per gallon; the Rocky Mountain price rose $0.029 to $3.380 per gallon; and the West Coast price increased $0.192 to $4.748 per gallon.
• For the week ended April 6, there were 211,000 new claims for unemployment insurance, a decrease of 11,000 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 for the week ended March 30 was 1.2%, unchanged from the previous week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended March 30 was 1,817,000, an increase of 28,000 from the previous week’s level, which was revised down by 2,000. States and territories with the highest insured unemployment rates for the week ended March 23 were New Jersey (2.6%), California (2.4%), Rhode Island (2.4%), Minnesota (2.3%), Massachusetts (2.2%), Illinois (2.0%), New York (1.9%), Alaska (1.8%), Connecticut (1.8%), Pennsylvania (1.8%), and Washington (1.8%). The largest increases in initial claims for unemployment insurance for the week ended March 30 were in California (+2,147), Pennsylvania (+1,913), Iowa (+1,383), New Jersey (+1,230), and Illinois (+1,195), while the largest decreases were in Texas (-3,248), Missouri (-2,369), Georgia (-935), Arkansas (-459), and North Carolina (-400).

Eye on the Week Ahead

This is a light week for important economic news. The March report on retail sales is out this Monday. The previous month saw retail sales rise 0.6%, partially reflective of rising consumer prices. The report from the Federal Reserve on industrial production is also available this week. Industrial production ticked up 0.1% in February, while manufacturing rose 0.8%.

The Markets (first quarter through March 29, 2024)

Wall Street got off to a fast start to begin 2024. Investors were encouraged by strength in the economy, the likelihood of interest rate cuts, possibly beginning in June, and opportunities in artificial intelligence. Each of the benchmark indexes listed here posted solid first-quarter gains led by the S&P 500 and the Nasdaq. Several indexes reached new highs throughout the quarter. The S&P 500 hit its first record high in two years late in January, leading to its best first-quarter performance since 2019. The Federal Reserve provided encouraging news following its meeting in March as it projected three interest rate cuts by the end of the year. Ten-year Treasury yields stayed around 4.20% for most of the quarter, up from 3.86% at the close of 2023. Roughly 76.0% of S&P 500 companies reported fourth-quarter corporate earnings that exceeded analysts’ expectations. Some of the “Magnificent Seven” megacap stocks stumbled a bit in the first quarter. Nevertheless, they were responsible for nearly 40.0% of the S&P 500’s year-to-date gain, which is down from over 60.0% last year. Ten of the 11 market sectors posted quarterly gains, with industrials, information technology, communication services, financials, and energy climbing more than 10.0%.

The U.S. dollar underwent several ups and downs, ultimately closing the first quarter higher. Gold prices advanced to reach record highs. Crude oil prices, which began the year at about $71.00 per barrel, climbed nearly 16.0% to over $82.00 per barrel as oil exporting countries cut back on supplies. Home mortgage rates began the year at about 6.62% for the 30-year fixed rate, according to Freddie Mac. Rates jumped as high as 6.94% at the end of February, before falling to 6.79% at the end of March. The retail price for regular gasoline was $3.523 per gallon on March 25, $0.027 above the February 26 price and $0.407 higher than the price three months earlier. Regular retail gas prices increased $0.102 from a year ago. Gold prices declined in the third quarter, nearing a seven-month low.

January saw stocks get off to a slow start as investors took some recent gains, particularly from tech shares, and moved into sectors that lagged in 2023, including consumer staples, health care, and energy. By the end of the month, each of the benchmark indexes listed here posted gains, with the exception of the Russell 2000. Inflation data showed prices inched higher, with the Consumer Price Index (CPI) and the personal consumption expenditures (PCE) price index increasing, both monthly and annually. The Federal Reserve met in January and maintained the federal funds target rate range at 5.25%-5.50%. The economy proved resilient in January, despite the ongoing war in Ukraine and the turmoil in the Middle East. Gross domestic product rose 3.2%, while personal consumption expenditures, a measure of consumer spending, rose 3.0%. Job growth remained steady, while industrial production inched higher. All 11 market sectors ended January higher, led by industrials and materials. Bond returns were slightly negative, with yields on 10-year Treasuries inching up 10.0 basis points.

Large-cap stocks advanced for the fourth consecutive month in February. Several of the benchmark indexes listed here reached record highs, with the S&P 500 off to its strongest start to a year since 2019. Value stocks and small caps also enjoyed a favorable month. Among the benchmark indexes listed here, the Nasdaq and the Russell 2000 led the way. In contrast, bond values dipped lower, pushing yields up. The economy continued to expand, despite operating in the highest interest-rate environment in nearly 20 years. The CPI and PCE price index climbed higher as inflationary pressures continued to prove stubborn. However, the annual rates for both indexes declined. Retail sales dropped 0.8%, pulled lower by declines in sales for motor vehicles and parts and gasoline stations. Job gains were robust, adding more than 300,000 new jobs. Investors’ hopes for an interest rate reduction waned on stubborn inflationary pressures, coupled with strength in the labor market and the economy.

March continued the bull run for stocks. Each of the benchmark indexes listed here advanced, with the Global Dow, the Russell 2000, and the S&P 500 each gaining over 3.0%. Utilities, financials, materials, and energy led the market sectors in March. Consumer spending and gross domestic product expanded in March. Inflationary pressures continued to increase as the Consumer Price Index rose 0.4% for the month and 3.2% for the year. Producer prices rose 0.6%, more than double most analysts’ expectations. Overall, price pressures remained firmer than expected. Crude oil prices rose nearly 6.0%, while prices at the pump increased by about $0.274 for a gallon of regular gasoline.

Stock Market Indexes

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 increased by 275,000 in February following a downwardly revised January total of 229,000 new jobs. Employment trended up in health care, government, food services and drinking places, social assistance, and transportation and warehousing. Over the 12 months ended in February, employment increased by an average of 230,000 per month. In February, the unemployment rate rose by 0.2 percentage point to 3.9% and was 0.3 percentage point higher than the rate a year earlier. The number of unemployed persons rose by 334,000 to 6.5 million, which was nearly 500,000 above the February 2023 figure. In February, the number of long-term unemployed (those jobless for 27 weeks or more), at 1.2 million, fell by 74,000 and accounted for 18.7% of all unemployed people. The labor force participation rate, at 62.5%, was unchanged from the January figure, while the employment-population ratio, at 60.1%, ticked down 0.1 percentage point. In February, average hourly earnings increased by $0.05 to $34.57 following an increase of $0.18 in January. Since February 2023, average hourly earnings rose by 4.3%. The average workweek increased by 0.1 hour to 34.3 hours in February.
• There were 215,000 initial claims for unemployment insurance for the week ended February 24, 2024. During the same period, the total number of workers receiving unemployment insurance was 1,905,000. A year ago, there were 221,000 initial claims, while the total number of workers receiving unemployment insurance was 1,718,000.
• FOMC/interest rates: The Federal Open Market Committee made no change to the federal funds target rate range following its meeting in March. The Committee decided to maintain interest rates at their current level primarily because inflation, while showing signs of general easing, remained elevated. The Fed continued to forecast three interest rate reductions this year, although that could change based on the course of inflation and the economy.
• GDP/budget: The economy, as measured by gross domestic product, accelerated at an annualized rate of 3.4% in the fourth quarter, according to the third and final estimate from the Bureau of Economic Analysis. GDP increased 4.9% in the third quarter. Compared to the third quarter, personal consumption expenditures rose from 3.1% to 3.3%. Fixed investment rose 2.6% to 3.5%. Nonresidential fixed investment increased from 1.4% to 3.7%. Residential fixed investment fell 3.9 percentage points to 2.8%. Exports decreased from 5.4% to 5.1%. Imports decreased from 4.2% to 2.2%. Government spending decreased 1.2 percentage points to 4.6%. The personal consumption expenditures price index increased 1.8% in the fourth quarter, compared with an increase of 1.7% in the third quarter.
• February saw the federal budget deficit come in at $296.0 billion, well above the $22.0 billion from the January deficit. Through the first five months of fiscal year 2024, the total deficit sits at $828.0 billion, is roughly $105.0 billion higher than the first five months of the previous fiscal year. So far in fiscal year 2024, total government receipts were $1.9 trillion ($1.7 trillion in 2023), while government outlays were $2.7 trillion through the first five months of fiscal year 2024, compared to $2.5 trillion over the same period in the previous fiscal year.
• Inflation/consumer spending: According to the latest personal income and outlays report, personal income rose 0.3% in February (1.0% in January), while disposable personal income increased 0.2% in February, down from 0.4% in January. Consumer prices climbed 0.3% in February, the same increase as in the previous month. Excluding food and energy (core prices), consumer prices rose 0.3% in February, down from January’s 0.5% increase. Consumer prices rose 2.5% since February 2023, 0.1 percentage point more than the advance for the 12 months ended in January. Core prices increased 2.8% over the same period, 0.1 percentage point lower than the year ended in January.
• The Consumer Price Index rose 0.4% in February after advancing 0.3% in January. Over the 12 months ended in February, the CPI rose 3.2%, up 0.1 percentage point from the period ended in January. Excluding food and energy prices, the CPI rose 0.4% in February, unchanged from the previous month, and 3.8% from February 2023, 0.1 percentage point less than the rate for the 12-month period ended in January. Prices for shelter, up 0.4%, continued to rise in February, as did gasoline prices (3.8%). Combined, these two indexes contributed to over 60.0% of the monthly all items increase. Food prices were unchanged in February. Over the last 12 months ended in February, food prices rose 2.2%, shelter prices increased 5.7%, while energy prices fell 1.9%.
• Prices that producers received for goods and services rose 0.6% in February following a 0.3% increase in the previous month. Producer prices increased 1.6% for the 12 months ended in February, up from the 0.9% increase for the 12 months ended in January. Producer prices less foods, energy, and trade services advanced 0.4% in February (0.6% in January), while prices excluding food and energy increased 0.3%. For the 12 months ended in February, prices less foods, energy, and trade services moved up 2.8%, a 0.2 percentage point increase over the 12 months ended in January. Prices less foods and energy increased 2.0% for the year ended in February, unchanged from the prior 12-month period.
• Housing: Sales of existing homes rose 9.5% in February from January. However, sales were down 3.3% from February 2023. The median existing-home price was $384,500 in February, up from the January price of $378,600 and well above the February 2023 price of $363,600. Unsold inventory of existing homes represented a 2.9-month supply at the current sales pace, down slightly from 3.0 months in January but above the 2.6-month supply from a year earlier. Sales of existing single-family homes increased 10.3% in February but declined 2.7% for the year. The median existing single-family home price was $388,700 in February, up from $382,900 in January and above the February 2023 price of $368,100. According to Freddie Mac, the 30-year fixed-rate mortgage averaged 6.74% as of March 14, down from 6.88% the previous week and from 6.60% one year ago.
• New single-family home sales decreased in February after increasing in December and January. Sales of new single-family homes fell 0.3% in February. Nevertheless, sales were up 5.9% from February 2023. The median sales price of new single-family houses sold in February was $400,500 ($414,900 in January). The February average sales price was $485,000 ($523,400 in January). The inventory of new single-family homes for sale in February represented a supply of 8.4 months at the current sales pace, down from 9.3 months in January.
• Manufacturing: Industrial production edged up 0.1% in February after declining 0.5% in the previous month. Manufacturing output rose 0.8% in February after falling 1.1% in January. Mining increased 2.2%, while utilities dropped 7.5% because of warmer-than-typical temperatures. Over the past 12 months ended in February, total industrial production was down 2.0%. For the 12 months ended in February, manufacturing decreased 0.7%, mining rose 1.4%, while utilities increased 0.8%.
• New orders for durable goods rose 1.4% in February following two consecutive monthly decreases. Excluding transportation, new orders increased 0.5% in February. Excluding defense, new orders rose 2.2%. New orders for transportation equipment advanced 3.3% in February, contributing to the overall increase in new orders. New orders for nondefense capital goods in February increased 4.4%, while new orders for defense capital goods decreased 12.7%.
• Imports and exports: U.S. import prices advanced 0.3% in February following a 0.8% advance in the previous month. The February and January advances were the first consecutive increases since September and August 2023. Despite the recent advances, prices for imports decreased 0.8% over the past year. Prices for import fuel rose 1.8% in February after advancing 1.2% in January. The February increase was the largest advance since a 6.4% rise in September 2023. In spite of the recent advances, import fuel prices fell 4.1% over the past year. Prices for nonfuel imports increased 0.2% in February following a 0.7% increase the previous month. Despite the recent increases, prices for nonfuel imports declined 0.5% over the past 12 months. Export prices advanced 0.8% in February after rising 0.9% in January. Despite the recent increases, export prices declined 1.8% for the year ended in February. That was the smallest 12-month drop since export prices decreased 0.8% for the period from February 2022 to February 2023.
• The international trade in goods deficit was $91.8 billion in February, up $1.3 billion, or 1.5%, from January. Exports of goods were $175.1 billion in February, $4.8 billion, or 2.8%, more than in January. Imports of goods were $266.9 billion in February, $6.1 billion, or 2.3%, more than in January. Since February 2023, exports rose 3.6%, while imports increased 2.8%.
• The latest information on international trade in goods and services, released March 7, is for January and revealed that the goods and services trade deficit was $67.4 billion, up $3.3 billion from the December deficit. January exports were $257.2 billion, 0.1% more than December exports. January imports were $324.6 billion, 1.1% more than December imports. Year over year, the goods and services deficit decreased $2.9 billion, or 4.1%, from January 2023. Exports decreased $1.0 billion, or 0.4%. Imports decreased $3.9 billion, or 1.2%.
• International markets: The United Kingdom appears headed for a period of consumer-led economic growth. Falling inflation and rising purchasing power have increased hopes of a further economic rebound in the U.K. European countries may be heading to an interest rate decrease. While the Bank of England held rates in March, Switzerland became the first European country to cut rates. China’s industrial profits expanded to start the year, offering further evidence that the Chinese economy may be stronger than some suggested. For March, the STOXX Europe 600 Index rose 3.8%; the United Kingdom’s FTSE gained 4.5%; Japan’s Nikkei 225 Index gained 2.6%; and China’s Shanghai Composite Index dipped 0.2%.
• Consumer confidence: Consumer confidence was little changed in March from February. The Conference Board Consumer Confidence Index® was 104.7 in March, essentially unchanged from a downwardly revised 104.8 in February. The Present Situation Index, based on consumers’ assessment of current business and labor market conditions, rose to 151.0 in March, up from 147.6 in the previous month. The Expectations Index, based on consumers’ short-term outlook for income, business, and labor market conditions, slipped to 73.8 in March, down from 76.3 in February.

Eye on the Quarter Ahead

The second quarter of 2024 will likely focus on election campaign rhetoric, first-quarter corporate earnings, and the ongoing turmoil in Ukraine and the Middle East. Investors will be watching for an interest rate reduction by the Federal Reserve, possibly in June.

The Markets (as of market close March 29, 2024)

Stocks finished the month of March in solid fashion. Each of the benchmark indexes listed here posted gains, with the exception of the Nasdaq. Bond yields dipped lower. Crude oil prices advanced, while energy shares ended up being a top performer. The dollar inched higher, while gold prices continued to climb.

Investors seemed to take a breath to begin last week, as stocks ticked lower by the close of trading last Monday. Of the benchmark indexes listed here, only the Russell 2000 was able to eke out a minimal 0.1% gain. The Dow fell 0.4%, while the Nasdaq and the S&P 500 dipped 0.3%, and the Global Dow lost 0.1%. Ten-year Treasury yields gained 3.5 basis points to 4.25%. Crude oil prices reached $82.02 per barrel after gaining $1.39. The dollar slipped 0.3%, while gold prices rose 0.6%.

Last Tuesday saw stocks lose steam after a favorable start to the day, ultimately closing lower for the second straight day. The Nasdaq fell 0.4%, the S&P 500 lost 0.3%, the Russell 2000 dropped 0.2%, the Dow slipped 0.1%, while the Global Dow broke even. Ten-year Treasury yields settled at 4.23%. Crude oil prices lost $0.50 to close at about $81.46 per barrel. The dollar and gold prices inched up minimally.

Stocks finally rebounded last Wednesday, ending a short-lived slump. Each of the benchmark indexes listed here posted notable gains, led by the Russell 2000, which rose 2.1%. the Dow climbed 1.2%, followed by the S&P 500 (0.9%), the Global Dow (0.8%), and the Nasdaq (0.5%). Ten-year Treasury yields declined 3.8 basis points to 4.19%. Crude oil prices ticked up marginally to $81.70 per barrel. The dollar was flat, while gold prices rose 0.7%. Real estate and utilities led the market sectors.

Wall Street closed the holiday week on Thursday, with equities generally advancing. The Russell 2000 gained 0.5%, while the Dow and the S&P 500 eked out 0.1% increases. The Nasdaq dipped 0.1%, while the Global Dow was flat. Ten-year Treasury yields inched up 1.0 basis point to close at 4.20%. The dollar rose 0.2%, while gold prices jumped 1.3%.

Stock Market Indexes

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

• Personal income rose 0.3% and disposable personal income advanced 0.2% in February, according to the latest data from the Bureau of Economic Analysis. Consumer spending, as measured by personal consumption expenditures, increased 0.8%. The personal consumption expenditures price index increased 0.3%, about where analysts expected. Excluding food and energy, prices rose 0.3%. Over the last 12 months, prices increased 2.5%, while core prices, excluding food and energy, advanced 2.8%.
• Gross domestic product rose at an annual rate of 3.4% in the fourth quarter, according to the third and final estimate released by the Bureau of Economic Analysis. GDP increased by 4.9% in the third quarter. Compared to the third quarter of 2023, the deceleration in GDP in the fourth quarter primarily reflected a downturn in private inventory investment and slowdowns in federal government spending and residential fixed investment. Imports decelerated. The personal consumption expenditures (PCE) price index increased 1.8%, while the PCE index excluding food and energy prices increased 2.0%. Personal consumption expenditures rose 3.3% in the fourth quarter, nonresidential fixed investment increased 3.7%, and residential fixed investment rose 2.8%. Exports advanced 5.1%, while imports edged up 2.2%.
• The advance report on international trade in goods showed the deficit rose 1.5% in February. Exports increased 2.8%, while imports rose 2.3%. Since February 2023, exports are up 3.6% and imports climbed 2.8%.
• Sales of new single-family homes dipped 0.3% in February, but were 5.9% above the February 2023 estimate. The median sales price in February was $400,500, while the average sales price was $485,000. February inventory of new single-family homes for sale sat at a supply of 8.4 months at the current sales pace.
• New orders for manufactured durable goods in February rose 1.4%, marking the first monthly increase since November 2023. Excluding transportation, new orders increased 0.5%. Excluding defense, new orders increased 2.2%. Transportation equipment, also up following two consecutive monthly decreases, led the increase, rising 3.3%. New orders for nondefense capital goods in February increased 4.4%. New orders for defense capital goods in February decreased 12.7%.
• The national average retail price for regular gasoline was $3.523 per gallon on March 25, $0.070 per gallon greater than the prior week’s price and $0.102 per gallon more than a year ago. Also, as of March 25, the East Coast price increased $0.039 to $3.388 per gallon; the Midwest price rose $0.097 to $3.406 per gallon; the Gulf Coast price increased $0.077 to $3.176 per gallon; the Rocky Mountain price rose $0.126 to $3.292 per gallon; and the West Coast price increased $0.080 to $4.460 per gallon.
• For the week ended March 23, there were 210,000 new claims for unemployment insurance, a decrease of 2,000 from the previous week’s level, which was revised up by 2,000. According to the Department of Labor, the advance rate for insured unemployment claims for the week ended March 16 was 1.2%, unchanged from the previous week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended March 16 was 1,819,000, an increase of 24,000 from the previous week’s level, which was revised down by 12,000. States and territories with the highest insured unemployment rates for the week ended March 9 were New Jersey (2.8%), Rhode Island (2.6%), California (2.4%), Minnesota (2.4%), Massachusetts (2.3%), Illinois (2.1%), New York (2.0%), Connecticut (1.9%), Montana (1.9%), Pennsylvania (1.9%), and Washington (1.9%). The largest increases in initial claims for unemployment insurance for the week ended March 16 were in Missouri (+1,443), Michigan (+1,204), Tennessee (+538), Mississippi (+353), and Arkansas (+279), while the largest decreases were in California (-5,794), Oregon (-1,651), Texas (-856), Pennsylvania (-740), and Illinois (-626).

Eye on the Week Ahead

The March employment data is available this week. Employment rose by 275,000 in February as the labor sector continued to show strength. The March surveys of purchasing managers for the manufacturing and services industries are also out this week. February saw both sectors expand.

The Markets (as of market close March 15, 2024)

Equities closed lower for the second straight week, with the Russell 2000 losing nearly 2.0%. A sell-off in tech shares pulled the Nasdaq down 0.7%, marking the first back-to-back weekly losses since last October. Higher-than-expected inflation data may have raised investor concerns that the Federal Reserve may keep interest rates elevated for longer than hoped for. Information technology, consumer discretionary, health care, industrials, real estate, and utilities underperformed, while energy jumped more than 4.0%. Long-term bond prices slipped, driving yields higher. The dollar ended the week higher. Crude oil prices rose 4.0%. Gold prices declined, ending a three-week rally.

Stocks mostly slipped lower to start the week, with only the Dow inching up 0.1%, as investors may have exercised caution ahead of the upcoming Consumer Price Index report. The Russell 2000 (-0.8%), the Nasdaq (-0.4%), the Global Dow (-0.4%), and the S&P 500 (-0.1%) lost value last Monday. Ten-year Treasury yields gained 1.5 basis points to close at 4.10%. Crude oil prices ticked up 0.1% to reach $78.09 per barrel. The dollar and gold prices rose 0.1%.

Wall Street saw stocks edge higher last Tuesday, despite a slight bump in the February Consumer Price Index (see below). The Nasdaq (1.5%) and the S&P 500 (1.1%) led the benchmark indexes listed here, followed by the Dow (0.6%) and the Global Dow (0.5%). The Russell 2000 declined less than 0.1%. The expected increase in prices did not dampen investors’ expectations that the Federal Reserve will cut rates, possibly in June. Tech and AI shares resumed their recent rally, helping to push stocks higher. Ten-year Treasury yields closed at 4.15% after adding 5.1 basis points. Crude oil prices slipped $0.19 to $77.74 per barrel as Houthi forces stepped up Red Sea attacks. The dollar inched up 0.1%, while gold prices fell for the first time in several sessions, declining 1.2%.

The Russell 2000 (0.3%), the Global Dow (0.2%), and the Dow (0.1%) advanced last Wednesday, while the Nasdaq (-0.5%) and the S&P 500 (-0.2%) declined, as the tech rally slowed. Yields on 10-year Treasuries gained 3.7 basis points to close at 4.19%. Crude oil prices rose to $79.73 per barrel after increasing $2.17. The dollar dipped 0.1%, while gold prices rose 0.5%.

Stocks closed lower last Thursday, likely in response to another batch of higher-than-expected inflation data. Ten-year Treasury yields also jumped 10.6 basis points to 4.29% as bond prices slid lower. Crude oil prices reached a four-month high after hitting $80.08 per barrel. The dollar advanced 0.6%, while gold prices fell 0.7%. Each of the benchmark indexes listed here lost value, led by the Russell 2000, which fell 2.0%. The Global Dow declined 0.5%, the Dow lost 0.4%, while the Nasdaq and the S&P 500 dipped 0.3%.

Friday saw stocks fall, with the Nasdaq (-1.0%) and the S&P 500 (-0.7%) dropping the furthest among the benchmark indexes listed here. The Dow lost 0.5% and the Global Dow dipped 0.3%. The Russell 2000 rose 0.4%. Ten-year Treasury yields ticked up less than 1.0 basis point. Crude oil prices followed two days of advances by slipping 0.3%. The dollar inched up 0.1%, while gold prices fell 0.3%.

Stock Market Indexes

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

• Inflation rose for the second straight month in February. The Consumer Price Index increased 0.4% last month after rising 0.3% in January. Over the last 12 months, the CPI increased 3.2%. Prices for shelter rose 0.4% in February and prices for gasoline increased 3.8%. Combined, these two indexes contributed over 60.0% of the monthly increase. Prices for food were unchanged in February. Energy prices rose 2.3%, while prices less food and energy advanced 0.4%. Over the last 12 months, prices for food rose 2.2% while energy prices decreased 1.9%. Prices less food and energy increased 3.8% since February 2023. Shelter prices increased 5.7% over the last year, accounting for roughly two thirds of the total 12-month increase in prices less food and energy. Other indexes with notable increases over the last year include motor vehicle insurance (20.6%), medical care (1.4%), recreation (2.1%), and personal care (4.2%).
• The Producer Price Index rose a higher-than-expected 0.6% in February, following a 0.3% increase in January. Excluding prices for food and energy, producer prices rose 0.3% in February. For the 12 months ended in February, the PPI advanced 1.6%, the largest increase since the 12-month period ended in September 2023. In February, nearly two thirds of the rise in producer prices could be traced to prices for goods, which advanced 1.2%. Prices for services moved up 0.3%. The increase in producer prices is in line with the Consumer Price Index, which showed price pressures have held firmer than expected.
• Retail and food services sales rose 0.6% last month and 1.5% over the February 2023 rate. Retail trade sales increased 0.6% in February and 0.8% above last year. Nonstore (internet) retail sales dipped 0.1% in February but were up 6.4% over the last 12 months.
• Prices for both imports and exports advanced in February. Import prices rose 0.3% last month after rising 0.8% in January. Despite the recent increases, import prices decreased 0.8% over the past 12 months. Import fuel prices rose 1.8% in February, while nonfuel import prices ticked up 0.2%. Export prices increased 0.8% in February after rising 0.9% in January. Nevertheless, since February 2023, export prices have fallen 1.8%, which was the smallest 12-month decrease since the 12-month period ended in February 2023.
• The Treasury budget deficit was $296.0 billion in February, up from $22.0 billion in January. Total receipts were $271.0 billion, while outlays were $567.0 billion. Through the first five months of the fiscal year, the deficit is $828.0 billion, about $100.0 billion above the deficit over the same period for the last fiscal year.
• Industrial production edged up 0.1% in February after declining 0.5% in January. In February, manufacturing rose 0.8% after declining 1.1% in January. Mining climbed 2.2%. The gains in manufacturing and mining partly reflected recoveries from weather-related declines in January. Utilities fell 7.5% in February because of warmer-than-typical temperatures. Total industrial production in February was 0.2% below its year-earlier level.
• The national average retail price for regular gasoline was $3.376 per gallon on March 11, $0.026 per gallon more than the prior week’s price but $0.080 per gallon less than a year ago. Also, as of March 11, the East Coast price increased $0.025 to $3.265 per gallon; the Midwest price rose $0.018 to $3.287 per gallon; the Gulf Coast price fell $0.004 to $2.945 per gallon; the Rocky Mountain price rose $0.063 to $3.077 per gallon; and the West Coast price increased $0.067 to $4.296 per gallon.
• For the week ended March 9, there were 209,000 new claims for unemployment insurance, a decrease of 1,000 from the previous week’s level, which was revised down by 7,000. According to the Department of Labor, the advance rate for insured unemployment claims for the week ended March 2 was 1.2%, unchanged from the previous week’s rate, which was revised down by 0.1%. The advance number of those receiving unemployment insurance benefits during the week ended March 2 was 1,811,000, an increase of 17,000 from the previous week’s level, which was revised down by 112,000. States and territories with the highest insured unemployment rates for the week ended February 24 were Rhode Island (3.1%), New Jersey (2.9%), Massachusetts (2.6%), California (2.4%), Minnesota (2.4%), Illinois (2.2%), New York (2.2%), Connecticut (2.1%), Montana (2.0%), and Pennsylvania (2.0%). The largest increases in initial claims for unemployment insurance for the week ended February 24 were in New York (+14,176), California (+5,549), Texas (+2,102), Michigan (+979), and Florida (+783), while the largest decreases were in Massachusetts (-3,894), Rhode Island (-1,955), Oregon (-1,063), Georgia (-882), and Tennessee (-335).

Eye on the Week Ahead

The Federal Open Market Committee meets this week. It is not expected that the Committee will lower interest rates at this time, however, it may give some more discernible indication as to when rates may be decreased. The FOMC does not meet again until the beginning of May.