What I’m Watching This Week – 11 November 2019

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

The Dow hit a new record high last week, and each of the benchmark indexes listed here posted solid gains as investors received encouraging news on the trade front. Both the United States and China sent signals out that an initial trade agreement would be signed in the near future, marking the first phase of the trade deal between the economic giants. As money flowed into stocks, long-term bond prices fell, pushing yields higher. For the week, the S&P 500 posted its fifth straight week of gains, while the Nasdaq advanced for the sixth consecutive week. The largest gainer last week was the Global Dow, which climbed over 1.50%.

Oil prices rose last week, closing at $57.39 per barrel by late Friday afternoon, up from the prior week’s price of $56.14. The price of gold (COMEX) fell for the first time in several weeks, closing at $1,459.20 by late Friday afternoon, down from the prior week’s price of $1,515.70. The national average retail regular gasoline price was $2.605 per gallon on November 4, 2019, $0.009 more than the prior week’s price but $0.148 less than a year ago.

Market/Index 2018 Close Prior Week As of 11/8 Weekly Change YTD Change
DJIA 23327.46 27347.36 27681.24 1.22% 18.66%
Nasdaq 6635.28 8386.40 8475.31 1.06% 27.73%
S&P 500 2506.85 3066.91 3093.08 0.85% 23.39%
Russell 2000 1348.56 1589.33 1598.86 0.60% 18.56%
Global Dow 2736.74 3109.68 3157.91 1.55% 15.39%
Fed. Funds target rate 2.25%-2.50% 1.50%-1.75% 1.50%-1.75% 0 bps -75 bps
10-year Treasuries 2.68% 1.72% 1.93% 21 bps -75 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 goods and services trade deficit was $52.5 billion in September, according to the latest report from the Bureau of Economic Analysis. The deficit in September was down $2.6 billion from August’s total. September exports were $1.8 billion less than August exports, while imports in September were $4.4 billion under the prior month’s figure. Year-to-date, the goods, and services deficit increased $24.8 billion, or 5.4%, from the same period in 2018. Over that 12-month period, exports fell 0.4% while imports increased 0.8%. The goods trade figures showed surpluses with several trade partners, including South and Central America ($5.0 billion), Hong Kong ($2.8 billion), and the United Kingdom ($0.7 billion). Notable goods trade deficits were recorded with China ($28.0 billion), the European Union ($15.7 billion), Mexico ($9.1 billion), and Japan ($5.9 billion).
  • The services sector of the economy continues to outpace the manufacturing sector. According to the latest report from the Institute for Supply Management, the October Non-Manufacturing Index increased 2.1 percentage points above its September reading. Survey respondents noted growth in business activity, new orders, and employment. Only prices received for services decreased in October from the prior month. The report indicated that, despite the positive results, “respondents continue to be concerned about tariffs, labor resources, and the geopolitical climate.”
  • The Bureau of Labor Statistics reported last week that the number of job openings fell 277,000 (3.8%) in September from the prior month. The job openings rate was 4.4% in September (4.6% in August) as the number of total private job openings edged down (-262,000). In September, the number of hires increased slightly (+50,000), as did the number of separations (+76,000). Hires increased in construction, manufacturing, professional and business services, leisure and hospitality, and trade, transportation, and utilities. Hires decreased in federal government, financial activities, and information.
  • For the week ended November 2, there were 211,000 claims for unemployment insurance, a decrease 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 October 26. The advance number of those receiving unemployment insurance benefits during the week ended October 26 was 1,689,000, a decrease of 3,000 from the prior week’s level, which was revised up by 2,000.

Eye on the Week Ahead

Inflation indicators are available this week with reports on consumer prices, producer prices, retail sales, and import and export prices. Inflation has been running lower than the Fed’s 2.0% target rate for much of the year. Also, the Federal Reserve’s report on industrial production is out this week. Manufacturing production was off in September, pulled down by weakening demand for U.S. exports.

What I’m Watching This Week – 4 November 2019

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

A better-than-expected jobs report and strong third-quarter earnings from some major companies drove stock prices higher for the fourth consecutive week. The S&P 500 and the Nasdaq reached closing highs while the other benchmark indexes listed here posted solid returns. The small caps of the Russell 2000 recorded the largest weekly gain, followed by the Nasdaq, the S&P 500, the Dow, and the Global Dow. Long-term bond prices rose, pulling yields lower as the yield on 10-year Treasuries fell 8 basis points.

Oil prices fell last week, closing at $56.14 per barrel by late Friday afternoon, down from the prior week’s price of $56.65. The price of gold (COMEX) rose for the third week in a row last week, closing at $1,515.70 by late Friday afternoon, up from the prior week’s price of $1,507.10. The national average retail regular gasoline price was $2.596 per gallon on October 28, 2019, $0.042 less than the prior week’s price and $0.215 less than a year ago.

Market/Index 2018 Close Prior Week As of 11/1 Weekly Change YTD Change
DJIA 23327.46 26958.06 27347.36 1.44% 17.23%
Nasdaq 6635.28 8243.12 8386.40 1.74% 26.39%
S&P 500 2506.85 3022.55 3066.91 1.47% 22.34%
Russell 2000 1348.56 1558.71 1589.33 1.96% 17.85%
Global Dow 2736.74 3079.14 3109.68 0.99% 13.63%
Fed. Funds target rate 2.25%-2.50% 1.75%-2.00% 1.50%-1.75% 25 bps -75 bps
10-year Treasuries 2.68% 1.80% 1.72% -8 bps -96 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 lowered interest rates for the third consecutive time, dropping the target range for the federal funds rate 25 basis points to 1.50%-1.75%. The Committee noted that while the labor market remains strong, economic activity has been rising at a moderate rate, and household spending has been accelerating at a strong pace, business fixed investment and exports remain weak. In addition, inflation continues to run below the Fed’s target rate of 2.0%. The Committee vote was 8 in favor and 2 voting to maintain the target range at 1.75%-2.00%. Further rate cuts are on hold for the time being. The Committee next meets in December.
  • The initial, or “advance,” estimate of the third-quarter gross domestic product showed the economy grew at an annualized rate of 1.9%. The second-quarter GDP increased 2.0%. While economic growth decelerated in the third quarter, it is better than most experts expected, primarily due to consumer spending, which offset weakness in other sectors of the economy. In the third quarter, personal income increased $172.8 billion compared with an increase of $244.2 billion in the second quarter. Disposable personal income increased $181.7 billion last quarter compared to $192.6 billion in the second quarter. With a reduction in consumer income in the third quarter came a deceleration in consumer spending (accounting for more than two-thirds of economic activity). However, consumer spending was enough to offset weak business investment, which turned negative for the first time since 2016.
  • There were 128,000 new jobs added in October, and the unemployment rate inched up one-tenth to 3.6%. Job growth has averaged 167,000 per month thus far in 2019. The number of unemployed persons also climbed marginally from 5.8 million in September to 5.9 million. The labor participation rate rose from 63.2% to 63.3% last month. The employment-population ratio held at 61.0%. Notable job gains in October occurred in food services and drinking places (48,000), social assistance (20,000), professional and business services (22,000), and financial activities (16,000). Indicative of the slowdown in manufacturing production, that sector declined by 36,000 jobs in October. The average workweek was unchanged at 34.4 hours in October. Average hourly earnings rose by $0.06 to $28.18. Over the past 12 months, average hourly earnings have increased by 3.0%.
  • Prices for consumer goods and services decreased less than 0.1% in September as inflationary pressures remained muted. Personal income and disposable (after-tax) personal income each climbed 0.3%. Consumer spending ramped up 0.2% in September, helped by robust employment and rising wages.
  • Manufacturing continued to lag in October, according to the latest Manufacturing ISM® Report On Business®. The purchasing managers’ index registered 48,3%, which, while better than September’s 47.8%, still represents contraction in the manufacturing sector (a reading below 50% constitutes contraction). Survey respondents noted an increase in new orders, up 1.8% at 49.1%, but still contracting. Production, supplier deliveries, and prices each fell in October and are all below 50.0%. Employment, inventories and new export orders increased, respectively.
  • The international trade in goods (excluding services) deficit for September was $70.4 billion, down $2.7 billion from August. Exports of goods for September were $135.9 billion, $2.2 billion less than August exports. Imports of goods for September were $206.3 billion, $4.9 billion less than August imports. While the goods deficit shrank last month, both import and export trading contracted — evidence of a slowing global economy.
  • For the week ended October 26, there were 218,000 claims for unemployment insurance, an increase of 5,000 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 October 19. The advance number of those receiving unemployment insurance benefits during the week ended October 19 was 1,690,000, an increase of 7,000 from the prior week’s level, which was revised up by 1,000.

Eye on the Week Ahead

While the last week of October was full of economic information and reports, the first week of November is relatively calm. The goods and services trade report for September is available this week. The 2019 goods and services international trade deficit sat at $429 billion for January through August — about $28 billion higher than the deficit over the same eight-month period in 2018.

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Monthly Market Review: October 2019

The Markets (as of market close October 31, 2019)

Investors continued to buy stocks, pushing values higher in October. Each of the benchmark indexes listed here posted solid monthly gains despite signs that the economy is slowing, both domestically and globally. Businesses remain hesitant to invest in nonresidential structures, equipment, and software, exports are lagging in volume, and prices remain subdued. Manufacturing continues to wane, and residential sales have been erratic at best. However, there may be headway in the negotiations between the United States and China, as the two economic giants try to resolve their ongoing trade war (although rhetoric from either side changes almost daily). The labor market continues to add new jobs, although wage inflation was muted last month. Since the beginning of the year, interest rates have been reduced by 75 basis points to their lowest levels since May 2018. The last day of the month saw the House of Representatives pass a resolution establishing a framework for a new phase of the impeachment inquiry.

By the close of trading on the last day of the month, each of the benchmark indexes listed here posted gains, led by the tech stocks of the Nasdaq, which climbed more than 3.50% from its September closing value. The large caps of the S&P 500 and the small caps of the Russell 2000 each gained over 2.0% by the end of October, while the Global Dow was close behind. The Dow advanced on the month, but by less than 0.50%. The yield on long-term bonds fluctuated during the month, ultimately closing October about where it began.

By the close of trading on October 31, the price of crude oil (WTI) was $54.09 per barrel, down from the September 30 price of $54.37 per barrel. The national average retail regular gasoline price was $2.596 per gallon on October 28, down from the September 30 selling price of $2.642 and $0.215 less than a year ago. The price of gold rose by the end of October, climbing to $1,515.10 by close of business on the 31st, up from its $1,479.30 price at the end of September.

Market/Index 2018 Close Prior Month As of October 31 Month Change YTD Change
DJIA 23327.46 26916.83 27046.23 0.48% 15.94%
NASDAQ 6635.28 7999.34 8292.36 3.66% 24.97%
S&P 500 2506.85 2976.74 3037.56 2.04% 21.17%
Russell 2000 1348.56 1523.37 1562.45 2.57% 15.86%
Global Dow 2736.74 3021.34 3081.07 1.98% 12.58%
Fed. Funds 2.25%-2.50% 1.75%-2.00% 1.50%-1.75% 25 bps -75 bps
10-year Treasuries 2.68% 1.67% 1.69% 2 bps -99 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.

  • Employment: The unemployment rate declined 0.2 percentage point to 3.5% in September. The last time the rate was this low was in December 1969, when it also was 3.5%. Total employment increased by 136,000 in September after adding 168,000 (revised) new jobs in August. The average monthly job gain so far in 2019 is 161,000 per month (223,000 in 2018). Notable employment increases for September occurred in health care (39,000), professional and business services (34,000), government (22,000), and transportation and warehousing (16,000). The number of unemployed persons dropped by 275,000 to 5.8 million. The labor participation rate remained at 63.2%, and the employment-population ratio rose to 61.0% (60.9% in August). The average workweek remained at 34.4 hours for September. Average hourly earnings fell by $0.01 to $28.09. Over the last 12 months ended in September, average hourly earnings have risen 2.9% (3.2% for the 12 months ended in August).
  • FOMC/interest rates: By an 8-2 vote, the Federal Open Market Committee dropped the target range for the federal funds rate 25 basis points following July’s 25-basis-point cut and September’s comparable rate slash. The federal funds rate range has been decreased by 75 basis points so far this year. The target range now sits at 1.50%-1.75%. In support of its decision to reduce interest rates again, the Committee noted that inflation continues to run below the Fed’s 2.0% target rate, business fixed investment and exports have weakened, and global economic developments are uncertain.
  • GDP/budget: Economic growth slowed again in the third quarter. According to the initial estimate for the third-quarter gross domestic product, the economy accelerated at a rate of 1.9%, down from the second quarter’s 2.0% annual growth rate. The first quarter saw an annualized growth of 3.1%. The personal consumption expenditures price index increased 1.5% in the third quarter compared to an increase of 2.4% in the second quarter. Driving economic growth in the third quarter was consumer spending, which increased at an annualized rate of 2.9% (4.6% in the second quarter). Another positive from the report comes from residential investment, which rose 5.1% — the first positive contribution to the GDP since 2017. Nonresidential (business) fixed investment continues to lag, falling 3.0% in the third quarter after dropping 1.0% in the second quarter. September marked the close of the 2019 fiscal year for the federal government. For the month, the federal budget came in at a smaller-than-expected surplus of $82.2 billion in September, narrowing the fiscal 2019 deficit to $984.4 billion, still 26.4% higher than the fiscal 2018 deficit.
  • Inflation/consumer spending: According to the personal income and outlays report, inflationary pressures remain weak, as prices for consumer goods and services rose less than 0.1% in September. Prices are up 1.3% over the last 12 months. Consumer prices excluding food and energy showed no movement in September and are up 1.7% year-over-year. On the other hand, consumers continue spending, as purchases rose 0.2% (0.2% in August). Personal income and disposable (after-tax) personal income each climbed 0.3% in September (0.5% and 0.6%, respectively, in August).
  • The Consumer Price Index was unchanged in September following a 0.1% advance in August. Over the 12 months ended in September, the CPI rose 1.7%. Energy prices fell 1.4% on the month with gasoline down 2.4%. Prices less food and energy rose 0.1% in September after increasing 0.3% the previous month. Since last September, core prices (less food and energy) are up 2.4%.
  • According to the Producer Price Index, the prices companies received for goods and services fell 0.3% in September after increasing 0.1% in August. The index increased 1.4% for the 12 months ended in September. Prices for goods fell 0.4% in September. Most of the decline is attributable to energy prices, which tumbled 2.5%. Prices for services dropped 0.2% in September, pulled down by declining prices for machinery and vehicle wholesaling, which fell 2.7%. The price index less foods, energy, and trade services was unchanged after jumping ahead 0.4% in August. For the 12 months ended in September, producer prices less foods, energy, and trade services advanced 1.7%.
  • Housing: The housing sector has been anything but steady for much of the year, and September was no exception. Existing home sales plunged 2.2% in September following two consecutive monthly increases. Year-over-year, existing-home sales are up 3.9%. Existing home prices fell in September, as the median price for existing homes was $272,100, down from August’s median price of $278,200. Nevertheless, existing home prices were up 5.9% from September 2018. Total housing inventory for existing homes for sale in September decreased to 1.83 million (1.86 million in August), representing a 4.1-month supply at the current sales pace. After rising 6.1% in August, sales of new single-family houses tumbled 0.7% in September. However, new home sales are up 15.5% over their September 2018 estimate. The median sales price of new houses sold in September was $299,400 ($328,400 in August). The average sales price was $362,700 ($404,200 in August). Inventory at the end of September remained at a supply of 5.5 months.
  • Manufacturing: According to the Federal Reserve, industrial production fell 0.4% in September after advancing 0.8% in August. Manufacturing output declined 0.5% following a 0.5% rise the prior month. In September, mining output fell 1.3%, while utilities climbed 1.4%. Total industrial production was 0.1% lower in September than it was a year earlier. Following three consecutive monthly increases, new orders for durable goods dropped 1.1% in September. Excluding transportation, new orders decreased 0.3%. Excluding defense, new orders decreased 1.2%. Transportation equipment, also down following three consecutive monthly increases, led the decrease, dropping 2.7%. New orders for capital goods (used by businesses to produce consumer goods) fell 2.8% in September as business investment continues to be weak.
  • Imports and exports: Both import and export prices remained soft in September. Import prices rose 0.2%, pushed higher by a boost from petroleum-based products. Nonfuel goods edged down 0.1%. For the year, import prices are also down 1.6%. Export prices fell 0.2% and are down 1.6% over the past 12 months. Agricultural export prices declined 1.8% in September, while nonagricultural prices for items such as consumer goods, automobiles, and industrial supplies and materials dropped 0.1%. The latest information on international trade in goods and services, out October 4, is for August and shows that the goods and services deficit was $59.4 billion, $0.9 billion over July’s revised figure. August exports were $207.9 billion, $0.5 billion more than July exports. August imports were $262.8 billion, $1.3 billion more than July imports. Year-to-date, the goods, and services deficit increased $28.3 billion, or 7.1%. Exports decreased $3.2 billion, or 0.2%. Imports increased $24.1 billion, or 1.2%. The advance report on international trade in goods (excluding services) revealed the trade deficit fell to $70.4 billion in September, down from $73.1 billion in August. However, both export and import trading slowed in September, with exports of goods dropping $2.2 billion from August and imports falling $4.9 billion below August’s total.
  • International markets: Still unable to reach an accord on a Brexit plan, the United Kingdom requested, and was granted, another extension by the European Union, this time to January 31. However, the UK could leave before that date if Parliament passes a withdrawal bill. UK stocks sank following news that the country was headed to yet another general election before the end of the year. In China, consumer prices rose 0.9% in September and are up 3.0% over the past 12 months — the highest level since 2013. Nevertheless, the Chinese economy continued to slow as its third-quarter gross domestic product expanded at a 6.0% year-over-year pace, down from the 6.2% rate of expansion in the second quarter.
  • Consumer confidence: Consumer confidence remained tepid in October. The Conference Board Consumer Confidence Index® registered 125.9, down from 126.3 in September. The Present Situation Index — based on consumers’ assessment of current business and labor market conditions — increased from 170.6 to 172.3. The Expectations Index — based on consumers’ short-term outlook for income, business and labor market conditions — declined from 96.8 last month to 94.9 this month.

Eye on the Month Ahead

While stocks rebounded nicely last month, will that trend continue in November? Stock market growth seemingly rides on the progress made in the trade negotiations between the United States and China. With the impeachment process moving on to another phase and the government on target to shut down by the middle of November, it should be an interesting fourth quarter.

What I’m Watching This Week – 28 October 2019

The Markets (as of market close October 25, 2019)

Solid corporate earnings reports and encouraging signs on the trade war front spurred stocks higher last week. The S&P 500 reached its second-highest closing value by last Friday, while the Dow is nearing a record high. Word came from government officials last Friday that progress had been made in negotiations with China on the first phase of a potential trade agreement between the two economic giants. Of the indexes listed here, the technology-heavy Nasdaq led the way gaining almost 2.0%, followed by the small caps of the Russell 2000, which surged over 1.5%. The large caps of the S&P 500 and Dow also fared well. Even the Global Dow rose more than 1.0%. As to corporate earnings, the majority of S&P 500 companies posting earnings for the third quarter beat analysts’ expectations. Investors may also be anticipating the Fed dropping interest rates this week following its October meeting.

Oil prices climbed last week, closing at $56.65 per barrel by late Friday afternoon, up from the prior week’s price of $53.71. The price of gold (COMEX) rose for the second week in a row last week, closing at $1,507.10 by late Friday afternoon, up from the prior week’s price of $1,493.60. The national average retail regular gasoline price was $2.638 per gallon on October 21, 2019, $0.009 more than the prior week’s price but $0.203 less than a year ago.

Market/Index 2018 Close Prior Week As of 10/25 Weekly Change YTD Change
DJIA 23327.46 26770.20 26958.06 0.70% 15.56%
Nasdaq 6635.28 8089.54 8243.12 1.90% 24.23%
S&P 500 2506.85 2986.20 3022.55 1.22% 20.57%
Russell 2000 1348.56 1535.48 1558.71 1.51% 15.58%
Global Dow 2736.74 3048.36 3079.14 1.01% 12.51%
Fed. Funds target rate 2.25%-2.50% 1.75%-2.00% 1.75%-2.00% 0 bps -50 bps
10-year Treasuries 2.68% 1.74% 1.80% 6 bps -88 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

  • September, the last month of the federal government’s fiscal year, recorded a budget surplus of $83 billion ($119 billion in September 2018). For the fiscal year, the deficit was $984 billion, 26.4% greater than the 2018 fiscal year deficit. In 2019, total individual income tax receipts were $1,718 billion, while corporate tax receipts were $230 billion. The largest government expenditures in 2019 were $1,044 billion for Social Security, $688 billion for national defense, and $651 billion for Medicare.
  • September proved to be a sour month in the manufacturing sector. New orders for long-lasting durable goods fell 1.1% in September from August. This decrease follows three consecutive monthly increases. Excluding transportation, new orders fell 0.3% last month. Transportation equipment led the September decrease, falling 2.7%. Shipments of durable goods, down three consecutive months, decreased 0.4% in September, likely impacted by the ongoing trade war with China. Unfilled orders for manufactured durable goods in September, down following two consecutive monthly increases, were essentially unchanged. Inventories of manufactured durable goods in September, up 14 of the last 15 months, increased 0.5%. Capital goods used in the manufacture of end products plunged 2.8% in September, a reflection of waning business investment.
  • After climbing for two consecutive months, sales of existing homes fell 2.2% in September. Overall, sales are still up 3.9% from a year ago. The median existing-home price in September was $272,100, down 2.2% from August’s price ($278,200) but 5.9% ahead of the September 2018 price ($256,900). Housing inventory in September was relatively unchanged from August, but is down 2.7% from last September’s inventory. Single-family home sales sat at an annual rate of 4.78 million in September, down 2.6% from August but up 3.9% from a year ago. The median existing single-family home price was $275,100 in September, down from the August median sales price of $281,900.
  • Sales of new single-family homes fared no better than existing home sales last month. New home sales dropped 0.7% in September, but are still 15.5% ahead of their pace a year ago. The median sales price of new houses sold in September was $299,400 ($325,200 in August). The average sales price fell from $394,800 in August to $362,700 last month. Inventory is at a 5.5-month supply, the same as in August.
  • For the week ended October 19, there were 212,000 claims for unemployment insurance, a decrease of 6,000 from the previous week’s level, which was revised up by 4,000. According to the Department of Labor, the advance rate for insured unemployment claims remained at 1.2% for the week ended October 12. The advance number of those receiving unemployment insurance benefits during the week ended October 12 was 1,682,000, a decrease of 1,000 from the prior week’s level, which was revised up by 4,000.

Eye on the Week Ahead

This is a busy week for market-moving economic reports. The week starts off with the latest report on international trade in goods for September. The trade deficit reached $73 billion in August. The first release of the gross domestic product for the third quarter is also available this week. The economy grew at a rate of 2.0% in the second quarter. The Federal Open Market Committee meets this week. Last month, the FOMC decided to lower the target range for the federal funds rate by 25 basis points. A similar reduction could ensue following the Committee’s meeting this week. Finally, the report on personal income and spending is out at the end of the week. This report covers how much consumers are making (income), saving, and spending. The report also looks at the prices of consumer goods and services — an important inflationary indicator used by the Federal Reserve.

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What I’m Watching This Week – 21 October 2019

The Markets (as of market close October 18, 2019)

For the second week in a row, each of the benchmark indexes listed here (except for the Dow) posted gains last week. Stocks got a boost from some strong third-quarter earnings reports as several large financial institutions recorded strong earnings. The S&P 500 came close to reaching its record high earlier in the week, while the small caps of the Russell 2000 surged ahead by more than 1.50%. Long term Treasuries saw yields fall slightly as prices inched up on news of another stalemate on new attempts to reach a Brexit accord and weak U.S. retail figures.

Oil prices dropped last week, closing at $53.71 per barrel by late Friday afternoon, down from the prior week’s price of $54.77. The price of gold (COMEX) rose last week, closing at $1,493.60 by late Friday afternoon, up from the prior week’s price of $1,491.70. The national average retail regular gasoline price was $2.629 per gallon on October 14, 2019, $0.016 less than the prior week’s price and $0.250 less than a year ago.

Market/Index 2018 Close Prior Week As of 10/18 Weekly Change YTD Change
DJIA 23327.46 26816.59 26770.20 -0.17% 14.76%
Nasdaq 6635.28 8057.04 8089.54 0.40% 21.92%
S&P 500 2506.85 2970.27 2986.20 0.54% 19.12%
Russell 2000 1348.56 1511.90 1535.48 1.56% 13.86%
Global Dow 2736.74 3021.17 3048.36 0.90% 11.39%
Fed. Funds target rate 2.25%-2.50% 1.75%-2.00% 1.75%-2.00% 0 bps -50 bps
10-year Treasuries 2.68% 1.75% 1.74% -1 bps -94 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

  • Retail sales fell 0.3% in September after climbing 0.6% in August. However, retail sales are up 4.1% over September 2018. Retail trade sales were also down 0.3% for September, as were online sales (nonstore retail). For September, sales grew in clothing and clothing accessories (1.3%) and furniture and home furnishing store (0.6%). Notable decreases were seen in sales for building material and garden equipment and supplies dealers (-1.0%), motor vehicle and parts dealers (-0.9%), and department stores (-1.4%). This report shows consumer spending cooled in September, which may be due to uncertainty about the economy moving forward.
  • Industrial production fell 0.4% in September after vaulting 0.8% in August, according to the latest report from the Federal Reserve. Total industrial production is 0.1% lower in September than it was a year earlier. Manufacturing dropped 0.5% last month following a 0.6% bump in August. According to the report, manufacturing output was reduced by a strike at a major manufacturer of motor vehicles. Excluding motor vehicles and parts, manufacturing slipped 0.2%. Mining plummeted 1.3%, while utilities jumped 1.4% in September. This report highlights the impact weakening demand for U.S. exports is having on manufacturing.
  • Residential construction could be in for a slowdown in the fall. Building permits for residential housing fell 2.7% in September after climbing in August. Housing starts also plummeted 9.4% last month, while home completions plunged 9.7%. On the plus side, building permits for single-family homes climbed 0.8% in September and single-family housing starts inched up 0.3%. On the other hand, single-family home completions decreased 8.6% from their August totals.
  • For the week ended October 12, there were 214,000 claims for unemployment insurance, an increase of 4,000 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 October 5. The advance number of those receiving unemployment insurance benefits during the week ended October 5 was 1,679,000, a decrease of 10,000 from the prior week’s level, which was revised up by 5,000.

Eye on the Week Ahead

The latest information on the housing sector is available this week. Sales of existing homes got a much needed boost in August, while new home sales continued to surge. Also out this week is the September report on durable goods orders. New orders have risen 3 consecutive months, but are still down 0.4% over the past 12 months ended in August.

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What I’m Watching This Week – 14 October 2019

The Markets (as of market close October 11, 2019)

Last week, President Trump said the United States and China had reached a “substantial, phase-one” agreement to resolve the trade war between the economic giants. Essentially, the United States agreed to hold off on the imposition of additional tariffs on Chinese imports, while China agreed to ramp up the purchase of U.S. agricultural products. Buoyed by the prospects of a further trade accord, investors dove into the market, sending each of the indexes listed here higher by the close of trading last week. Both the Dow and Nasdaq rose by almost 1.0%, followed by the Russell 2000 and the S&P 500. However, the biggest mover was the Global Dow, which surged almost 2.0%. With money moving to stocks, gold and 10-year Treasuries saw their respective prices slip.

Oil prices climbed last week, closing at $54.77 per barrel by late Friday afternoon, up from the prior week’s price of $53.01. The price of gold (COMEX) fell last week, closing at $1,491.70 by late Friday afternoon, down from the prior week’s price of $1,510.30. The national average retail regular gasoline price was $2.645 per gallon on October 7, 2019, $0.003 more than the prior week’s price but $0.258 less than a year ago.

Market/Index 2018 Close Prior Week As of 10/11 Weekly Change YTD Change
DJIA 23327.46 26573.72 26816.59 0.91% 14.96%
Nasdaq 6635.28 7982.47 8057.04 0.93% 21.43%
S&P 500 2506.85 2952.01 2970.27 0.62% 18.49%
Russell 2000 1348.56 1500.70 1511.90 0.75% 12.11%
Global Dow 2736.74 2964.37 3021.17 1.92% 10.39%
Fed. Funds target rate 2.25%-2.50% 1.75%-2.00% 1.75%-2.00% 0 bps -50 bps
10-year Treasuries 2.68% 1.51% 1.75% 24 bps -93 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

  • Inflationary pressures remained subdued in September. The Consumer Price Index was unchanged last month after rising 0.1% in August. Over the last 12 months, the CPI has increased 1.7%. Prices less food and energy rose 0.1% in September after increasing 0.3% in each of the last 3 months. A closer look at consumer prices last month shows that energy prices fell 1.4% as gasoline prices sank 2.4%. Prices for used cars and trucks dropped 1.6%, apparel prices decreased 0.4%, and medical care commodities prices tumbled 0.6%. Offsetting those declines were increases in prices for food (0.1%), shelter (0.3%), transportation services (0.3%), and medical care services (0.4%).
  • Producers of goods and services at the wholesale level saw their prices drop by 0.3% in September following two consecutive monthly increases. Over the past 12 months, producer prices are up 1.4%. A closer look reveals that prices for services at the producer level dropped 0.2% in September after climbing 0.3% in August. Nearly half of the September decline in prices for services can be traced to machinery and vehicle wholesaling prices, which fell 2.7%. Producer prices for goods decreased 0.4% in September after a 0.5% drop in August. Three-fourths of the September decrease in goods prices can be traced to prices for gasoline, which fell 7.2%. This report, coupled with the CPI, supports expectations that the Federal Reserve will cut interest rates at least one more time this year.
  • Higher fuel prices drove import prices 0.2% higher in September following a 0.2% drop in August. Over the past 12 months, import prices are down 1.6%. Exports fell 0.2% last month after decreasing 0.6% in August. Since September 2018, export prices have also fallen 1.6%.
  • According to the Bureau of Labor Statistics Job Openings and Labor Turnover report (JOLTS), the number of job openings slipped by a little more than 100,000 from July. The number of hires also fell by about 200,000, as did the number of separations. In August, job openings rose in such industries as construction; trade; transportation and utilities; finance and insurance; and government. During the same period, job openings fell in education and health services; manufacturing; information; and leisure and hospitality. Over the 12 months ended in August, hires totaled 69.5 million and separations totaled 67.1 million, yielding a net employment gain of 2.4 million.
  • For the week ended October 5, there were 210,000 claims for unemployment insurance, a decrease of 10,000 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 inched up from 1.1% to 1.2% for the week ended September 28. The advance number of those receiving unemployment insurance benefits during the week ended September 28 was 1,684,000, an increase of 29,000 from the prior week’s level, which was revised up by 4,000.

Eye on the Week Ahead

A few economic reports worth reviewing are out this week. The retail sales report for September, which measures prices retailers of consumer goods and services receive, is another important indicator of inflationary pressures. August saw retail sales increase by 0.4%. Total sales for the June 2019 through August 2019 period were up 3.7% from the same period a year ago. Nonstore (online) retailers continue to see sales grow — up 1.6% for the month and 16.0% since August 2018. The report on new residential construction is also out this week. August showed strong growth in building permits and housing starts, which should add to needed inventory for new residential properties for the fall. Another report out this week is the Federal Reserve’s statement on industrial production. August saw industrial production rise 0.6% after falling 0.1% in July. Manufacturing also increased 0.5% for the month — both encouraging signs for the manufacturing sector.

Quarterly Market Review: July – September 2019

The Markets (third quarter through September 30, 2019)

The third quarter was full of ups and downs for stocks, much like the second quarter. Stock values moved in response to the rhetoric from the participants in the trade war between the United States and China. The Federal Reserve lowered interest rates two times during the quarter. More new jobs were added, but at a reduced rate, while wage growth continued. Manufacturing and industrial production remain muted, influenced, in part, by the waning global economy. Nevertheless, consumers were undaunted by economic developments, spending at a steady rate throughout the quarter.

July kicked off the third quarter in a somewhat lackluster manner, as the benchmark indexes listed here posted gains over June’s respective closing values. The Nasdaq gained over 2.0% for the month, followed by the S&P 500, which rose 1.31%. The Dow and Russell 2000 inched ahead by less than one percent, while the Global Dow dipped by almost half a percent. The Federal Open Market Committee reduced short-term interest rates 25 basis points, which sent stocks reeling. However, strong corporate earnings reports, low unemployment, and higher wages helped ease investors’ concerns by the end of the month.

August started with President Trump’s threat to impose additional tariffs on Chinese imports, which sent stocks plummeting. Throughout the month, each of the benchmark indexes listed here continued to lose value. Even a final-week push couldn’t save stocks from posting month-over-month losses. The small caps of the Russell 2000 were hit particularly hard, falling over 5.0% in August. The Global Dow lost almost 3.5%, and the tech-heavy Nasdaq dropped more than 2.5%. The large caps of the Dow and S&P 500 also fell close to 2.0%. Oil and gas prices at the pump fell in August, while long-term bond yields plunged as prices soared.

September saw each of the benchmark indexes listed here post solid gains, led by the Global Dow, which rode a solid close to the month on encouraging economic data from China. The Russell 2000 climbed almost 2.0% ahead of its August closing total, while both the Dow and S&P 500 exceeded their respective August closing marks by respectable amounts. The Nasdaq gained about half a percent on the month. The Federal Open Market Committee once again lowered interest rates 25 basis points in September following July’s 25-basis-point cut (the FOMC did not meet in August). By the close of trading on September 30, the price of crude oil (WTI) was $54.37 per barrel, down from the August 30 price of $55.16 per barrel. The national average retail regular gasoline price was $2.654 per gallon on September 23, up from the August 26 selling price of $2.574 but $0.190 lower than a year ago. The price of gold dropped by the end of September, falling to $1,479.30 by close of business on the 30th, off from $1,529.20 at the end of August.

For the third quarter, large caps performed better than small caps. The Dow and the S&P 500 each finished 1.19% above their respective second-quarter closing values. The tech stocks of the Nasdaq broke about even for the quarter, while the Russell 2000 and the Global Dow lost value. For the quarter, the price of crude oil (WTI) was $3.79 per barrel lower than its June 28 price. Gold closed the third quarter $66.00 higher than its second-quarter closing price. And the national average retail regular gasoline price, at $2.654 per gallon on September 23, did not change from its average price at the end of the second quarter.

Market/Index 2018 Close As of September 30 Monthly Change Quarterly Change YTD Change
DJIA 23327.46 26916.83 1.95% 1.19% 15.39%
Nasdaq 6635.28 7999.34 0.46% -0.09% 20.56%
S&P 500 2506.85 2976.74 1.72% 1.19% 18.74%
Russell 2000 1348.56 1523.37 1.91% -2.76% 12.96%
Global Dow 2736.74 3021.34 2.31% -1.73% 10.40%
Fed. Funds 2.25%-2.50% 1.75%-2.00% -25 bps -50 bps -50 bps
10-year Treasuries 2.68% 1.67% 17 bps -33 bps -101 bps

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

Latest Economic Reports

  • Employment: Total employment increased by 130,000 in August after adding 159,000 (revised) new jobs in July. The average monthly job gain so far in 2019 fell to 158,000 per month (223,000 in 2018). Notable employment increases for August occurred in professional and business services (37,000), health care (24,000), financial activities (15,000), and social assistance (13,000). The unemployment rate remained at 3.7% in August. The number of unemployed persons fell slightly to 6.0 million (6.1 million in July). The labor participation rate edged up 0.2 percentage point to 63.2%, and the employment-population ratio was 60.9% (60.7% in July). The average workweek increased 0.1 hour to 34.4 hours for August. Average hourly earnings increased by $0.11 to $28.11. Over the last 12 months ended in August, average hourly earnings have risen 3.2%.
  • FOMC/interest rates: The Federal Open Market Committee followed July’s 25-basis-point cut by lowering interest rates another 25 basis points in September. The federal funds rate range has been decreased by 50 basis points so far this year. Interestingly, the Committee’s action was not unanimous. Of the 10 members voting, 1 voted for a 50-basis-point reduction, while 2 members opted for no rate reduction. Nevertheless, in support of its decision to reduce interest rates, the Committee noted that inflation continues to run below the Fed’s 2.0% target rate, business fixed investment and exports have weakened, and global economic developments are uncertain.
  • GDP/budget: Economic growth slowed in the second quarter but was still solid. According to the third and final estimate of the gross domestic product, the second quarter grew at an annualized rate of 2.0%. The first quarter saw an annualized growth of 3.1%. Consumer prices and spending increased in the second quarter, rising 2.4% and 4.6%, respectively. Pulling the GDP down in the second quarter were negative contributions from business fixed investment (equipment, software, structures, etc.) and exports. The federal budget deficit was $200 billion in August ($119.7 billion in July). Through the first 11 months of the fiscal year, the government deficit sits at $1,067 billion,18.8% more than the deficit over the same period last year.
  • Inflation/consumer spending: Inflationary pressures remain weak, as consumer prices showed no increase in August and are up 1.4% over the last 12 months. Consumer prices excluding food and energy inched up 0.1% in August (0.2% increase in July) and 1.8% since August 2018. In August, consumer spending rose 0.1% (0.5% in July). Personal income and disposable (after-tax) personal income climbed 0.4% and 0.5%, respectively, in August.
  • The Consumer Price Index increased 0.1% in August following a 0.3% advance in July. Over the 12 months ended in August, the CPI rose 1.7%. Energy prices fell 1.9% on the month with gasoline down 3.5%. Prices less food and energy rose 0.3% in August — the same increase as in July. Since last August, core prices (less food and energy) are up 2.4%.
  • According to the Producer Price Index, the prices companies received for goods and services rose 0.1% in August after increasing 0.2% in July. The index increased 1.8% for the 12 months ended in August. Prices for goods fell 0.5% in August, pulled down by falling energy prices. Prices for services increased 0.3% last month. However, the price index less foods, energy, and trade services jumped 0.4% in August after dropping 0.1% the prior month. The price index less foods, energy, and trade services increased 1.9% over the last 12 months.
  • Housing: Activity in the housing market can be described as erratic at best. Existing home sales jumped 1.3% in August after climbing 2.5% in July. Year-over-year, existing home sales are up 2.6%. Existing home prices fell in August, as the median price for existing homes was $278,200, down from July’s median price of $280,800. Nevertheless, existing home prices were up 4.7% from August 2018. Total housing inventory for existing homes for sale in August decreased to 1.86 million (1.89 million in July), representing a 4.1-month supply at the current sales pace. After falling close to 9.5% in July, sales of new single-family houses climbed 7.1% in August. New home sales are up 18.0% over their August 2018 estimate. The median sales price of new houses sold in August was $328,400 ($305,400 in July). The average sales price was $404,200 ($372,700 in July). Inventory at the end of August was at a supply of 5.5 months (5.9 months in July).
  • Manufacturing: According to the Federal Reserve, industrial production rose 0.6% in August after falling 0.1% July. Manufacturing output advanced 0.5% following a 0.4% drop in July. In August, mining output and utilities climbed 1.4% and 0.6%, respectively. Total industrial production was 0.4% higher in August than it was a year earlier. Orders for durable goods increased for the second month in a row in August, climbing 0.2% after increasing 2.0% in July. New orders for capital goods used by businesses to produce consumer goods fell 2.1% in August. New orders for capital goods excluding transportation increased 0.5% last month, while new orders for capital goods excluding defense fell 0.6%.
  • Imports and exports: Both import and export prices ebbed in August, falling 0.5% and 0.6%, respectively. For the year, import prices are down 2.0%, while export prices are off 1.4%. In August, a drop in fuel prices was the main drag on import prices, while falling agricultural and nonagricultural prices pulled export prices lower. The latest information on international trade in goods and services, out September 4, is for July and shows that the goods and services deficit was $54.0 billion, down from the revised $55.5 billion deficit in June. July exports were $207.4 billion, $1.2 billion more than June exports. July imports were $261.4 billion, $0.4 billion less than June imports. Year-to-date, the goods and services deficit increased $28.2 billion, or 8.2%. Exports decreased $3.4 billion, or 0.2%. Imports increased $24.9 billion, or 1.4%. The advance report on international trade in goods (excluding services) revealed the trade deficit rose to $72.8 billion in August, up from $72.5 billion in July. Exports of goods in August were $137.8 billion, $0.2 billion more than July exports, while imports of goods were $210.6 billion, $0.5 billion more than July imports.
  • International markets: British Prime Minister Boris Johnson attempted to shut down Parliament for several weeks as part of his effort to shunt opponents to his plan to push through a “no deal” Brexit by October 31. However, the UK Supreme Court ruled the move was unlawful. This decision will likely put pressure on Johnson to resign. How this affects Brexit moving forward remains unclear. Household spending helped push the eurozone gross domestic product ahead 0.2% in the second quarter. The eurozone economy has grown 1.2% year-over-year. In China, economic activity worsened in August as industrial production slowed to its weakest pace since 2012, most likely impacted by the trade war with the United States.
  • Consumer confidence: While consumer confidence has been relatively strong for much of the year, it did fall back in August. Consumers’ assessment of current business and labor market conditions decreased, as did consumers’ short-term outlook for income, business and labor market conditions.

Eye on the Month Ahead

Economic growth has slowed so far this year, as lagging export orders have quelled manufacturing output. Wages continued to grow, while consumers ratcheted up their spending. The fourth quarter will likely ride the ebb and flow of economic and world events, not the least of which is the ongoing trade war between the world’s two economic giants: China and the United States.