What I’m Watching This Week – 18 March 2019

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

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

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

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

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

Last Week’s Economic Headlines

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

Eye on the Week Ahead

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

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What I’m Watching This Week – 11 March 2019

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

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

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

Market/Index 2018 Close Prior Week As of 3/8 Weekly Change YTD Change
DJIA 23327.46 26026.32 25450.24 -2.21% 9.10%
Nasdaq 6635.28 7595.35 7408.14 -2.46% 11.65%
S&P 500 2506.85 2803.69 2743.07 -2.16% 9.42%
Russell 2000 1348.56 1589.64 1521.88 -4.26% 12.85%
Global Dow 2736.74 3006.41 2940.82 -2.18% 7.46%
Fed. Funds target rate 2.25%-2.50% 2.25%-2.50% 2.25%-2.50% 0 bps 0 bps
10-year Treasuries 2.68% 2.75% 2.63% -12 bps -5 bps

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

Last Week’s Economic Headlines

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

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

Eye on the Week Ahead

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

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What I’m Watching This Week – 4 March 2019

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

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

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

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

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

Last Week’s Economic Headlines

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

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

Eye on the Week Ahead

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

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Monthly Market Review – February 2019

The Markets (as of market close February 28, 2019)

Each of the benchmark indexes listed here posted positive monthly gains, led by the Russell 2000, which lapped the field after gaining over 5.0% for the month. The small-cap index is almost 17.0% ahead of its 2018 closing value. Signs that a trade accord with China may be in the offing helped stimulate investors to trade throughout February. Also, word from the Federal Reserve that it may not raise the target interest rate range as aggressively as proposed last year has had a positive impact on stocks. Corporate earnings season continued on a relatively positive trend, while energy stocks rebounded as oil production was curbed, sending gas prices at the pumps higher. Overall, following the Russell 2000, the Dow posted the next highest monthly gain ahead of the Nasdaq, S&P 500, and the Global Dow.

By the close of trading on February 28, the price of crude oil (WTI) was $57.26 per barrel, up from the January 31 price of $53.95 per barrel. The national average retail regular gasoline price was $2.390 per gallon on February 25, up from the January 28 selling price of $2.256 but $0.158 lower than a year ago. The price of gold dipped by the end of February, falling to $1,314.40 by close of business on the 28th, down from $1,325.70 at the end of January.

Market/Index 2018 Close Prior Month As of February 28 Month Change YTD Change
DJIA 23327.46 24999.67 25916.00 3.67% 11.10%
NASDAQ 6635.28 7281.74 7532.53 3.44% 13.52%
S&P 500 2506.85 2704.10 2784.49 2.97% 11.08%
Russell 2000 1348.56 1499.42 1575.55 5.08% 16.83%
Global Dow 2736.74 2945.73 3000.97 1.88% 9.65%
Fed. Funds 2.25%-2.50% 2.25%-2.50% 2.25%-2.50% 0 bps 0 bps
10-year Treasuries 2.68% 2.63% 2.71% 8 bps 3 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 Month’s Economic News

Note:  Due to the partial government shutdown earlier last month, information from some reporting agencies is delayed.

  • Employment: Total employment rose by 304,000 in January after adding 222,000 (revised) new jobs in December. The average monthly job gain in 2018 was 223,000. Notable employment increases for January occurred in leisure and hospitality (74,000), construction (42,000), health care (42,000), and food services and drinking places (37,000). The unemployment rate jumped from 3.9% in December to 4.0% in January. The number of unemployed persons increased to 6.5 million. The impact of the partial federal government shutdown contributed to the uptick in these measures. The labor participation rate rose 0.1% from December to 63.2% in January. The employment-population ratio also advanced 0.1% to 60.7%. The average workweek was unchanged at 34.5 hours for the first month of the year. Average hourly earnings increased by $0.03 to $27.56. Over the last 12 months, average hourly earnings have risen $0.85, or 3.2%.
  • FOMC/interest rates: The Federal Open Market Committee did not meet in February, after leaving interest rates unchanged in January. The next FOMC meeting is scheduled for March 19 and 20.
  • GDP/budget: The advance estimate of the fourth-quarter gross domestic product showed the economy grew at an annualized rate of 2.6%. The GDP expanded at a rate of 3.4% in the third quarter. Of note, consumer spending rose by 2.8%, despite a sharp decline in December retail sales. Also of note, business investment rose 6.2% for nonresidential fixed investment. On the other hand, residential investment was weak, falling by 3.5%. The federal budget deficit was $13.54 billion in December. For the three months of fiscal year 2019, the government deficit is $319 billion. Over the same period for fiscal year 2018, the deficit was $225 billion.
  • Inflation/consumer spending: The report on consumer income and spending, one that is favored by the Federal Reserve as an inflation indicator, showed personal income increased 1.0% in December while it decreased 0.1% in January (the report has income and expenditures for December and only income for January). Disposable (after-tax) income increased 1.1% in December but fell 0.2% in January. Consumer spending (personal consumption expenditures) decreased 0.5% in December.
  • The Consumer Price Index was unchanged in January following no change in December. Over the previous 12 months, the CPI rose 1.6%. Core prices, which exclude food and energy, climbed 0.2% for the month and were up 2.2% over the previous 12 months.
  • According to the Producer Price Index, the prices companies received for goods and services dropped 0.1% in January following a 0.1% decrease in December. Tumbling energy and food prices helped drive producer prices lower. Over the 12 months ended in January, producer prices increased 2.5%.
  • Housing: Following a mundane 2018, the housing sector continues to lack steam entering the new year. Sales of existing homes fell 1.2% in January after plunging 6.4% in December. Year-over-year, existing home sales were down 8.5%. The January median price for existing homes was $247,500, down from $253,600 in December. Existing home prices were up a relatively scant 2.8% from January 2018. Total housing inventory for existing homes for sale in January increased to 1.59 million, up from 1.53 million existing homes available for sale in December. There was no government report on new home sales in February (for December). That report is scheduled for release on March 5.
  • Manufacturing: The manufacturing sector lost steam in January as industrial production fell 0.6% following a 0.1% advance in December. In January, manufacturing production fell 0.9%, primarily as a result of a large drop in motor vehicle assemblies; factory output excluding motor vehicles and parts decreased 0.2%. The latest figures on durable goods orders from the Census Bureau are for December (again, due to the government shutdown). New orders for manufactured durable goods increased 1.2% following a 1.0% jump in November. Transportation led much of the increase, as new orders excluding transportation increased only 0.1% in December.
  • Imports and exports: The latest information on international trade in goods and services, out February 6, is for November. For that month, the goods and services deficit was $49.3 billion, down $6.4 billion from October’s figures. November’s exports were $1.3 billion less than October exports. Imports were $7.7 billion less than October imports. Year-to-date, the goods, and services deficit increased $51.9 billion, or 10.4%, from the same period in 2017. The advance international trade in goods report for December showed the trade deficit sat at $79.5 billion, up $9.0 billion from $70.5 billion in November. Exports of goods for December were $135.7 billion, $4.0 billion less than November exports. Imports of goods for December were $215.2 billion, $5.0 billion more than November imports.
  • International markets: In Great Britain, Prime Minister Theresa May was unable to gain parliamentary approval of the exit deal she negotiated with the European Union. In addition, there does not appear to be a package that the British government can agree on, leading to the likelihood that the March 29 scheduled UK exit from the European Union will be delayed. On a larger scale, world trade regressed in 2018 as the trade war between the United States and China pulled the reins on global economic growth. According to the CPB Netherlands Bureau for Economic Policy Analysis, total goods trade across borders slowed from a 4.7% increase in 2017 to a 3.3% gain in 2018.
  • Consumer confidence: The Conference Board Consumer Confidence Index® increased in February following a decline in January. The index now stands at 131.4, up from 121.7 in January. The Present Situation Index, which gauges how consumers feel about current business and labor market conditions, improved in February, as did consumers’ outlook for income, business, and labor market conditions over the short term.

Eye on the Month Ahead

Gains in the market last month were due, in large part, to apparent progress made in trade negotiations between the United States and China. Whether an accord is actually reached in March remains to be seen. Economic data has been a mixed bag through the first few months of the new year. Inflation has been subdued; manufacturing — and more importantly, business investment in capital goods production — has also been marginal. As the first quarter comes to an end, look for more current information on the state of the economy as the government reporting agencies catch up with data.

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What I’m Watching This Week – 25 February 2019

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

The benchmark indexes listed here posted modest gains last week, led by the small caps of the Russell 2000. With another weekly gain, the Dow has enjoyed its longest streak in almost 25 years. Volatility was moderate last week as the Cboe Volatility Index® hit its lowest level in several months. Long-term bond prices moved very little as yields have remained fairly stable for much of this month. For the year, investors have been bullish on small-cap stocks, pushing the Russell 2000 to an almost 18% gain over its 2018 closing value. The Nasdaq is next, followed by the large caps of the Dow and the S&P 500. Even the Global Dow is 10% ahead of last year’s closing mark.

Oil prices rose again last week, closing at $57.16 per barrel by late Friday, up from the prior week’s closing price of $55.80 per barrel. The price of gold (COMEX) climbed higher last week, jumping to $1,330.20 by last Friday evening, up from the prior week’s price of $1,324.60. The national average retail regular gasoline price was $2.317 per gallon on February 18, 2019, $0.041 higher than the prior week’s price but $0.240 less than a year ago.

Market/Index 2018 Close Prior Week As of 2/22 Weekly Change YTD Change
DJIA 23327.46 25883.25 26031.81 0.57% 11.59%
Nasdaq 6635.28 7472.41 7527.54 0.74% 13.45%
S&P 500 2506.85 2775.60 2792.67 0.62% 11.40%
Russell 2000 1348.56 1569.25 1590.06 1.33% 17.91%
Global Dow 2736.74 2981.11 3010.94 1.00% 10.02%
Fed. Funds target rate 2.25%-2.50% 2.25%-2.50% 2.25%-2.50% 0 bps 0 bps
10-year Treasuries 2.68% 2.66% 2.65% -1 bps -3 bps

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

Last Week’s Economic Headlines

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

  • New orders for manufactured durable goods in December increased $3.0 billion, or 1.2%, to $254.4 billion, according to the latest Census Bureau report. This increase, up two consecutive months, followed a 1.0% November increase. Excluding transportation, new orders increased 0.1%. Excluding defense, new orders increased 1.8%. However, a closer look at the report reveals that business investment in new orders for durable capital goods is lagging. New orders for core capital goods (excluding defense and transportation) fell 0.7% in December, following a revised November drop of 1.0%. Capital goods include buildings, machinery, vehicles, tools, and equipment.
  • Sales of existing homes fell for the third consecutive month in January, according to the National Association of Realtors®. Of the four major geographical regions of the United States, only the Northeast saw sales climb higher in January over December. Overall, sales fell 1.2% for the first month of the year and are now down 8.5% from a year ago. The median existing-home price in January was $247,500, up 2.8% from January 2018 ($240,800), but down from December’s median price of $253,600. According to the report, home price growth is the slowest since February 2012. Inventory for existing homes for sale edged up from 3.7 months in December to 3.9 months in January.
  • For the week ended February 16, there were 216,000 new claims for unemployment insurance, a decrease of 23,000 from the previous week’s level. According to the Department of Labor, the advance rate for insured unemployment claims remained at 1.2% for the week ended February 9. The advance number of those receiving unemployment insurance benefits during the week ended February 9 was 1,725,000, a decrease of 55,000 from the prior week’s level.

Eye on the Week Ahead

With the threat of another government shutdown apparently behind us, several economic reports are out during the last week of the month, not the least of which is the gross domestic product report for the fourth quarter of 2018. Inflation has been held in check at the consumer level, a trend that is likely to be reflected in the latest report on personal income and outlays. Delayed by the aforementioned shutdown, January figures on income will be available, but spending and savings information is available only for December.

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What I’m Watching This Week – 19 February 2019

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

Stocks extended their streak last week, as each of the benchmark indexes listed here posted gains of at least 2.0%. Positive developments in the trade talks between the United States and China, coupled with avoidance of another government shutdown, gave investors the confidence to continue trading. Robust market gains came despite weak retail sales numbers for January. Oil prices climbed over $55 per barrel for the first time in many weeks as OPEC and Russia agreed to cut production. Small caps led the way last week as the Russell 2000 gained over 4.0%. The Dow registered its eighth consecutive week of gains and is now almost 11.0% ahead of its December closing value.

Oil prices rose last week, closing at $55.80 per barrel by late Friday, up from the prior week’s closing price of $52.71 per barrel. The price of gold (COMEX) rebounded last week, jumping to $1,324.60 by last Friday evening, up from the prior week’s price of $1,317.90. The national average retail regular gasoline price was $2.276 per gallon on February 11, 2019, $0.022 higher than the prior week’s price but $0.331 less than a year ago.

Market/Index 2018 Close Prior Week As of 2/15 Weekly Change YTD Change
DJIA 23327.46 25106.33 25883.25 3.09% 10.96%
Nasdaq 6635.28 7298.20 7472.41 2.39% 12.62%
S&P 500 2506.85 2707.88 2775.60 2.50% 10.72%
Russell 2000 1348.56 1506.39 1569.25 4.17% 16.36%
Global Dow 2736.74 2920.60 2981.11 2.07% 8.93%
Fed. Funds target rate 2.25%-2.50% 2.25%-2.50% 2.25%-2.50% 0 bps 0 bps
10-year Treasuries 2.68% 2.63% 2.66% 3 bps -2 bps

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

Last Week’s Economic Headlines

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

  • For the third consecutive month consumer prices, as measured by the Consumer Price Index, remained unchanged in January. Prices less food and energy inched up 0.2%. Energy prices fell 3.1% in January, after falling 2.6% in December. For the 12 months ended in January, the CPI is up 1.6%, while the CPI less food and energy is ahead 2.2%. A 10.1% drop in gas prices over the last 12 months has pulled consumer prices lower.
  • December was not a good month at the retail level, as sales suffered their largest drop in nine years. Evidencing signs that economic growth slowed during the last quarter of 2018, total sales fell 1.2% in December, following a downwardly-revised 0.1% increase in November. The good news is that total sales for 2018 were up 5.0%. Nevertheless, some retail sectors were hit hard in December, including furniture and home furnishings stores (-1.3%); sporting goods, hobby, musical instrument, and book stores (-4.9%); health and personal care stores (-2.0%); and gasoline stations (-5.1%). Also of note, for the first time in several months, nonstore (online) retailers saw sales fall, declining 3.9% in December.
  • Prices received by domestic producers of goods and services, as measured by the Producer Price Index, fell 0.1% in January after declining 0.1% (revised) in December. Goods plummeted 0.8% for the month, while services actually increased 0.3% in January. Overall, producer prices advanced 2.0% for the 12 months ended in January. The index less foods, energy, and trade services rose 0.2% in January following no change in December. For the 12 months ended in January, prices less foods, energy, and trade services moved up 2.5%.
  • Inflationary indicators has been soft so far this year and import and export prices are no exception. In January, United States import prices fell 0.5% and export prices decreased 0.6% for the second consecutive month. Import prices have fallen 3.1% over the first three months of 2019, the largest drop over a 3-month period since February 2016. The January decrease in import prices was driven by a drop in natural gas prices. Import prices, excluding fuel, edged down 0.2% in January. Exports have recorded only one price increase since June. Decreases in both agricultural and nonagricultural prices contributed to the overall decline.
  • According to the latest treasury budget statement, the government deficit was $13.5 billion in December. For the first three months of the fiscal year, the deficit sits at $318.9 billion — more than 40% higher than the $225 billion deficit over the same period in fiscal year 2018. Individual income taxes accounted for $373 billion of income in December, while corporation income taxes totaled $53 billion. On the other side of the ledger, the largest expenditures last December were for Social Security ($251 billion) and national defense ($188 billion).
  • Industrial production decreased 0.6% in January after rising 0.1% in December. In January, manufacturing production fell 0.9%, primarily as a result of a large drop in motor vehicle assemblies; factory output, excluding motor vehicles and parts, decreased 0.2%. The indexes for mining and utilities moved up 0.1% and 0.4%, respectively. Compared to last January, total industrial production is 3.8% higher in the first month of 2019.
  • According to the Job Openings and Labor Turnover report, job openings continued to expand at a faster rate than hires. December saw job openings reach a high of 7.3 million and the job openings rate was 4.7%. Job opening increased in construction, accommodation and food services, and health care and social assistance. Job openings decreased in nondurable goods manufacturing, federal government, and real estate and rental and leasing. December hires increased to 5.907 million from November’s 5.812 million. Hires increased in retail trade, educational services, and mining and logging. Hires fell in information and in federal government. Over the 12 months ended in December, hires totaled 68.5 million and separations totaled 65.9 million, yielding a net employment gain of 2.6 million.
  • For the week ended February 9, there were 239,000 new claims for unemployment insurance, an increase of 4,000 from the previous week’s level, which was revised up by 1,000. According to the Department of Labor, the advance rate for insured unemployment claims remained at 1.2% for the week ended February 2. The advance number of those receiving unemployment insurance benefits during the week ended February 2 was 1,773,000, an increase of 37,000 from the prior week’s level.

Eye on the Week Ahead

This week offers a couple of noteworthy economic reports. The National Association of Realtors® releases its figures on existing home sales in January. Sales took a big dive in December and look to rebound. Also, the December report on durable goods orders should be out this week. This report was delayed last month due to the government shutdown.

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What I’m Watching This Week – 11 February 2019

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

Most of the benchmark indexes listed here posted gains for the seventh consecutive week. Only the Global Dow lagged behind. Utilities and information technology shares performed well last week, while oil and energy shares did not fare quite so favorably. International trade once again was in the news as negotiations between the United States and China continue with no apparent resolution in sight. Investors will be keeping their eyes on the rhetoric from both of the global economic giants as the deadline for the tariff truce draws nearer. Of the indexes listed here, the Nasdaq led the way, followed by the Russell 2000, which continued to perform best since the beginning of the year.

Oil prices fell last week, closing at $52.71 per barrel by late Friday, down from the prior week’s closing price of $55.37 per barrel. The price of gold (COMEX) dipped for the first time in several weeks, dropping to $1,317.90 by last Friday evening, off from the prior week’s price of $1,322.00. The national average retail regular gasoline price was $2.254 per gallon on February 4, 2019, $0.002 lower than the prior week’s price and $0.383 less than a year ago.

Market/Index 2018 Close Prior Week As of 2/8 Weekly Change YTD Change
DJIA 23327.46 25063.89 25106.33 0.17% 7.63%
Nasdaq 6635.28 7263.87 7298.20 0.47% 9.99%
S&P 500 2506.85 2706.53 2707.88 0.05% 8.02%
Russell 2000 1348.56 1502.05 1506.39 0.29% 11.70%
Global Dow 2736.74 2947.87 2920.60 -0.93% 6.72%
Fed. Funds target rate 2.25%-2.50% 2.25%-2.50% 2.25%-2.50% 0 bps 0 bps
10-year Treasuries 2.68% 2.68% 2.63% -5 bps -5 bps

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

Last Week’s Economic Headlines

  • Some government agencies are playing catch-up as they post information not available during the shutdown. Such is the case with the release of the international trade deficit, which is for November. According to the Bureau of Economic Analysis, the goods and services deficit was $49.3 billion, down $6.4 billion from October. November exports were $209.9 billion, $1.3 billion less than October exports. November imports were $259.2 billion, $7.7 billion less than October imports. The November decrease in the goods and services deficit reflected a decrease in the goods deficit of $6.7 billion to $71.6 billion and a decrease in the services surplus of $0.3 billion to $22.3 billion. Year-to-date, the goods, and services deficit increased $51.9 billion, or 10.4%, from the same period in 2017. Exports increased $157.1 billion, or 7.3%. Imports increased $208.9 billion, or 7.9%.
  • Economic activity in the services sector slowed in January. According to the Non-Manufacturing ISM® Report On Business®, the non-manufacturing index fell 1.3% from its December reading. Business activity and new orders also regressed, while employment and prices increased. Survey respondents expressed concern about the impacts of the government shutdown but remained generally optimistic about overall business conditions.
  • For the week ended February 2, there were 234,000 new claims for unemployment insurance, a decrease of 19,000 from the previous week’s level. According to the Department of Labor, the advance rate for insured unemployment claims remained at 1.2% for the week ended January 26. The advance number of those receiving unemployment insurance benefits during the week ended January 26 was 1,736,000, a decrease of 42,000 from the prior week’s level, which was revised down by 4,000.

Eye on the Week Ahead

More economic information should be forthcoming as government agencies try to catch up following the shutdown. Inflation indicators are front and center this week with reports on the Consumer Price Index and the retail sales report. Also, the Treasury budget report should be out this week, which should be for last December.

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