Market Week: May 27, 2015

May 26th, 2015

The Markets

Equities were very much a mixed bag last week, as trading was generally quiet ahead of the Memorial Day weekend. The S&P 500, which closed at an all-time high, continued its positive trend, gaining 0.16%. But the Dow and Global Dow fell back into negative territory. The Nasdaq and Russell 2000 posted moderate gains. A relatively strong housing starts report and an uptick in the Consumer Price Index may have helped drive U.S. Treasury yields higher. The lack of heavy trading may be the result of relatively mundane economic news during the week, the wrap up of corporate earnings season, and assurances from the Federal Reserve Chair that interest
rates aren’t moving up in the near future.

Market/Index

2014 Close

Prior Week

As of 5/22

Weekly Change

YTD Change

DJIA

17823.07

18272.56

18232.02

-0.22%

2.29%

Nasdaq

4736.05

5048.29

5089.36

0.81%

7.46%

S&P 500

2058.90

2122.73

2126.06

0.16%

3.26%

Russell 2000

1204.70

1243.95

1252.22

0.66%

3.94%

Global Dow

2501.66

2639.52

2627.85

-0.44%

5.04%

Fed. Funds

0.25%

0.25%

0.25%

0%

0%

10-year Treasuries

2.17%

2.15%

2.21%

6 bps

4 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 Headlines

· New home construction may be outpacing sales of existing homes as housing starts soared in April, while existing home sales dipped. New applications for building permits were 10.1% higher than March and 6.4% ahead of April 2014. Construction starts of privately owned homes increased by 20.2% above March and 9.2% over April 2014.

· On the other hand, sales of existing homes in April were down 3.3% compared to March, but they’re still more than 6% better than this time last year. The number of existing homes on the market increased by about 10%, as did the median price, which rose to $219,400 (8.9% above April 2014).

· For the third consecutive week, inventories of oil fell for the week ending May 15. The U.S. average retail price of regular gasoline increased five cents from last week to $2.74 per gallon as of May 18, 2015, which is 92 cents per gallon less than the same time last year.

· Layoffs continue to be scant as the May 16 week jobless claims report showed only a slight increase of 10,000 claims over last week. Continuing claims dropped 12,000 for the May 9 week, while the unemployment rate (1.6%) decreased by 0.1% from the previous week.

· The general conditions index of the Manufacturing Business Outlook Survey from the Federal Reserve Bank of Philadelphia, a closely watched manufacturing index, came in slightly down in May (6.7) from April (7.5), but reported an uptick in new orders and employment.

· Consumer prices increased 0.1% in April following a 0.2% gain in March. The index for all items less food and energy rose 0.3%, which contributed to April’s overall gain, more than offsetting the decline (-1.3%) in energy. The food index rose 2.0% over the last year, and the year-on-year index for all items less food and energy rose 1.8%. With prices increasing, may a rate hike be in the offing?

· Not in the immediate future, according to Fed Reserve Chair Janet Yellen. In a speech given Friday, Yellen indicated that the economy is soft but slowly gaining momentum that will likely necessitate a rate hike later in the year. However, low inflation coupled with low wages, and slowing in business spending and exports apparently is enough to hold off raising rates. This message is in keeping with the minutes from the April Federal Open Market Committee meeting that indicated most members haven’t seen enough economic growth to warrant increasing short-term interest rates–at least not yet. However, discussion of raising rates will remain on the agenda for the next several meetings.

Eye on the Week Ahead

This week brings major updates in manufacturing, housing, and the GDP. Will durable goods orders continue to lag, held back by weak exports and aircraft? Will new home sales continue their positive trend? Will the first-quarter gross domestic product reflect the trade gap and slow growth in inventories?

Data sources: News items are based on reports from multiple commonly available international news sources (i.e. wire services) and are independently verified when necessary with secondary sources such as government agencies, corporate press releases, or trade organizations. Market data: Based on data reported in WSJ Market Data Center (indexes); U.S. Treasury (Treasury yields); U.S. Energy Information Administration/Bloomberg.com Market Data (oil spot price, WTI Cushing, OK); www.goldprice.org (spot gold/silver); Oanda/FX Street (currency exchange rates). All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results. All investing involves risk, including the potential loss of principal, and there can be no guarantee that any investing strategy will be successful.

The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2,000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indices listed are unmanaged and are not available for direct investment.

Market Week: May 19, 2015

May 18th, 2015

The Markets

Despite drops in consumer confidence, import and export prices, crude oil inventories, and producer prices, the stock market rallied at the end of the week to post positive gains across the board lead by the S&P 500, which closed at an all-time high. However, the biggest gainers for the week were the Nasdaq (0.89%) and the Russell 2000, which gained 0.73% over last week. The domestic market’s positive close to the week may be in response to the rather sluggish economic news, which has increased sentiment that a Federal Reserve interest rate hike is not in the immediate future.

Market/Index

2014 Close

Prior Week

As of 5/15

Weekly Change

YTD Change

DJIA

17823.07

18191.11

18272.56

0.45%

2.52%

Nasdaq

4736.05

5003.55

5048.29

0.89%

6.59%

S&P 500

2058.90

2116.10

2122.73

0.31%

3.10%

Russell 2000

1204.70

1234.93

1243.95

0.73%

3.26%

Global Dow

2501.66

2621.90

2639.52

0.67%

5.51%

Fed. Funds

.25%

.25%

.25%

0%

0%

10-year Treasuries

2.17%

2.13%

2.15%

2 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 Headlines

· The Treasury Department reported that government receipts in April reached an all-time high. Total receipts came in at $471.8 billion, which created a surplus of $156.7 billion, the largest surplus in the last seven years. Of course, April is generally the biggest tax month of the year, with the bulk of the government’s receipts coming from individual income taxes ($288 billion). Through the first seven months of the budget, the deficit ($282.8 billion) is about 7.7% lower compared to this time last year.

· Compared to February, the March nonfarm jobs market saw fewer job openings (4.99 million vs. 5.14 million) according to the Department of Labor’s Job Openings and Labor Turnover Survey (JOLTS). Yet the number of unemployment claims continued to decrease, down 1,000 for the week ending May 9, while the four-week moving average (271,750) is the lowest level since April 22, 2000. It appears that while employers aren’t hiring at a brisk pace, they’re also not letting employees go either.

· Continuing a trend, U.S. import prices fell 0.3%, while prices for U.S. exports fell 0.7% in April. Compared to last April, import prices are down 10.7% with export prices dropping 6.3%.

· April also saw producer prices fall 0.4%, while industrial production decreased 0.3% for its fifth consecutive monthly loss.

· The Census Bureau’s latest report for April showed virtually no change in advance estimates of retail and food sales compared to March. Sales of autos, furniture, electronics/appliances, and food/beverages all declined, as did department store sales.

· For a second week in a row, crude oil inventories fell, a decrease of 2.2 million barrels from the previous week. Nevertheless, at 484.8 million barrels, U.S. crude oil inventories are at the highest level for this time of year in at least the last 80 years.

· Last quarter’s sluggish economy coupled with increasing gas prices at the pumps may have caused a distinct drop in consumer confidence, according to the University of Michigan’s preliminary index of consumer sentiment for May. The 7.3% decrease from April (95.9 to 88.6) is the largest decrease since December 2012.

Eye on the Week Ahead

The week begins with housing data. Will this lagging sector begin to gain momentum during the spring season? And will jobless claims reports continue to show a positive trend?

Data sources: News items are based on reports from multiple commonly available international news sources (i.e. wire services) and are independently verified when necessary with secondary sources such as government agencies, corporate press releases, or trade organizations. Market data: Based on data reported in WSJ Market Data Center (indexes); U.S. Treasury (Treasury yields); U.S. Energy Information Administration/Bloomberg.com Market Data (oil spot price, WTI Cushing, OK); www.goldprice.org (spot gold/silver); Oanda/FX Street (currency exchange rates). All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results. All investing involves risk, including the potential loss of principal, and there can be no guarantee that any investing strategy will be successful.

The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2,000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indices listed are unmanaged and are not available for direct investment.

Market Week: May 12, 2015

May 11th, 2015

The Markets

Buoyed by generally encouraging labor data, leading equity benchmarks enjoyed a major rally on Friday, overcoming an otherwise sluggish week. While the Dow’s gains exceeded those of the S&P 500, both indexes outperformed the Nasdaq. After dipping below 18000 during the week, the Dow closed at 18191, up .93% from the previous week, while the S&P 500 closed Friday’s trading up .37%. Equally encouraging is the fact that, despite the deep freeze that resulted in a lackluster first quarter, the year-to-date returns of the major indexes remain positive.

Market/Index

2014 Close

Prior Week

As of 5/8

Weekly Change

YTD Change

DJIA

17823.07

18024.06

18191.11

0.93%

2.06%

Nasdaq

4736.05

5005.39

5003.55

-0.04%

5.65%

S&P 500

2058.90

2108.29

2116.10

0.37%

2.78%

Russell 2000

1204.70

1228.11

1234.93

0.56%

2.51%

Global Dow

2501.66

2610.75

2621.90

0.43%

4.81%

Fed. Funds

.25%

.25%

25%

0%

0%

10-year Treasuries

2.17%

2.12%

2.15%

3bps

-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 Headlines

· While not overwhelming, the employment report allowed for cautious economic optimism moving forward. The unemployment rate for April was essentially unchanged at 5.4% (about 8.5 million persons), the U.S. Bureau of Labor Statistics reported on Friday. The report also notes that 223,000 new jobs were created in April–an increase of 138,000 new jobs compared to a weak March (based on revised numbers). Job gains occurred in professional and business services, health care, and construction. The job gains and consistent unemployment rate may be more indicative of a rebound from the brutal winter that dominated most of the first quarter. However, it’s uncertain whether this report shows enough economic stability to entice further discussion by the Fed of an imminent interest rate hike.

· New claims for unemployment insurance for the May 2 week came in at 265,000 a modest increase over last week’s reading of 262,000 claims. The four-week moving average of 279,500 represents the lowest average since the May 6, 2000, reading of 279,250. Ongoing jobless claims (people already collecting unemployment checks) declined by 28,000 to 2.228 million–the lowest level since November 2000. The favorable unemployment claims report could be a precursor to a promising employment report.

· Business productivity in the first quarter continued its downward trend, slumping at an annualized rate of 1.9%. This follows a fourth quarter decline of 2.1%. Output declined 0.2% while hours worked increased 1.7%. However, compared annually, productivity for the first quarter of 2015 is slightly ahead of 2014 by 0.6%.

· U.S. International Trade in Goods and Services deficit for March was $51.4 billion, up from the $35.9 billion deficit in February, marking the largest deficit since October 2008. Compared to February, March’s exports increased by $1.6 billion while imports grew by $17.1 billion. According to the report, the March increase in the goods and services deficit reflected an increase in the goods deficit of $14.9 billion to $70.6 billion and a decrease in the services surplus of $0.6 billion to $19.2 billion.

· The Census Bureau’s report on factory orders for March showed a 2.1% increase over February, ending a string of seven consecutive monthly declines. March’s gains were strongly influenced by factory orders for aircraft and motor vehicle industries. While the first quarter concluded on a positive note, enthusiasm may be tempered based on the overall weakness seen in April’s manufacturing reports.

· Contrary to predictions, Britain’s Conservative Party led by Prime Minister David Cameron won reelection. The Financial Times Stock Exchange 100 Index (FTSE) and the European stock indexes surged Friday overcoming early week volatility, likely due to the uncertainty of the pending elections.

Eye on the Week Ahead

Labor news dominates the early part of next week with the Fed’s Labor Market Conditions Index report on Monday, followed by Tuesday’s Job Openings and Labor Turnover Survey. Wednesday’s retail sales report may give indications whether consumer confidence is leading to increased sales. The week closes with Friday’s industrial production report.

Data sources: News items are based on reports from multiple commonly available international news sources (i.e. wire services) and are independently verified when necessary with secondary sources such as government agencies, corporate press releases, or trade organizations. Market data: Based on data reported in WSJ Market Data Center (indexes); U.S. Treasury (Treasury yields); U.S. Energy Information Administration/Bloomberg.com Market Data (oil spot price, WTI Cushing, OK); www.goldprice.org (spot gold/silver); Oanda/FX Street (currency exchange rates). All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results. All investing involves risk, including the potential loss of principal, and there can be no guarantee that any investing strategy will be successful.

The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2,000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indices listed are unmanaged and are not available for direct investment.

Market Week: May 5, 2015

May 4th, 2015

The Markets

Although May Day brought a rally in stock markets across the board, it wasn’t enough to wipe out the week’s losses. Several earnings reports and a disappointing GDP reading dampened the fervor that drove markets to new highs a week prior, while a Fed announcement fueled speculation about a June interest rate hike. The 10-year Treasury yield rose past the 2% mark.

Market/Index

2014 Close

Prior Week

As of 5/1

Weekly Change

YTD Change

DJIA

17823.07

18080.14

18024.06

-0.31%

1.13%

Nasdaq

4736.05

5092.08

5005.39

-1.70%

5.69%

S&P 500

2058.90

2117.69

2108.29

-0.44%

2.40%

Russell 2000

1204.70

1267.54

1228.11

-3.11%

1.94%

Global Dow

2501.66

2623.79

2610.75

-0.50%

4.36%

Fed. Funds

.25%

.25%

.25%

0%

0%

10-year Treasuries

2.17%

1.93%

2.12%

19 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 Headlines

· Gross domestic product rose at a paltry 0.2% during the first quarter of 2015, according to the Bureau of Economic Analysis’s (BEA) advance estimate. That compares with a 2.2% rise in Q4 2014. The reading reflects increases in consumer spending, private inventory investment, and federal government spending, which offset decreases in exports, business investment, and state and local government spending. Imports also increased, which affects the final numbers negatively. Observers noted several factors that could have been at play during the winter months, including challenging weather, a strengthening dollar, disruptions in West Coast port operations, and lower oil
prices. While disposable personal income rose 4.1% in Q1, compared with 3.2% in Q4, the personal savings rate also rose, by 5.5% in Q1 vs. 4.6% in Q4.

· In its announcement after the April meeting, the Federal Open Market Committee suggested that the first quarter’s slower growth was due in part to “transitory factors.” The Committee also said that, with “appropriate policy accommodations,” it expects growth to expand at a moderate pace. Noting its mandate to “foster maximum employment and price stability,” the Fed reiterated its position that the current target interest rate range of 0 to 0.25% is appropriate. “The Committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen further improvement in the labor market and is reasonably confident that inflation will move back to its 2% objective over the medium term.”

· Pending home sales remained at their highest level since June 2013 in March, according to the National Association of Realtors®. Sales, as measured by contracts signed, rose 1.1% since February, and were 11.1% higher than a year prior. The index has increased year-over-year for seven consecutive months. While this is good news, noted NAR chief economist Lawrence Yun, “The increased number of traditional buyers who appear to be replacing investors paying in cash is even better news.” He also said that high demand is causing prices to rise to “unhealthy levels”–in some areas nearly four or more times the pace of wage growth.

· Lending credence to Yun’s point about prices, the S&P/Case-Shiller Home Price Index 10-city and 20-city indices showed prices rising at a faster pace in February than a month earlier. However, the national index slowed in comparison to January. The 10-city index rose 4.8% year-over-year, compared to 4.3% in January; the 20-city index saw a 5.0% annual increase, compared to 4.5% in January; and the national index rose 4.2% in February over the previous year, compared to 4.4% a month prior. “While nationally prices are recovering,” said David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices, “new construction of single family homes remains very weak despite low vacancy rates among both renters and owner-occupied homes.”

· Despite a personal income picture that remained virtually flat from February to March, consumers spent more during the month than they had since November 2014. The BEA said that both personal income and disposable personal income rose less than 0.1%, while personal consumption expenditures increased 0.4%.

· Weekly unemployment insurance claims totaled 262,000 for the week ended April 25. According to the Department of Labor, that was the lowest level for initial claims since April 15, 2000.

· The Institute for Supply Management’s Manufacturing Index held steady at 51.5, matching the March reading, which was the lowest since May 2013. Readings above 50 indicate growth.

· Controversial Greek Finance Minister Yanis Varoufakis was relieved of his role leading negotiations with eurozone officials about the country’s financial future, and a new team was put in place.

Eye on the Week Ahead

Investors may be holding their breath in anticipation of Friday’s April employment report, hoping that it improves substantially over March. Other key indicators include reports on business productivity and international trade, which should offer some insight on how the strong dollar has affected the deficit.

Data sources: News items are based on reports from multiple commonly available international news sources (i.e. wire services) and are independently verified when necessary with secondary sources such as government agencies, corporate press releases, or trade organizations. Market data: Based on data reported in WSJ Market Data Center (indexes); U.S. Treasury (Treasury yields); U.S. Energy
Information Administration/Bloomberg.com Market Data (oil spot price, WTI Cushing, OK); www.goldprice.org (spot gold/silver); Oanda/FX Street (currency exchange rates). All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results. All investing involves risk, including the potential loss of principal, and there can be no guarantee that any investing strategy will be successful.

The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2,000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indices listed are unmanaged and are not available for direct investment.