Market Week: October 24, 2016

October 24th, 2016

The Markets (as of market close October 21, 2016)

Last week began with a whimper as equities closed down (the Dow fell 0.3%), while the 10-year Treasuries yield dropped 4 basis points and bond prices increased. Oil (WTI) fell below $50 per barrel before rallying to around $50.50 per barrel last Tuesday morning. Midweek saw the markets remain steady after the European Central Bank decided to leave its interest rates unchanged.

Favorable earnings reports pushed the markets into positive territory by last week’s end, as each of the indexes listed here posted gains week-over-week, led by the Global Dow and the Nasdaq, each of which gained almost 1.0%. The price of crude oil (WTI) advanced $0.68, while gold had a good week, gaining almost $14 over the prior week’s closing price.

The price of crude oil (WTI) closed at $51.0 per barrel last week, up from $50.32 per barrel the previous week.
The price of gold (COMEX) increased, closing at $1,266.70 by late Friday afternoon, up from the prior week’s price of $1,252.90. The national average retail regular gasoline price decreased to $2.257 per gallon on October 17, 2016, $0.015 less than last week’s price and $0.020 lower than a year ago.

Market/Index

2015 Close

Prior Week

As of 10/21

Weekly Change

YTD Change

DJIA

17425.03

18138.38

18145.71

0.04%

4.14%

Nasdaq

5007.41

5214.16

5257.40

0.83%

4.99%

S&P 500

2043.94

2132.98

2141.16

0.38%

4.76%

Russell 2000

1135.89

1212.41

1218.10

0.47%

7.24%

Global Dow

2336.45

2426.05

2449.62

0.97%

4.84%

Fed. Funds target rate

0.25%-0.50%

0.25%-0.50%

0.25%-0.50%

0 bps

0 bps

10-year Treasuries

2.26%

1.80%

1.73%

-7 bps

-53 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

· Overall, consumer prices increased in September, but core prices changed very little. The Consumer Price Index, a measure of the change in the prices of goods and services purchased by consumers, increased 0.3% in September over August. The gasoline index rose 5.8% in September and accounted for more than half of the increase in the CPI. The energy index increased 2.9%, its largest advance since April. The index for all items less food and energy (core prices) rose a scant 0.1% in September after a 0.3% increase in August. The CPI has risen 1.5% over the last 12 months — its largest 12-month increase since October 2014. However, core prices actually fell 0.1 percentage point year-over-year. Based on this report, inflation may be trending up, but at a very moderate pace.

· As expected, the single-family housing market picked up steam in September after a brief retreat in August. Sales of existing homes jumped 3.2% in September to an annual rate of 5.47 million, up from August’s downwardly revised 5.30 million. Through September, existing home sales are at their highest pace since last June and are 0.6% above a year ago. The median existing-home price for all housing types in September was $234,200, up 5.6% from September 2015 ($221,700). The median existing single-family home price was $235,700 in September, up 5.6% from September 2015. Unsold inventory (2.04 million homes available) is at a 4.5-month supply at the current sales pace, which is down from 4.6 months in August. Adding to the increase of existing home sales is the jump in sales to first-time homebuyers, which accounts for 34% of total sales in September. First-time buyers represented 30% of sales in all of 2015.

· According to the latest information from the Census Bureau, building permits are up 6.3% and single-family housing starts increased 8.1% in September. On the negative side, single-family housing completions fell 8.8% and multifamily housing starts plummeted 38%. However, multifamily building permits advanced 16.8%, indicating that construction in that sector should pick up over the next several months.

· The National Association of Home Builders Housing Market Index, based on a survey of NAHB members, fell 2 points to 63 for October. Home builders have some reservations about the present market for new home sales due to concerns over shortages of lots and labor. However, the index for single-family home sales over the next six months increased 1 percentage point, as respondents expect the housing market to continue to make slow and steady gains.

· Industrial production edged up 0.1% in September after falling 0.5% in August. For the third quarter as a whole, industrial production rose at an annual rate of 1.8% for its first quarterly increase since the third quarter of 2015. Manufacturing output increased 0.2% in September and moved up at an annual rate of 0.9% in the third quarter. However, compared to last year, industrial production is down 1.0%
with manufacturing output remaining unchanged from a year earlier.

· In the week ended October 15, the advance figure for seasonally adjusted initial unemployment insurance claims was 260,000, an increase of 13,000 from the previous week’s revised level. The advance seasonally adjusted insured unemployment rate remained at 1.5%. The advance number for seasonally adjusted insured unemployment during the week ended October 8 was 2,057,000, an increase of 7,000 from the previous week’s revised level.

Eye on the Week Ahead

After several weeks of volatility, investors will likely keep their fingers crossed for a break in the action as
third-quarter earnings reports continue to stream in. Rising oil prices and increased consumer spending could expand the third-quarter GDP.

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: October 10, 2016

October 10th, 2016

The Markets (as of market close October 7, 2016)

Equities took a tumble early last week as the Dow, the Nasdaq, the S&P 500, and the Russell 2000 lost value. Only the Global Dow saw gains, largely feeding off the fading value of the British pound. Oil (WTI) opened last week on an uptick, gaining over $0.40 per barrel late last Monday. On Tuesday, word that the European Central Bank would reduce stimulus and raise interest rates (a fact that was denied by the ECB) sent U.S. and global stocks reeling. Bond yields jumped, with the yield on 10-year Treasuries gaining almost 10 basis points by Wednesday morning. Gold fell $42 to $1,276.40, and the Dow tumbled almost 140 points compared
to its closing value from the prior week. Oil prices continued to climb on news that U.S. reserves fell for the fifth consecutive week.

As last week came to a close, stocks slipped further as each of the indexes listed here lost value except for the
Global Dow, which posted a small gain. A weaker-than-expected jobs report didn’t help matters. Bond prices fell as yields jumped to their highest levels in quite some time. The yield on 10-year Treasuries increased 13 basis points last week.

The price of crude oil (WTI) closed at $49.55 per barrel last week, up from $48.05 per barrel the previous week.
The price of gold (COMEX) plummeted $60, closing at $1,258.60 by late Friday afternoon, down from the prior week’s price of $1,318.80. The national average retail regular gasoline price increased to $2.245 per gallon on October 3, 2016, $0.021 more than last week’s price but $0.073 less than a year ago.

Market/Index

2015 Close

Prior Week

As of 10/7

Weekly Change

YTD Change

DJIA

17425.03

18308.15

18240.49

-0.37%

4.68%

Nasdaq

5007.41

5312.00

5292.40

-0.37%

5.69%

S&P 500

2043.94

2168.27

2153.74

-0.67%

5.37%

Russell 2000

1135.89

1251.65

1236.56

-1.21%

8.86%

Global Dow

2336.45

2459.66

2464.52

0.20%

5.48%

Fed. Funds target rate

0.25%-0.50%

0.25%-0.50%

0.25%-0.50%

0 bps

0 bps

10-year Treasuries

2.26%

1.59%

1.72%

13 bps

-54 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 number of new jobs created in September fell a bit from August. According to the Bureau of Labor Statistics, there were 156,000 new jobs in September, down from 167,000 in August. September’s total number of new jobs is well below the 178,000 monthly average for 2016. The unemployment rate inched up 0.1 percentage point to 5.0%, and the number of unemployed persons was little changed at 7.9 million. The employment to population ratio was 59.8 — up 0.1 percentage point from August, while the labor participation rate was little changed at 62.9. In September, the average workweek for all employees on private nonfarm payrolls increased by 0.1 hour to 34.4 hours.

In September, average hourly earnings for all employees on private nonfarm payrolls rose by $0.06 to $25.79. Over the year, average hourly earnings have risen by 2.6%. Overall, this lackluster jobs report should quell any thoughts of the Fed raising interest rates when it meets again in November.

· The Institute for Supply Management Report On Business® for September showed manufacturing expanding as the purchasing managers’ index (PMI) came in at 51.5% compared to 49.4% in August. Of the 18 manufacturing industries covered, 7 reported growth, including food, beverage & tobacco products, and computer & electronic products. Industries reporting contraction include petroleum & coal products; apparel, leather & allied products; transportation equipment; and machinery. Noteworthy is the 6 percentage point increase in new orders in September over August.

· The seasonally adjusted final Markit U.S. Manufacturing Purchasing Managers’ Index™ (PMI™) registered 51.5, down slightly from 52.0 in August, to signal the weakest improvement in overall business conditions since June. Manufacturers noted slower growth in September due to a reduction in client demand and diminished export sales. A reading above 50,0 indicates growth, but at a slower pace than in August. While the Markit and ISM reports may appear divergent, they are essentially reporting slow growth in the manufacturing sector.

· The Institute for Supply Management’s Non-Manufacturing ISM® Report On Business® shows economic activity expanded in the non-manufacturing, or services, sector in September. The non-manufacturing index registered 57.1% in September, 5.7 percentage points higher than the August reading of 51.4%. This is the highest reading since October 2015. Survey respondents also reported an increase in business activity, new orders, employment, and prices. Covered non-manufacturing sectors include agriculture, utilities, retail trade, management of companies & support services, health care & social assistance, transportation & warehousing.

· The U.S. goods and services deficit was $40.7 billion in August, up $1.2 billion from July. August exports were $187.9 billion, $1.5 billion more than July exports. August imports were $228.6 billion, $2.6 billion more than July imports. Year-to-date, the goods and services deficit decreased $4.3 billion, or 1.3%, from the same period in 2015. Exports decreased $62.4 billion, or 4.1%. Imports decreased $66.8 billion, or 3.6%. The positive from the report is the increase in exports against the continued strength of the dollar. Higher imports reflects strengthening of domestic demand for goods and services.

· In the week ended October 1, the advance figure for seasonally adjusted initial unemployment insurance claims was 249,000, a decrease of 5,000 from the prior week’s unrevised level. The advance seasonally adjusted insured unemployment rate remained at 1.5%. The advance number for seasonally adjusted insured unemployment during the week ended September 24 was 2,058,000, a decrease of 6,000 from the previous week’s revised level.

Eye on the Week Ahead

The Columbus holiday week begins with the job openings report for August. While a bit dated, the report provides information on the number of job openings, hires, and quits. At the end of the week, a couple of reports relating to inflationary trends are available. The Producer Price Index for September measures price changes from the producers’ perspective relative to goods, services, and construction sold to the consumer. The retail sales report offers a comparison on merchandise and services sold to consumers based on the total receipts of merchants.

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: October 3, 2016

October 3rd, 2016

The Markets (as of market close September 30, 2016)

Last week equities started off well enough, still feeding off the Fed’s decision to leave interest rates alone for the time being. But fear of financial instability for one of the world’s largest banks may have prompted many investors to sell, causing the market to tumble by mid-week. However, news that the bank in question was near a deal to settle some of its financial issues quelled some investors’ fears, lifting the market back to where it left off the prior week.

Both the Dow and S&P 500 posted slight gains, as did the Nasdaq. The Russell 2000 and Global Dow rebounded by last week’s end, but not enough to avoid posting a slight loss for the week.

The price of crude oil (WTI) closed at $48.05 per barrel last week, up from $44.59 per barrel the previous week.
The price of gold (COMEX) fell, closing at $1,318.80 by late Friday afternoon, down from the prior week’s price of $1,341.10. The national average retail regular gasoline price decreased to $2.224 per gallon on September 26, $0.001 lower than the prior week’s price and $0.098 below a year ago.

Market/Index

2015 Close

Prior Week

As of 9/30

Weekly Change

YTD Change

DJIA

17425.03

18261.45

18308.15

0.26%

5.07%

Nasdaq

5007.41

5305.75

5312.00

0.12%

6.08%

S&P 500

2043.94

2164.69

2168.27

0.17%

6.08%

Russell 2000

1135.89

1254.62

1251.65

-0.24%

10.19%

Global Dow

2336.45

2465.66

2459.21

-0.24%

5.27%

Fed. Funds target rate

0.25%-0.50%

0.25%-0.50%

0.25%-0.50%

0 bps

0 bps

10-year Treasuries

2.26%

1.61%

1.59%

-2 bps

-67 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 gross domestic product grew at a slightly faster pace in the second quarter compared to the first, according to the third and final estimate released by the Bureau of Economic Analysis. The GDP increased at an annual rate of 1.4% in the second quarter of 2016, compared to an 0.8% increase in the first quarter. The second quarter increase in the GDP reflected positive contributions from personal consumption expenditures, exports, and nonresidential fixed investment. These were partly offset by negative contributions from private inventory investment, residential fixed investment, and state and local government spending. Imports, which are a subtraction in the calculation of GDP, increased. In any case, the current pace of economic expansion is the slowest since 1949. The price index for gross domestic purchases increased 2.1% in the second quarter, compared with an increase of 0.2% in the first. The price index of the GDP measures changes in the prices of goods and services included in the GDP. The GDP price index is an indicator of inflationary trends.

·
Following several months of positive gains, August proved to be a soft month for consumer income and spending, leading to weak inflationary trends. The latest report from the Bureau of Economic Analysis shows consumer income increased $39.3 billion (0.2%) in August, disposable (after-tax) income increased $31.9 billion (0.2%), and consumer purchases of goods and services (personal consumption expenditures) increased $6.2 billion (less than 0.1%). The price index, which measures the change in prices of consumer goods and services, increased 0.1% for the month, while the price index excluding food and energy (core PCE) gained a scant 0.2%. Year-over-year, the core PCE is up 1.7% — still below the Fed’s target of 2.0% inflation.

·
During testimony before the Committee on Financial Services, FOMC Chair Janet Yellen indicated that the majority of the Committee favors raising interest rates, but there is no fixed timetable. She said the Committee expects the jobless rate to fall further and job growth to continue.

·
The U. S. trade deficit narrowed 0.6% in August from July, according to the latest report from the Census Bureau. The international trade deficit was $58.4 billion in August, down $0.4 billion from $58.8 billion in July. Exports of goods for August were $124.6 billion, $0.9 billion more than July exports. Imports of goods for August were $183.0 billion, $0.5 billion more than July imports.

·
The manufacturing sector followed a favorable July with a weak August. According to the latest Census Bureau report, new orders for manufactured goods ($0.1 billion), shipments of manufactured goods ($0.8 billion), unfilled orders ($1.5 billion), and new orders for capital goods ($3.1 billion) each declined in August from July. Only inventories of manufactured goods increased, gaining $0.5 billion, or 0.1%,
in August following a 0.4% increase in July.

·
With both residential construction and existing home sales falling in August, it isn’t a surprise that sales of new homes also dropped off for the month.

According to a Census Bureau report, sales of new single-family homes fell 7.6% in August compared to July. But at an annual rate of 609,000, the sales rate in August 2016 is over 20% higher than the sales rate a year ago. The median sales price of new houses sold in August was $284,000; the average sales price was $353,600. The seasonally adjusted estimate of new houses for sale at the end of August was 235,000. This represents a supply of 4.6 months at the current sales rate.

·
Consumer confidence in the economy grew in September. The Conference Board Consumer Confidence Index® grew to 104.1 in September, up from 101.8 in August. The Present Situation Index rose from 125.3 to 128.5, while the Expectations Index improved from 86.1 last month to 87.8.

·
The University of Michigan’s Survey of Consumers indicated consumer confidence in economic conditions edged upward in September due to gains among higher income households, while the Sentiment Index among households with incomes under $75,000 remained at the same level for the third consecutive month. The Index of Consumer Sentiment increased to 91.2 in September (89.8 in August), and the Current Economic Conditions index fell from 107 in August to 104.2, while the Index of Consumer Expectations jumped from 78.7 in August to 82.7 in September.

·
In the week ended September 24, the advance figure for seasonally adjusted initial unemployment insurance claims was 254,000, an increase of 3,000 from the prior week’s revised level. The advance seasonally adjusted insured unemployment rate remained at 1.5%. The advance number for seasonally adjusted insured unemployment during the week ended September 17 was 2,062,000, a decrease of 46,000 from the previous week’s revised level.

Eye on the Week Ahead

Job growth has been steady throughout much of the year, averaging about 187,000 new jobs per month. The upcoming jobs report this week is expected to show continued growth for September. Also worth noting are reports focusing on the manufacturing sector, which has slowed during the summer but may pick up in the fall.

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.