Market Week: April 28, 2014
After a mostly positive
week, investors went into Friday seemingly determined to take some
money off the table over a weekend when the Ukrainian conflict seemed to
promise fresh sanctions against Russia. The small caps of the Russell
2000 took the brunt of the selling with a 1.9% loss on Friday alone,
while the S&P 500 was left essentially flat.
Last Week's Headlines
- New
home sales plummeted 14.5% in March; according to the Commerce
Department, that's the lowest level since July and more than 13% below
March 2013. It's the first time since September 2011 that year-over-year
sales have dropped. The figures raised questions about how much of the
recent slump was attributable to winter weather. However, the $290,000
median sales price was 12.6% higher than a year earlier.
- Sales
of existing homes also slipped in March, but by only 0.2%, according to
the National Association of Realtors®. That left them 7.5% below March
2013. Tight inventories continued to help push prices up; the NAR said
the $198,500 median sales price was nearly 8% higher than in March 2013.
- Orders
for big-ticket items such as aircraft and electronics surged 2.6% in
March, following a 2.1% increase in February. The Commerce Department
said the volatile transportation sector was up 4%, while
non-transportation items also rose 2%, led by a 5.7% jump in computers
and electronics and a nearly 8% increase in orders for communications
equipment. Business orders for capital goods rose more than 7%.
- In
the wake of an appeals court ruling that struck down so-called "net
neutrality" regulations, the Federal Communications Commission proposed
new rules that would allow broadband Internet service providers to
charge content providers higher fees for speedier Internet connections
as long as they did so in a "commercially reasonable" manner. The rules
will be subject to public comment before going before the full
commission for a vote, possibly later in the year.
Eye on the Week Ahead
Markets
will have no shortage of potential influences next week. In addition to
tension over Ukraine, the Federal Reserve will meet, though little
change in its current tapering is expected. April unemployment figures
and the first estimate of Q1 gross domestic product will be released, as
will consumer spending and manufacturing data.
Data
sources: All information is based on sources deemed reliable, but no
warranty or guarantee is made as to its accuracy or completeness. 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:
U.S. Treasury (Treasury yields); WSJ Market Data Center (equities);
Federal Reserve Board (Fed Funds target rate); U.S. Energy Information
Administration/Bloomberg.com Market Data (oil spot price, WTI Cushing,
OK); www.goldprice.org (spot gold, NY close); Oanda/FX Street (currency
exchange rates). 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.
The Markets
Despite
the holiday-shortened trading week, domestic equities managed to
recapture virtually all of the ground lost the week before--and more
important, the gains were across the board. Even the tech and biotech
sectors that have suffered recently showed signs of stabilization, while
the S&P 500 managed to return to positive territory for the year.
Last Week's Headlines
- Springtime
for retail: Shoppers emerged from hibernation and returned to stores
again in March, according to the Commerce Department. Retail sales rose
1.1% from February, and were 3.8% higher than in March 2013. Auto sales
were up 3.4% for the month and up 9.5% from March 2013. The figures were
hailed as confirmation that frigid winter weather was a major factor in
previous months' sluggish sales.
- China's economy grew 7.4% over
the last year, according to the country's National Bureau of
Statistics. That represents a slowing from the previous quarter's
annualized 7.7% rate, and is slightly below the targeted 7.5% growth for
all of 2014. It also represents the nation's slowest quarterly growth
in 18 months. Chinese officials said weaker winter demand from the
United States for exports and a sluggish housing market were major
factors in the decline.
- Consumer
prices rose 0.2% in March, helping to cut the inflation rate for the
last 12 months slightly to 1.5%. The Bureau of Labor Statistics said the
biggest increases were seen in the costs of food and shelter. Grocery
prices overall were up .5% for the month and 1.7% for the year, while
restaurant prices are up 2.3% since March 2013. The 2.7% increase in the
cost of shelter since last March in part reflects rising home prices.
Meanwhile, energy costs declined 0.1% in March, led by a 1.7% drop in
gas prices.
- Housing starts improved
in March, rising 2.8%, but were nevertheless almost 6% lower than March
2013. The Commerce Department said building permits--an indicator of
future activity--fell 2.4% for the month but were more than 11% higher
than the previous March.
- U.S.
industrial production grew 0.7% in March, driven largely by mining and
the utilities sector. Also, the Federal Reserve revised February's 0.7%
gain upward to 1.2%; it was the highest monthly growth rate in almost
four years. The increases represent an annualized 4.4% growth rate in
Q1. Meanwhile, the Fed's April Empire State manufacturing survey slipped
4 points to 1.3, but the Philly Fed's survey for the month rose from
9.0 to 16.6, its highest reading since last September and the second
consecutive month of gains.
- The
nonpartisan Congressional Budget Office said the federal government's
cost of expanding health-care coverage under the Affordable Care Act
(primarily from providing insurance premium subsidies) will be $36
billion in 2014--roughly 12% less than the amount predicted in
February--and almost 7% ($100 billion) less than the $1,487 billion
previously estimated for the next 10 years.
- The
weekly earnings of full-time American workers during the first quarter
were 3% higher than a year earlier; according to the Bureau of Labor
Statistics, that's the fastest annual growth since 2008 and was more
than double the 1.4% increase in the Consumer Price Index over the last
12 months. The report said the increase put inflation-adjusted median
weekly earnings at $796, their highest level since Q2 2012.
Eye on the Week Ahead
Data
on home sales and manufacturing could suggest whether a spring rebound
is in store. Many of the major Nasdaq tech companies will release Q1
earnings, which could influence whether last week's rally shows some
ongoing strength.
Data
sources: All information is based on sources deemed reliable, but no
warranty or guarantee is made as to its accuracy or completeness. 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:
U.S. Treasury (Treasury yields); WSJ Market Data Center (equities);
Federal Reserve Board (Fed Funds target rate); U.S. Energy Information
Administration/Bloomberg.com Market Data (oil spot price, WTI Cushing,
OK); www.goldprice.org (spot gold, NY close); Oanda/FX Street (currency
exchange rates). 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.
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.
The Markets
For
the second straight week, the large caps of the Dow and S&P 500
fared better than the Nasdaq, which continued to be hurt by selling in
the technology and biotech sectors that played such a big part in its
2013 gains. The S&P hit a new all-time closing high on Wednesday,
while the Dow came close to matching the record close seen on New Year's
Eve 2013. Meanwhile, a jobs report that seemed to support the Fed's
current gradual tapering left bond markets relatively stable.
Last Week's Headlines
- The
U.S. economy created 192,000 new jobs in March, and the Bureau of Labor
Statistics revised its figures for January and February upward.
However, because more people sought work, the unemployment rate remained
at 6.7%.
- There was encouraging news about the U.S.
manufacturing sector. After two months of declines, the Commerce
Department said new orders at U.S. factories were up 1.6% in February,
led by a 7% increase in transportation equipment, and shipments also
rebounded. Manufacturing data from the Institute for Supply Management®
also showed accelerating growth in March; the half-percent increase to
53.7% was the 10th straight month of growth. And in the services sector,
the ISM's March survey also showed acceleration, with a 1.5-point
increase to 53.1%.
- Despite a 0.5% inflation rate--the lowest in
more than four years--the European Central Bank left its key interest
rate unchanged at 0.25%. President Mario Draghi said the ECB discussed
adopting both conventional and extraordinary quantitative easing
measures, including a negative deposit rate and asset purchases, to
prevent the threat of deflation. Such measures could weaken the euro,
potentially increasing European exports. However, the group decided to
postpone action to see whether the inflation rate rises to a more
acceptable level after the end of a warm winter that has cut heating and
food prices there.
- According to the Commerce Department, the
U.S. trade deficit rose 7.6% in February to its highest level in five
months as a 0.4% increase in imports, particularly oil, wasn't enough to
overcome a 1.1% decline in American exports.
- Despite the winter
weather, a 1.2% increase in money spent on commercial buildings helped
push overall construction spending up 0.1% in February, according to the
Commerce Department.
- The
Department of Justice confirmed that it is investigating the practice of
high-frequency trading to see whether it has been used to violate
insider trading laws. The SEC and Commodity Futures Trading Commission
also are investigating HFT.
- Past
performance was no indicator of current results: Despite the troubled
rollout of www.healthcare.gov, the White House said that by the March 31
deadline, more than 7 million individuals--the initial goal--had signed
up (or were in the process of doing so) for health insurance coverage
under the Affordable Care Act.
Eye on the Week Ahead
Investors
will watch to see whether the tech selling continues and whether it
spreads to the large-cap indices. However, they'll have little economic
data for guidance, though minutes of the recent Federal Open Market
Committee meeting could show the extent of any division among members
about the future of interest rates.
Data
sources: All information is based on sources deemed reliable, but no
warranty or guarantee is made as to its accuracy or completeness. 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:
U.S. Treasury (Treasury yields); WSJ Market Data Center (equities);
Federal Reserve Board (Fed Funds target rate); U.S. Energy Information
Administration/Bloomberg.com Market Data (oil spot price, WTI Cushing,
OK); www.goldprice.org (spot gold, NY close); Oanda/FX Street (currency
exchange rates). 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.
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.
