Generally encouraging data that suggested winter's economic deep freeze
might be thawing led to broad-based gains for equities despite some
slippage at week's end. The Dow finally managed to surpass briefly the
record closing high it hadn't seen since New Year's Eve. However, of the
four domestic indices in the table below, the S&P 500 remained the
only one still in positive territory year-to-date. Meanwhile, the Fed's
steady-as-she-goes approach to tapering helped boost demand for the
benchmark 10-year Treasury, whose yield fell to its lowest level so far
this year.
Last Week's Headlines
- As expected, economic growth stalled during the first quarter,
falling from 2.9% in Q4 2013 to the current 0.1% (though that figure
will be subject to two revisions over the next two months). The Bureau
of Economic Analysis said lower exports, less spending by businesses on
fixed investments and inventory, and reduced spending by local and state
governments were key to the decline.
- The unemployment rate saw its biggest drop since December 2010,
falling from 6.7% to 6.3% in April; that's the lowest it's been since
September 2008. Also, the Bureau of Labor Statistics said the number of
new jobs created--288,000--was far greater than the last 12 months'
190,000 monthly average and represented the strongest job creation in
more than two years. Gains were broadly distributed, led by employment
in business and professional services, retail, restaurants/bars, and
construction. However, the report wasn't all good news; the drop in the
unemployment rate resulted partly from 806,000 people leaving the labor
force.
- Consumer spending rebounded from the previous two months' deep
freeze, rising an inflation-adjusted 0.7% in March. Even better, the
Commerce Department said the spending was widespread, with the biggest
gains in durable goods, which rose 2.7% (about half of which was
purchases of cars and car parts). The bad news? Spending on durable
goods was down 2.2% from the previous March, and one reason for March's
higher sales was a 0.5% jump in the cost of food. Nondurable goods were
up 0.9% for the month, while spending on services rose 0.4% and personal
income was up 0.5%.
- Business for U.S. manufacturers also accelerated coming out of the
frigid winter. The April reading on the most recent Institute for Supply
Management survey rose to 54.9%, its highest level since December, and
all but one of the 18 industries reporting saw gains. In addition, the
Commerce Department said orders at U.S. factories were up 1.1% in March;
a 3.5% jump in business spending on capital equipment (not including
the volatile aircraft sector) was the biggest increase in that figure
since January 2013.
- Home prices in the cities tracked by the S&P/Case-Shiller
20-City Composite Index were relatively flat for the month, rising only
0.2% as 13 of the 20 cities showed declines. Also, the 12.9%
year-over-year gain was slightly lower than the previous 12 months'
13.2% increase.
- As expected, the Federal Reserve's monetary policy committee once
again cut its monthly bond purchases by $10 billion, leaving them at $45
billion a month. The committee also reiterated its belief that its
target interest rate will remain at its current level well after bond
purchases end.
Eye on the Week Ahead
With few economic reports on tap this week, investors' focus could be
overseas. Heightened tensions over Ukraine could counterbalance any
data-induced optimism, as they did last Friday. Also, the European
Central Bank will meet Thursday, when additional economic stimulus
measures could be on the table.
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.
|
|
|
|
|
