The Markets
Hit the reset button: A rebound in the price of oil and some promising economic data helped equities recoup their losses of the week before, returning them to roughly even for the year. As oil rose above $50 a barrel once again and investors regained confidence in equities, the yield of the benchmark 10-year Treasury note rose as prices fell.
Last Week's Headlines
- The U.S. economy added 257,000 jobs in January, and the Bureau of Labor Statistics figures for jobs created in November and December were revised upward substantially. Even more encouraging, average hourly earnings rose 12 cents to $24.75. However, because more jobs drew more workers back into the workforce, the unemployment rate was little changed at 5.7%; it has been within 0.1% of that level since October.
- The Federal Communications Commission announced proposed regulations that would treat Internet service providers much like telecommunications companies. The regulations, which would prevent providers from varying service speeds based on how much a customer paid for service, are scheduled to be voted on by the full commission at its February 26 meeting.
- More signs of slowing growth prompted China's central bank to ease its reserve requirements for the country's commercial banks, which should make more money available for lending. HSBC's China Services PMI--a key measure of non-manufacturing activity--showed that growth had fallen in January to 51.8%, its lowest level in six months and just barely in expansion territory. The official National Bureau of Statistics' non-manufacturing PMI index hit 53.4%, also indicating slower growth, while the NBS's equivalent gauge for the manufacturing sector actually showed a slight contraction with a reading of 49.8%
- Personal income rose 0.3% in December, according to the Bureau of Economic Analysis; adjusted for inflation, the increase was 0.5%. Meanwhile, personal consumption was down 0.3%.
- During a tour aimed at convincing European leaders to modify the terms of its bailout agreements, Greek Finance Minister Yanis Varoufakis proposed a "bridge agreement" until a more lasting solution to restructuring the country's debt can be crafted. The European Central Bank said it would not allow Greek sovereign debt to be used as collateral for loans from the bank, but investors were partly reassured by the ECB's authorization of emergency liquidity assistance for Greece's central bank in case of a run on Greek banks.
- U.S. manufacturing growth slowed slightly in January, according to the Institute for Supply Management, but growth in the services sector accelerated by 0.2% during the month.
- The Commerce Department said construction spending was up 0.4% in December, with residential building accounting for most of the increase. For all of 2014, construction was 5.6% higher than in 2013, driven largely by a 10.5% increase in nonresidential construction.
- The Commerce Department said new orders at U.S. manufacturers fell 3.4% in January--the fifth straight monthly decline--but that business orders for capital equipment slipped only 0.1%.
- A 17.1% jump in the U.S. trade deficit in December put it at $46.6 billion, its highest level since November 2012, according to the Commerce Department. In part, the increase was due to a 2.2% increase in imports, which economists said resulted from strength in both the dollar and the U.S. economy as a whole.
Eye on the Week Ahead
Investors are likely to keep an eye on oil prices and the unfolding situation in Greece. Also, they may watch to see whether additional economic sanctions are in store if Russia ignores German Prime Minister Angela Merkel's Wednesday deadline to present a plan for resolving the conflict in Ukraine.
Data sources: Economic: Based on data from U.S. Bureau of Labor Statistics (unemployment, inflation); U.S. Department of Commerce (GDP, corporate profits, retail sales, housing); S&P/Case-Shiller 20-City Composite Index (home prices); Institute for Supply Management (manufacturing/services). Performance: 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.
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