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.
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: 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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