A weekly update from Jeff Mitchell, your Trusted Advisor.
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The Markets
Despite
news that interest rates would not be increased in September, the stock
market endured a significant sell-off by week's end, presumably in
response to the Federal Reserve's report that the economy isn't strong
enough to warrant an interest rate hike. Of the indexes listed here, the
Nasdaq and Russell 2000 posted slight gains, while the large-cap Dow
and S&P 500 regressed. Only the Nasdaq has posted positive returns
year-to-date while the other listed indexes have all lost compared to
the close of 2014.
The
price of gold (COMEX) jumped a bit higher, selling at about $1,139.10 by
late Friday afternoon compared to $1,107.90 a week earlier. Crude oil
(WTI) prices remained relatively the same, selling at $44.98 per barrel
by week's end. The national average retail regular gasoline price
decreased to $2.375 per gallon on September 14, 2015, $0.062 under the
previous week's price of $2.437 per gallon and $1.033 below a year ago.
Last Week's Headlines
- The
Federal Open Market Committee (FOMC) determined at its September meeting
that economic conditions have not shown sufficient progress to warrant
an increase in short-term interest rates. According to the FOMC press release,
while there were improvements in the labor market with solid job gains
and declining unemployment, inflation has "continued to run below the
Committee's longer-run objective, partly reflecting declines in energy
prices and in prices of non-energy imports." Also, "recent global
economic and financial developments may restrain economic activity
somewhat and are likely to put further downward pressure on inflation in
the near term." As to when interest rates might be increased, "the
Committee anticipates that it will be appropriate to raise the target
range for the federal funds rate when it has seen some further
improvement in the labor market and is reasonably confident that
inflation will move back to its 2% objective over the medium term."
- Growth
continues in retail sales and services. According to the latest Census
Bureau report, retail and food services sales increased 0.2% for August
from the previous month and 2.2% from August 2014. Continuing its
positive trend, total sales for the June 2015 through August 2015 period
were up 2.2% from the same period a year ago.
- Industrial
production decreased 0.4% in August after increasing 0.9% in July,
according to the latest figures released by the Federal Reserve. The
increase in July is now estimated to be greater than originally reported
last month, largely as a result of upward revisions for mining and
utilities. Manufacturing output fell 0.5% in August primarily because of
a large drop in motor vehicles and parts that reversed a substantial
portion of its jump in July; production elsewhere in manufacturing was
unchanged.
- Business
inventories moved up 0.1% in July over June--the smallest gain since
March, according to the Census Bureau report. Inventories were up 2.6%
compared to July 2014. The total business inventories/sales ratio at the
end of July was 1.36. The July 2014 ratio was 1.29. Softening
inventories may be an indication that businesses are less optimistic
about near-term growth in sales.
- Inflationary
trends took a slight step back as consumer prices fell 0.1% in August,
primarily caused by a sharp decline in gasoline prices, according to the
latest report from the Bureau of Labor Statistics. The index for all
items less food and energy increased 0.1% in August, the same increase
as in July. For the last 12 months ended in August, the all items index
rose 0.2% before seasonal adjustment.
- The
National Association of Home Builders Housing Market Index of
single-family homes for September (preliminary) increased a point to 62
over August's revised index of 61. This reading continues this year's
sentiment of respondent home builders that housing market conditions are
favorable with moderate to low inventories, which likely will boost
demand and prices.
- The
Census Bureau's latest report on new residential construction for August
was a bit of a mixed bag. Building permits for privately owned housing
units rose 3.5% above the revised July rate and 12.5% ahead of August
2014. On the other hand, housing starts (beginning of actual
construction) dropped 3.0% below July's estimate, but still 16.6% ahead
of August 2014.
- The Census Bureau's report on Income, Poverty and Health Insurance Coverage in the United States: 2014
reveals that 2014 produced no statistically significant change from
2013 in either real median household income or the official poverty
rate. At the same time, the percentage of people without health
insurance coverage declined. Median household income in the United
States in 2014 was $53,657, not statistically different in real terms
from the 2013 median income. This is the third consecutive year that the
annual change was not statistically significant, following two
consecutive annual declines.
- For
the week ended September 12, new claims for unemployment insurance
dropped 11,000 from the previous week, according to the Department of
Labor. The insured unemployment rate remained at 1.7% for the week ended
September 5, while the advance number for continuing unemployment
claims decreased 26,000 from the prior week.
Eye on the Week Ahead
The
housing market, which has performed consistently so far this year,
offers the latest information on new and existing home sales. The week
ends with reports that focus on the economy, including the durable goods
orders and the gross domestic product.
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.
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