The Markets
Last week saw a mixed
bag of information from some major economic sectors, which may have
influenced the equities markets to record some marginal gains by week's
end. Each of the indexes listed here posted week-on-week gains, led by
the Russell 2000 and Nasdaq. The Dow and S&P 500 posted gains of
about 1.5%, respectively, while the Global Dow inched ahead despite
Saudi Arabia's oil minister saying he did not foresee cuts in the supply
of oil, likely adding to the glut of global supply.
The price of crude oil
(WTI) increased again last week, closing the week at $32.84 a barrel,
$3.01 ahead of the prior week's closing price. The price of gold (COMEX)
fell by last week's end, selling at $1,222.80 by late Friday afternoon,
down from the prior week's closing price of $1,228.00. The national
average retail regular gasoline price actually increased for the first
time in eight weeks, selling at $1.730 per gallon on February 22, 2016, a
mere $0.006 above the prior week's price of $1.724 but still $0.602
under a year ago.
Last Week's Headlines
- The "second" estimate of the gross
domestic product was a little better than the first as the GDP advanced
1.0%, which is 0.3 percentage point above the initial fourth quarter
estimate. The GDP, which is the broadest measure of economic activity in
the United States, increased 2.0% in the third quarter and 3.9% in the
second. The increase in real GDP in the fourth quarter reflected
positive contributions from personal consumption expenditures (PCE),
residential fixed investment, and federal government spending, gains
that were partly offset by negative contributions from exports,
nonresidential fixed investment, state and local government spending,
and private inventory investment. Essentially, the fourth quarter
deceleration in the GDP reflects weaker consumer spending. However, this
trend may be changing as evidenced by January's income and outlays
report that follows.
- According to the latest report from
the Bureau of Economic Analysis, consumers increased spending in
January, as personal spending increased 0.5% from December. An indicator
of inflationary trends relied upon by the Fed, core personal
consumption expenditures (excluding volatile food and energy costs)
gained 0.3% in January and is 1.7% ahead of the same period last year as
it inches toward the Fed's inflation target of 2.0%. Both personal
income (pretax earnings) and disposable personal income (less taxes)
increased 0.5%. Wages and salaries increased $48.1 billion in January,
compared with an increase of $18.3 billion in December. Personal saving
remained relatively unchanged at $705.1 billion in January, compared
with $709.2 billion in December.
- Existing home sales increased 0.4% in
January to a seasonally adjusted annualized rate of 5.47 million--the
highest annual rate in six months. The median sales price of existing
homes fell from $223,200 in December to $213,800 in January, but it is
still up 8.2% from January 2015, according to the National Association
of Realtors®. While total housing inventory is 2.2% lower than a year
ago, January saw inventory increase 3.4% over the prior month.
- In another sign that the real estate
sector is slowing a bit, sales of new single-family homes sunk 9.2% in
January compared with the prior month. January's 494,000 sales figure is
50,000 off December's revised total, and 5.2% below the January 2015
estimate of 521,000. The median sales price of new houses sold in
January was $278,800, while the average sales price was $365,700. The
seasonally adjusted estimate of new houses for sale at the end of
January was 238,000. This represents a supply of 5.8 months at the
current sales rate.
- The Census Bureau's advance report on
orders for manufactured durable goods (expected to last at least three
years) shows new orders increased $11.1 billion, or 4.9%, to $237.5
billion in January following two consecutive months of declines.
Excluding transportation (up $8.2 billion, or 11.5%), new orders
increased 1.8%. Excluding defense, new orders increased 4.5%. Shipments
of manufactured durable goods in January, up two of the last three
months, increased $4.6 billion, or 1.9%, to $241.9 billion. Inventories
of manufactured durable goods in January, down six of the last seven
months, decreased $0.4 billion, or 0.1%, to $396.3 billion. This report
signals an investment by business in goods and equipment--a welcome sign
for the manufacturing sector of the economy.
- The advance report on the trade
deficit in goods for January shows the trade gap widening to $62.2
billion, compared with $61.5 billion in December. Both exports (2.9%)
and imports (1.5%) decreased for the month.
- The Conference Board Consumer
Confidence Index®, which had increased moderately in January, declined
in February. The index now stands at 92.2, down from 97.8 in January.
The index was reflective of surveyed consumers' weakened assessment of
current business conditions, apprehension about their personal financial
situations, and, to a lesser degree, labor market prospects. Following
suit, the University of Michigan's Index of Consumer Sentiment dropped
0.3 percentage point in February to 91.7, compared with 92.0 in January.
- For the week ended February 20, there
were 272,000 initial claims for unemployment insurance, an increase of
10,000 from the prior week's unrevised level of 262,000. For the week
ended February 13, the advance number for continuing unemployment
insurance claims was 2,253,000, a decrease of 19,000 from the previous
week's revised level. The advance seasonally adjusted insured
unemployment rate remained at 1.7% for the week ended February 13.
Eye on the Week Ahead
Important economic information available this week centers on two
sectors that have not been particularly favorable of late: manufacturing
and international trade. On the other hand, the Bureau of Labor
Statistics releases its latest figures on the employment situation,
which has been one of the few economic bright spots over the last
several months.
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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