The Markets
After a fifth
consecutive week of gains, both the S&P 500 and the Dow have finally
surpassed their 2015 year-end closing values. The Dow gained 389 points
to close up 2.26%, while the S&P 500 increased 1.35% over the prior
week. In fact, each of the indexes listed here posted gains by last
week's end and are edging toward positive territory for the year.
Late-week gains were likely influenced by the Fed's decision to refrain
from raising interest rates, at least until it meets again in April.
The price of crude oil
(WTI) is clearly trending upward as the price increased again last week,
closing the week at $39.35 a barrel, $0.86 ahead of the prior week's
closing price. The price of gold (COMEX) increased by last week's end,
selling at $1,256 by late Friday afternoon, up from the prior week's
closing price of $1,251.10. The national average retail regular gasoline
price increased for the fourth week in a row, selling at $1.961 per
gallon on March 14, 2016, $0.120 over the prior week's price but $0.492
under a year ago.
Last Week's Headlines
- Following its March meeting, the Federal Open Market Committee
decided to maintain the current target range for the federal funds rate
at 0.25%-0.50%. On the plus side, the Committee noted that economic
activity has been expanding at a moderate pace, with favorable growth in
household spending, the housing sector, and the labor market. However,
in maintaining the current interest rates, both the Committee and Chair
Janet Yellen observed that business fixed investment and net exports
have been soft, global economic and financial developments continue to
pose risks, and inflation continues to run below the Committee's 2.0%
target rate.
- An indicator of inflationary trends, producer prices for goods and
services fell 0.2% in February, with goods decreasing a noteworthy 0.6%.
According to the latest report from the Bureau of Labor Statistics,
prices, less food, energy, and trade services, inched up 0.1% in
February following a 0.2% gain in both December and January. For the 12
months ended in February 2016, final demand prices for all categories of
goods and services remained unchanged. However, over the same period,
prices, less food, energy, and trade services, rose 0.9%--the largest
12-month advance since a 0.9% increase in July 2015.
- Looking at the prices for goods and services from the perspective
of what the consumer is spending, retail and food services sales fell
0.1% in February from January's revised total. However, compared to a
year earlier, sales are up 3.1%. Nevertheless, consumer spending in 2016
has not gotten off to a strong start, especially following January's
revised retail sales figures, which fell 0.4% following a prior advance
estimate of +0.2%. While relatively low gas prices have given consumers
more money to spend, other economic factors may be influencing consumers
to remain a bit cautious with their spending.
- The Consumer Price Index (CPI) for February declined 0.2%,
according to the Bureau of Labor Statistics. However, over the last 12
months, the index has increased 1.0%. The energy index, particularly the
gasoline index (-13.0%), was the major cause of the seasonally adjusted
decline in the all items index, more than offsetting increases in the
indexes for food and for all items less food and energy (core CPI). In
fact, the core CPI increased 0.3% for the month, the same increase as in
January. While not overwhelming, gains in the core CPI, an indicator of
particular interest to the Fed, continue to show some inflationary
pressure as it inches toward the Fed's target rate of 2.0%.
- The industrial sector is still weak, but showing signs of gaining
some momentum. The latest report from the Federal Reserve on industrial
production reveals an overall decrease of 0.5% in February after
increasing 0.8% in January, largely attributable to declines in
utilities and mining. However, manufacturing production rose 0.2% after
gaining 0.5% in January. Over the last 12 months, manufacturing
production is up 1.8%. Capacity utilization for the industrial sector
decreased 0.4 percentage point in February to 76.7%, a rate that is 3.3
percentage points below its long-run (1972-2015) average of 80%.
- The latest report on the housing sector was a mixed bag, as new
home construction starts increased 5.2% in February from a month
earlier--the highest level since last September. Single family home
construction increased 7.2% for the month, to its highest level since
November 2007, while multifamily units (apartments and condominiums)
gained only 0.8%. On the other hand, new applications for building
permits dropped 3.1% in February--not a good omen for future home
construction. Privately owned housing completions in February were 4.2%
below the revised January estimate, but are 17.5% above the February
2015 rate.
- Home builders' collective opinion of the housing market hasn't
changed much in March from February, according to the National
Association of Home Builders advance Housing Market Index (HMI). The HMI
reading for March remained at 58--the same as February's reading. A
reading of 50 or better indicates builders generally view housing
conditions as positive. However, this reading remains at its lowest
level since May. According to NAHB Chairman Ed Brady, "the single-family
market continues to make slow but steady progress. However, builders
continue to report problems regarding a shortage of lots and labor."
- The latest Job Openings and Labor Turnover Survey (JOLTS) for
January reveals that job openings rose to 5.5 million (260,000 more than
December), while hires and separations (quits, layoffs, and discharges)
decreased to 5.0 million and 4.9 million, respectively.
- The March preliminary results for the University of Michigan's
Index of Consumer Sentiment show consumer confidence is easing due to
increased concerns about prospects for the economy as well as the
expectation that gas prices would inch upward during the year ahead. The
latest index reading of 90.0 is 1.7 percentage points below February's
index reading and 3.0 percentage points behind the index for March 2015.
- For the week ended March 12, there were 265,000 claims for
unemployment insurance, an increase of 7,000 from the previous week's
revised level. The advance seasonally adjusted insured unemployment rate
remained at 1.6%. The advance number for continuing unemployment
insurance claims was 2,235,000, an increase of 8,000, for the week ended
March 5.
Eye on the Week Ahead
The week begins with a focus on the housing sector, including the latest
reports on existing home sales and new home sales. The week closes with
the "third" estimate for the fourth-quarter 2015 GDP.
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.
|
|
|
|
|
