The Markets
Stocks enjoyed one of
their best weeks in months as each of the indexes listed here posted
gains last week. Some positive economic data, particularly in the
housing sector, along with higher oil prices may have influenced the
favorable returns. The Dow and S&P 500 each gained over 2.0%, while
the Nasdaq and Russell 2000 ended the week up close to 3.50%. Only the
Nasdaq remains behind its end-of-year closing value, although it closed
the gap with last week's performance.
Crude oil (WTI) closed
at $49.56 a barrel last week, up $1.89 over the prior week's closing
price. The price of gold (COMEX) fell by last week's end, selling at
$1,215.30 by late Friday afternoon, down from the prior week's closing
price of $1,252.90. The national average retail regular gasoline price
increased to $2.300 per gallon on May 23, 2016, $0.058 above the prior
week's price but $0.474 below a year ago.
Last Week's Headlines
- According to the Bureau of Economic
Analysis, the second estimate of the gross domestic product for the
first quarter increased at an annual rate of 0.8%. The first estimate
for the fourth quarter had the GDP increasing at an annual rate of 0.5%.
According to the report, the increase in the second estimate is
primarily attributable to an adjustment in private inventory investment,
which decreased less than originally estimated. In the fourth quarter,
GDP increased 1.4%. The increase in real GDP in the first quarter
primarily reflected positive contributions from personal consumption
expenditures (PCE), residential fixed investment, and state and local
government spending that were partly offset by negative contributions
from nonresidential fixed investment, exports, private inventory
investment, and federal government spending. Imports, which are a
subtraction in the calculation of GDP, decreased.
- Speaking on a panel at Harvard
University, FOMC Chair Janet Yellen intimated that interest rates may be
increased in the coming months. "It's appropriate, and I've said this
in the past I think, for the Fed to gradually and cautiously increase
our overnight interest rate over time, and probably in the coming months
such a move would be appropriate."
- Sales of new single family homes rose
by 16.6% in April over March--the fastest pace in eight years--according
to the Census Bureau. At an annual rate of 619,000, new home sales are
23.8% above the April 2015 estimate of 500,000. The median sales price
of new houses sold in April was $321,100; the average sales price was
$379,800. The seasonally adjusted estimate of new houses for sale at the
end of April was 243,000, which represents a supply of 4.7 months at
the current sales rate.
- Further evidence of an improving real
estate sector, the National Association of Realtors® reported that
pending home sales rose 5.1% in April--their highest level since
February 2006. The Pending Home Sales Index reached 116.3 in April
following an upwardly revised 110.7 in March, and is 4.6% above April
2015. The index is based on the number of reported contract signings,
with closing expected to occur within four to six weeks. According to
Lawrence Yun, NAR chief economist, "The building momentum from the over
14 million jobs created since 2010 and the prospect of facing higher
rents and mortgage rates down the road appear to be bringing more
interested buyers into the market."
- New orders for manufactured goods in
April were better than expected, as the Census Bureau reported that
orders for durable goods increased $7.7 billion, or 3.4%, from the prior
month. Shipments of durable goods also increased 0.6% in April
following two consecutive months of decreases. Unfilled orders were up
0.6% and new orders for nondefense capital goods (ranging from
construction equipment to computers) increased 7.8%. However, excluding
aircraft, nondefense capital goods orders actually decreased 0.8% and
are down 4.1% over the past four months compared to the same four-month
period last year.
- The trade deficit grew by roughly 3.4%
in April from March as U.S. imports exceeded exports by $57.5 billion
compared to the March balance of $55.6 billion. The Census Bureau's
advance report on international trade in goods showed April's exports
totaled $119.3 billion, with imports coming in at $176.8 billion.
However, foreign trade picked up overall as imports increased by 2.3%
over March, while exports grew by 1.8%.
- Consumers were more positive in their
assessment of the economy in May, according to the latest report from
the University of Michigan. The Index of Consumer Sentiment increased
from 89.0 in April to 94.7 in May. Both the Current Economic Conditions
Index (109.9) and the Index of Consumer Expectations (84.9) increased in
May. According to the report, "there have only been four prior months
since the January 2007 peak in which the Sentiment Index was higher than
in May 2016, all recorded at the start of 2015."
- For the week ended May 21, there were
268,000 claims for unemployment insurance, a decrease of 10,000 from the
previous week's unrevised level. The advance seasonally adjusted
insured unemployment rate remained at 1.6% from the prior week's
unrevised level. The advance number for continuing unemployment
insurance claims for the week ended May 14 was 2,163,000, an increase of
10,000 from the previous week's revised level.
Eye on the Week Ahead
Following the Memorial Day holiday, the week begins with a report on
consumer income and spending, which includes the core personal
consumption expenditures index--a closely watched indicator of
inflationary trends. The week also brings the latest information on the
manufacturing sector as revealed through surveys of purchasing managers.
The week closes with the important employment situation report for May,
which includes information on the unemployment rate, payrolls, and
average hourly earnings.
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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