A weekly update from Jeff Mitchell, your Trusted Advisor.
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Market Week: June 13, 2016
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The Markets
The major market indexes
listed here were relatively flat for the week. Despite gains earlier in
the week, losses Thursday and Friday wiped out most of the positive
returns. By midweek, the S&P 500 reached its highest level since
last July only to give back most of the gains, closing the week slightly
behind its prior week's closing value. Technologies underperformed with
Nasdaq falling almost 1%. Oil reached $51 per barrel by the middle of
the week, but fell back to below that benchmark by week's end.
Crude oil (WTI) closed
at $48.88 a barrel last week, down $0.02 from the previous week. The
price of gold (COMEX) rose to $1,276.30 by late Friday afternoon, up
from the prior week's price of $1,246.50. The national average retail
regular gasoline price increased for the fourth week in a row to $2.381
per gallon on June 6, 2016, $0.042 above the prior week's price but
$0.399 below a year ago.
Last Week's Headlines
- Speaking to the World Affairs Council
of Philadelphia, FOMC Chair Janet Yellen emphasized that the economy is
moving in the right direction. According to Yellen, "I see good reasons
to expect that the positive forces supporting employment growth and
higher inflation will continue to outweigh the negative ones. As a
result, I expect the economic expansion to continue, with the labor
market improving further and GDP growing moderately. . . . I expect to
see inflation moving up to 2% over the next couple of years." As to the
prospect of increasing interest rates, Yellen noted that "further
gradual increases in the federal funds rate will probably be appropriate
to best promote the FOMC's goals of maximum employment and price
stability," although she did not go so far as to hint that a rate
increase was imminent following the June FOMC meeting.
- Productivity remains weak as the
second estimate for the first quarter showed nonfarm business sector
labor productivity decreased at a 0.6% annual rate during the first
quarter of 2016, the U.S. Bureau of Labor Statistics reported. Output
increased only 0.9%, while hours worked increased 1.5%. From the first
quarter of 2015 to the first quarter of 2016, productivity increased
0.7%. Unit labor costs in the nonfarm business sector increased 4.5% in
the first quarter of 2016, reflecting a 3.9% increase in hourly
compensation and a 0.6% decline in productivity. Unit labor costs have
increased 3.0% over the last four quarters.
- The U.S. Bureau of Labor Statistics
reported the number of job openings was little changed at 5.8 million on
the last business day of April. The job openings rate was 3.9%. Job
openings increased in a number of industries, with the largest changes
occurring in wholesale trade, transportation, warehousing, and
utilities. Job openings decreased in professional and business services.
The number of hires edged down to 5.1 million in April. The hires rate
was 3.5%. There were 5.0 million total separations in April, little
changed from March. The total separations rate in April was 3.5%. Total
separations, or turnover, includes quits, layoffs and discharges, and
other separations.
- The federal deficit expanded by $52.5
billion in May amid rising spending and falling corporate profits. For
the first seven months of the fiscal year, the deficit sits at $407.1
billion compared to $366.8 billion for the same period last year.
- Initial survey results for June show
consumers are still cautiously optimistic about the economy. The latest
report from the University of Michigan's Surveys of Consumers shows the
Index of Consumer Sentiment fell slightly to 94.3 from 94.7 in May. But
the Current Economic Conditions Index increased from 109.9 to 111.7. The
Index of Consumer Expectations dropped to 83.2 from 84.9 in May.
According to the report, consumers rated their current financial
situation at the best levels since 2007, but they did not think the
economy is as strong as it was last year nor do they anticipate the
economy will enjoy the same financial health in the year ahead as they
anticipated a year ago.
- In the week ended June 4, the advance
figure for seasonally adjusted initial unemployment insurance claims was
264,000, a decrease of 4,000 from the previous week's unrevised level.
The advance seasonally adjusted insured unemployment rate fell to 1.5%
for the week ended May 28, a decrease of 0.1 percentage point from the
previous week's unrevised rate. The advance number for seasonally
adjusted insured unemployment during the week ended May 28 was
2,095,000, a decrease of 77,000 from the previous week's unrevised level
of 2,172,000.
Eye on the Week Ahead
FOMC Chair Janet Yellen's remarks last week may prove to be a precursor
to the Committee's actions following this week's meeting. A poor
employment report may be enough to influence members to hold off on
raising interest rates, unless retail sales and consumer prices show
sufficient inflationary pressure for the Committee to justify a bump in
rates.
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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