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Market Commentary

Weekly Economic Update for March 30, 2015

WeeklyMarketUpdate.jpgHOME SALES PICK UP

Existing home sales accelerated 1.2% to an annual pace of 4.88 million in February, the National Association of Realtors announced. Sales had slowed markedly in January. February also brought a big jump in new home buying – a 7.8% increase according to the Census Bureau, taking the year-over-year gain to 24.8%.1,2

  

FEBRUARY BRINGS AN ADVANCE IN THE CPI

The 0.2% gain represented the first monthly rise in consumer prices since October; a 2.4% increase in gasoline prices made a demonstrable difference. Even so, this left the headline CPI flat year-over-year. The core CPI rose 0.2% in February, taking its annualized gain to 1.7%.3

         

UMICH INDEX STAGES MARCH RETREAT

At a mark of 93.0, March’s final University of Michigan consumer sentiment index declined 2.4 points from its final February reading. It has still improved vastly in the past year – last March, it was at 80.0.4

 

Weekly Economic Update for March 23, 2015

WeeklyMarketUpdate.jpgFED MAY WAIT LONGER TO TIGHTEN

March’s Federal Reserve policy statement provided less forward guidance than many investors expected. As anticipated, the word “patient” disappeared – but the Federal Open Market Committee also lowered its 2015 GDP forecast (to a range of 2.3-2.7%) and nearly halved its 2015 inflation projection (to a range of 0.6-0.8%). Seconding this weaker economic outlook, the Fed indicated it might wait until late 2015 to tinker with interest rates, altering the commonly held perception that a rate hike might be in store before Q2 ends.1

  

OIL PRICES RISE

Light sweet crude rose 3.9% on the NYMEX last week, settling at $45.72 Friday. It was the first winning week in five for the commodity, and a short-term decline in the dollar and lower U.S. rig counts helped. Gasoline advanced 2.0% on the NYMEX for the week, natural gas 2.2% and heating oil 1.2%.2

         

FEWER STARTS, BUT MORE PERMITS

The Census Bureau measured a 17.0% drop in groundbreaking for February, which took housing starts to a 13-month low. Declining builder sentiment, higher construction costs and fewer available parcels were all contributing factors. Building permits increased 3.0% last month; apartment permits jumped 18.3%.3

Weekly Economic Update for March 16, 2015

WeeklyMarketUpdate.jpgWHERE ARE THE SHOPPERS?

Retail sales were off again in February – the 0.6% decline reported by the Census Bureau was the third straight monthly retreat. Economists surveyed by Briefing.com anticipated an 0.4% advance. This severe winter may have prompted households to spend more on utilities and services than on retail purchases. Another closely watched indicator, the University of Michigan’s consumer sentiment index, showed a preliminary March reading of 91.2. That was 4.2 points under its final February reading and 4.1 points below the expectations of economists polled by the Wall Street Journal. Less optimism among lower-income households influenced the decline.1,2

   

PPI DEFIES EXPECTATIONS

Both the overall and core Producer Price Index retreated half a percent for February. Even with low fuel and energy costs, economists polled by Briefing.com still projected a 0.3% rise in the headline PPI and an 0.1% advance for the core PPI. In January, the headline PPI fell 0.8%.2

         

OIL DOWN 9.6% IN A WEEK

Worries about a supply glut sent light sweet crude lower on the NYMEX. It settled at just $44.84 Friday, yet there was a nice development for oil investors: the Energy Department announced it would be buying up to 5 million barrels for its Strategic Petroleum Reserve. That could ease anxieties about excess inventory.3

     

BIG SWINGS, NO ADVANCE

A rollercoaster week ended with 5-day losses for all three major U.S. indices. The Dow shed 0.60%, the Nasdaq 1.13% and the S&P 500 0.86%. That resulted in the following Friday settlements: Dow, 17,749.31; Nasdaq, 4,871.76; S&P, 2,053.40.4

 

Weekly Economic Update for March 9, 2015

WeeklyMarketUpdate.jpgGREAT JOBS REPORT MIGHT GIVE FED A SIGNAL

Good news on Main Street was not so good for Wall Street. Non-farm employers added 295,000 new workers to payrolls in February, according to the Labor Department; the headline unemployment rate fell to 5.5% while the U-6 rate measuring the unemployed plus underemployed declined to 11.0%. Professional and business sector hiring was up 3.5% year-over-year, construction hiring 5.3%. These labor market improvements weighed on the stock market Friday, with the S&P 500 (-29.78) suffering its biggest one-day loss since January – investors worried that the report would tip the Federal Reserve toward tightening sooner, even with only 2.0% hourly wage growth over the past year.1,2

  

PERSONAL SPENDING SLIPS IN JANUARY

Rather than spending leftover money resulting from falling gas prices, households seem to be saving it. The Commerce Department said consumer spending lessened 0.2% in January after declining 0.3% in December. Core personal spending (with fuel and energy expenditures removed) did rise 0.3%.3

         

ISM FACTORY PMI SHOWS SMALL DECLINE

February saw the Institute for Supply Management’s manufacturing PMI tail off 0.6 points to a 52.9 mark. ISM’s service sector PMI rose 0.2% to a reading of 56.9, however. In other manufacturing news, January brought a 0.2% retreat in the Federal Reserve’s gauge of factory orders, which had slipped 3.5% in December.1,4

    

STOCKS POST 5-DAY LOSSES

Friday’s selloff left the S&P 500 down 1.58% for the week, the Dow off 1.52% and the Nasdaq down 0.73%. Friday’s settlements for the big three were as follows: S&P, 2071.26; Dow, 17,856.78; Nasdaq, 4,927.37.5

 

Weekly Economic Update for February 23, 2015

WeeklyMarketUpdate.jpgGREECE DEAL, FED MINUTES REASSURE INVESTORS

On Friday, Greece reached an agreement with eurozone finance ministers to extend its economic bailout through June. The four extra months of financial aid depend on reforms that the country will present to its creditors this week (they must be approved by April). Stateside, minutes from the Federal Reserve’s January policy meeting noted that most Fed officials favored “keeping the federal funds rate at its effective lower bound for a longer time,” which also pleased the markets.1,2

  

PRODUCER PRICES FALL BY MOST IN 5 YEARS

Labor Department data showed an 0.8% dip in the Producer Price Index in January, the largest monthly decline since November 2009. Cheaper fuel costs were the major factor. The core PPI (minus food and energy prices) was flat year-over-year.2

      

LESS GROUNDBREAKING IN JANUARY

The pace of housing starts slowed 2.0% last month – not surprising given the rough weather in much of the nation. January also saw building permits decline 0.7%. While the Commerce Department reported fewer single-family projects starting up, multi-family construction actually accelerated in the year’s opening month.2

Weekly Economic Update for February 16, 2015

WeeklyMarketUpdate.jpgRETAIL SALES DECREASE AGAIN

Recently, economists have worried about a decline in household spending. The 0.8% fall for retail sales in January affirmed their anxieties. Consumers have certainly been buying less fuel, but even with gas purchases removed, there was still an 0.2% retreat. Headline retail sales have now sunk for consecutive months; earlier Commerce Department data showed an 0.9% falloff in December.1

  

HOUSEHOLD SENTIMENT INDEX DECLINES

Did the rough weather blasting much of the nation affect the reading of the latest University of Michigan consumer sentiment index? Quite possibly. The final January edition came in at an 11-year high of 98.1, but February’s initial edition fell to 93.6 – and per region, the major declines came in the Midwest and Northeast.1

         

OIL ENDS THE WEEK WITH A RALLY

Rising 3.1% in a day, WTI crude settled at $52.78 a barrel on the NYMEX Friday. Over on the COMEX, silver rose 3.6% on the week to $17.29 while gold slipped 0.6% across five days to $1.227.10.2

              

S&P 500 CLOSES AT A NEW RECORD HIGH

Thanks to a 2.02% weekly ascent, the index settled at 2,096.99 Friday. Rising crude prices and signs of economic improvement in the euro area helped. Those factors also assisted the Dow and Nasdaq: the former gained 1.09% on the week, the latter 3.15%. Friday brought a close of 4,893.84 for the Nasdaq, 18,019.35 for the Dow.3

Weekly Economic Update for February 9, 2015

WeeklyMarketUpdate.jpgEMPLOYERS ADD 257,000 JOBS IN JANUARY

That beat the 230,000 hires forecast in a MarketWatch consensus of analysts. Yes, the headline jobless rate actually rose 0.1% to 5.7% last month, and the total unemployment rate (U-6) rose for the first time in six months to 11.3% - but average hourly wages were up 0.5%, a striking shift after the 0.3% December decrease.1,2

  

ONE ISM PMI FALLS, ANOTHER RISES

The Institute for Supply Management’s January factory PMI lost 1.6 points to come in at 53.5, while its January service sector index advanced 0.2 points to 56.7. Analysts polled by MarketWatch projected readings of 55.0 for the manufacturing gauge and 56.5 for the services gauge. In related news, the Federal Reserve said factory orders fell 3.4% in December, twice the November decline.1

         

CONSUMER SPENDING SANK IN DECEMBER

December saw a welcome 0.3% gain in consumer incomes but also a 0.3% pullback in consumer spending – the largest monthly dip since 2009. The Commerce Department noted sizable December declines in car and truck sales – and less spending on gas and other fuels. The personal savings rate rose 0.6% to 4.9%.3

Weekly Economic Update for February 2, 2015

WeeklyMarketUpdate.jpgFOURTH QUARTER SAW 2.6% GROWTH

Given the final 5.0% GDP reading for Q3, this initial Commerce Department estimate displeased many investors – even though the personal spending rate rose an impressive 4.3% in Q4. Investors also disliked the 3.4% overall dip in hard goods orders for December, which followed a 2.1% descent in November.1,2

                                                                                  

HOUSEHOLDS IN AN UPBEAT MOOD

At 102.9, January’s Conference Board consumer confidence index shattered the 96.9 forecast of analysts polled by MarketWatch. The University of Michigan’s January consumer sentiment index reached 98.1, its best final monthly reading in 11 years.1,2

         

NEW HOME SALES ACCELERATE

They advanced 11.6% in December, with the Census Bureau noting an 8.8% yearly rise in the sales pace. On the other hand, the National Association of Realtors found pending home sales down 3.7% in December. November’s S&P/Case-Shiller home price index showed an overall 4.3% yearly gain, 0.2% less than the October edition.1,3

              

A ROUGH MONTH ENDS ON WALL STREET

While the January 28 Federal Reserve policy statement bullishly referenced an economy growing at “a solid pace,” disappointment over key earnings reports and the Q4 GDP number sent stocks further south. Losing another 2.77% across five trading days, the S&P 500 concluded January at 1,994.99. The Dow and Nasdaq also gave up ground last week – the Dow lost 2.87% to close at 17,164.95 Friday, while the Nasdaq retreated 2.58% in five days to slip to 4,635.24.4,5

Weekly Economic Update for January 26, 2015

WeeklyMarketUpdate.jpgA RISE IN HOME BUYING

Existing home sales were up 2.4% in December and 3.5% for 2014. In its latest report, the National Association of Realtors noted a median sale price of $208,500, 5.8% above a year before. The sales pace in the last half of 2014 was 8% better than in the first half, with cheaper mortgages certainly a factor. (Last week, a 30-year FRM averaged just 3.66% interest.) December saw a 1.9% dip in building permits, but the Census Bureau also noted a 4.4% boost for housing starts. Starts for 2014 totaled 1.01 million, a 9-year high. Last year, groundbreaking increased 8.8%.1,2

    

ECB FIGHTS DEFLATION RISK WITH STIMULUS

Thursday, the European Central Bank unveiled a plan to ease: a massive stimulus that will purchase 60 billion euros (about $69 billion) of bonds per month through September 2016. The tipping point for the move appeared to be the 0.2% December retreat in the eurozone inflation rate. All this easing will weaken the euro even more, thereby offering relief to the export-reliant economies of many eurozone nations.3

                

NASDAQ GOES POSITIVE YTD; GOLD TOPS $1,300

Across four days, the tech-heavy benchmark rose 2.68% to settle Friday at 4,757.88. The S&P 500 ended the week at 2,051.82, the Dow at 17,672.60; those settlements resulted from 4-day gains of 1.63% for the S&P and 0.94% for the Dow. Thursday, gold closed above $1,300 on the COMEX for the first time since August; it settled Friday at $1,292.60, up 1.2% for the week. A barrel of West Texas crude was valued at just $45.83 at Friday’s NYMEX close.4,5

Weekly Economic Update for January 19, 2015

WeeklyMarketUpdate.jpgWHAT HAPPENED TO RETAIL SALES?

Wall Street was surprised by the news of December’s 0.9% retreat, especially given November’s (revised) 0.4% advance. Minus auto buying, the decline was 1.0%. Economists surveyed by Briefing.com had forecast a gain of 0.1%. The plunge came even with holiday sales, cheap gas, strong hiring and increasing optimism about household economic prospects (see below). This disappointment raises concerns about the strength of Q4 consumer spending.1,2

    

CONSUMER PRICES TAKE A BIG DIP

December saw the Consumer Price Index decrease 0.4%, its largest monthly pullback since December 2008. That brought its 2-month decline to 0.7%. Falling gas prices were a major influence, of course – on Friday, AAA announced a nationwide average price of just $2.08 for a gallon of regular unleaded. The University of Michigan’s consumer sentiment index hit an 11-year peak last week with a preliminary mark of 98.2.1

            

DRAMA FOR CURRENCIES, A BIG GAIN FOR GOLD

The Swiss National Bank rocked the currency markets Thursday by abruptly lifting its cap on its franc. In the minutes after the announcement, the Swiss franc gained 25% on the dollar and 30% against the euro while Germany’s DAX index fell 250 points. Perhaps the SNB anticipates a stimulus from the European Central Bank. COMEX gold futures were up 4.5% last week to $1,276.90 at Friday’s close; WTI crude settled at $48.69 on the NYMEX Friday.3,4

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