Markets closed out their best week of the year last week, buoyed by higher oil prices and positive economic data that reassured some recession worriers. For the week, the S&P increased 2.84%, the Dow grew 2.62%, and the NASDAQ added 3.85%.
After tumbling for weeks, oil prices stabilized close to $30/barrel after several major oil producers-including Saudi Arabia, Russia, Qatar, and Venezuela-announced their willingness to freeze production levels to fight low prices. It's not clear that the deal will go anywhere since other countries are refusing to participate. Since cutting production will only work if all or most oil producers commit to collective action, it's not certain that oil prices have ended their declines. However, the temporary pause was enough to give markets a boost.
A key barometer of prices in the U.S.- the Consumer Price Index - showed that core inflation rose 2.2% over the last 12 months. A modest rise is good news because it shows that there is demand pushing up prices. Demand means that the economy continues to grow. However, the increase is small enough that it's not likely to trigger another interest rate increase by the Federal Reserve any time soon.
On the negative side, the current manufacturing picture is bleak. Two reports released last week show that the manufacturing sector is still contracting, a victim of a decline in global demand for manufactured goods. However, some portions of the sector that depend on domestic demand are doing well.
The official minutes from January's Federal Reserve Open Market Committee meeting show that officials are concerned by how global risks may affect the domestic growth picture. This isn't news to investors, and markets didn't react very much to the release. Overall, the FOMC intends to be cautious in moving ahead with rate increases, though they are holding to their medium-term positive outlook on the U.S. economy. We're not likely to see a rate increase in March or April. Currently, the latest Wall Street Journal poll of economists shows June as the odds-on favorite for the next rate hike. We're not holding our breath.
The week ahead is packed with important economic data, including the second release of fourth-quarter GDP, consumer sentiment, international trade, and consumer spending. Will last week's optimism hold? Possibly, if we get more good news. However, it's likely that we'll see additional volatility in the days and weeks ahead.
Monday: PMI Manufacturing Index Flash
Tuesday: S&P Case-Shiller HPI, Consumer Confidence, Existing Home Sales
Wednesday: New Home Sales, EIA Petroleum Status Report
Thursday: Durable Goods Orders, Jobless Claims
Friday: GDP, International Trade in Goods, Personal Income and Outlays, Consumer Sentiment
Notes: All index returns exclude reinvested dividends, and the 5-year and 10-year returns are annualized. Sources: Yahoo! Finance and Treasury.gov. International performance is represented by the MSCI EAFE Index. Corporate bond performance is represented by the DJCBP. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.
Housing starts drop in January. Groundbreaking on new homes fell 3.8%, surprising economists who expected to see a rise. Seasonal factors like the large blizzard that blanketed the East Coast could be responsible.
Jobless claims fall unexpectedly. The number of Americans filing new claims for unemployment benefits fell last week, pointing to renewed strength in the labor market.
Mortgage applications rise on lower rates. Falling rates on mortgages continue to drive purchase applications and refinancing activity. Applications for home purchases are up 30% over the same period last year.
Home builders may be losing confidence. An indicator of optimism among the nation's home builders shows that though current and future sales expectations are strong, a lack of labor and available lots may be dragging on future building.
These are the views of 4th River Financial Group, and not necessarily those of the named representative, and should not be construed as investment advice. Neither the named representative nor the Investment Advisor gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your financial advisor for further information.
Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.
Diversification does not guarantee profit nor is it guaranteed to protect assets.
The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.
The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ. The DJIA was invented by Charles Dow back in 1896.
The Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of stocks of technology companies and growth companies.
The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) that serves as a benchmark of the performance in major international equity markets as represented by 21 major MSCI indexes from Europe, Australia and Southeast Asia.
The Dow Jones Corporate Bond Index is a 96-bond index designed to represent the market performance, on a total-return basis, of investment-grade bonds issued by leading U.S. companies. Bonds are equally weighted by maturity cell, industry sector, and the overall index.
The S&P/Case-Shiller Home Price Indices are the leading measures of U.S. residential real estate prices, tracking changes in the value of residential real estate. The index is made up of measures of real estate prices in 20 cities and weighted to produce the index.
The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
Google Finance is the source for any reference to the performance of an index between two specific periods.
Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
Past performance does not guarantee future results.
You cannot invest directly in an index.
Consult your financial professional before making any investment decision.
Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors.
By clicking on these links, you will leave our server, as they are located on another server. We have not independently verified the information available through this link. The link is provided to you as a matter of interest. Please click on the links below to leave and proceed to the selected site.