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Weekly Economic Update - 9.25.17

FEDERAL RESERVE: UNWINDING WILL BE GRADUAL

Last Wednesday, the country’s central bank detailed how it would shrink its mammoth balance sheet. During the fourth quarter, the Fed will unload $10 billion of maturing bonds per month; in each subsequent quarter, the monthly runoff will increase by $10 billion until reaching a limit of $50 billion. Fed chair Janet Yellen said that this schedule is set in stone, barring a “sufficiently great” economic threat. The Fed made no interest rate move last week, but 12 of 16 Fed officials do project a hike before 2017 ends.1

 

HOME SALES RETREAT AGAIN

In August, existing home sales fell for the fourth time in five months. Resales decreased 1.7% to a seasonally adjusted annual pace of 5.35 million, a 12-month low, according to the National Association of Realtors. Two factors hindered would-be buyers: a median house price of $253,500 and a 2.1% monthly reduction in inventory (the supply of homes for sale was 6.5% greater in August 2016).2

  

BUILDING PERMITS UP 5.7% IN AUGUST

This good news was countered by last month’s 0.8% reduction in groundbreaking. The Census Bureau’s report on August construction activity showed the rate of issuance for permits 8.3% above where it was a year earlier; the pace of starts was 1.4% improved. Starts for single-family homes were up 17.1% in 12 months.3

 

A MIXED WEEK FOR EQUITIES

Leading the way among the three major indices last week, the Dow Jones Industrial Average rose 0.36% in five days to 22,349.59. The S&P 500 made a smaller advance of 0.08% to 2,502.22. The Nasdaq Composite took a weekly loss of 0.33%, settling Friday at 6,426.92.4

   

THIS WEEK: On Monday, Red Hat reports quarterly results. August new home sales numbers, the latest S&P/Case-Shiller home price index, the September Conference Board consumer confidence index, and earnings from Cintas, Darden Restaurants, Micron Technology, and Nike all arrive on Tuesday. Earnings announcements from Jabil Circuit, Pier 1 Imports, Thor Industries, and Worthington Industries complement reports on August durable goods orders and pending home sales, Wednesday. Thursday, the federal government’s second estimate of Q2 GDP and a new initial jobless claims report appear; also, Accenture, Blackberry, Conagra Brands, KB Home, and Rite Aid present earnings. The August personal spending report, the Federal Reserve’s August PCE price index, and the final September University of Michigan consumer sentiment index surface Friday.

 

% CHANGE

Y-T-D

1-YR CHG

5-YR AVG

10-YR AVG

DJIA

+13.09

+21.51

+12.92

+6.17

NASDAQ

+19.39

+20.37

+20.42

+14.06

S&P 500

+11.76

+14.93

+14.27

+6.40

REAL YIELD

9/22 RATE

1 YR AGO

5 YRS AGO

10 YRS AGO

10 YR TIPS

0.42%

0.08%

-0.71%

2.31%

 

 


Sources: wsj.com, bigcharts.com, treasury.gov - 9/22/174,5,6,7

Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly. These returns do not include dividends. 10-year TIPS real yield = projected return at maturity given expected inflation.

 

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. The information herein has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. Investments will fluctuate and when redeemed may be worth more or less than when originally invested. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All market indices discussed are unmanaged and are not illustrative of any particular investment. Indices do not incur management fees, costs and expenses, and cannot be invested into directly. All economic and performance data is historical and not indicative of future results. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The NASDAQ Composite Index is a market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Standard & Poor's 500 (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. NYSE Group, Inc. (NYSE:NYX) operates two securities exchanges: the New York Stock Exchange (the “NYSE”) and NYSE Arca (formerly known as the Archipelago Exchange, or ArcaEx®, and the Pacific Exchange). NYSE Group is a leading provider of securities listing, trading and market data products and services. The New York Mercantile Exchange, Inc. (NYMEX) is the world's largest physical commodity futures exchange and the preeminent trading forum for energy and precious metals, with trading conducted through two divisions – the NYMEX Division, home to the energy, platinum, and palladium markets, and the COMEX Division, on which all other metals trade. Additional risks are associated with international investing, such as currency fluctuations, political and economic instability and differences in accounting standards. This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. MarketingPro, Inc. is not affiliated with any person or firm that may be providing this information to you. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional.

 

Citations.

1 - nytimes.com/2017/09/20/business/economy/fed-bond-buying.html [9/20/17]

2 - marketwatch.com/story/existing-home-sales-fall-in-august-for-the-fourth-time-in-five-months-2017-09-20 [9/20/17]

3 - forbes.com/sites/samanthasharf/2017/09/19/u-s-housing-starts-slipped-permits-rose-in-august/ [9/19/17]

4 - markets.wsj.com/us [9/22/17]

5 - bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=9%2F22%2F16&x=0&y=0 [9/22/17]

5 - bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=9%2F22%2F16&x=0&y=0 [9/22/17]

5 - bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=9%2F22%2F16&x=0&y=0 [9/22/17]

5 - bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=9%2F21%2F12&x=0&y=0 [9/22/17]

5 - bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=9%2F21%2F12&x=0&y=0 [9/22/17]

5 - bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=9%2F21%2F12&x=0&y=0 [9/22/17]

5 - bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=9%2F21%2F07&x=0&y=0 [9/22/17]

5 - bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=9%2F21%2F07&x=0&y=0 [9/22/17]

5 - bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=9%2F21%2F07&x=0&y=0 [9/22/17]

6 - treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyield [9/22/17]

7 - treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyieldAll [9/22/17]

Weekly Economic Update - 9.18.17

INFLATION SPIKED IN AUGUST

Economists had long assumed consumer prices would rise abruptly at some point, and they certainly did last month. The Consumer Price Index increased 0.4% in August, its biggest one-month advance since its 0.6% gain in January. Higher gas prices were a major influence: they rose 6.3% for August. Core inflation was up 0.2% after four straight 0.1% monthly gains. Yearly consumer inflation is now at 1.9%. Wholesale inflation, as measured by the Producer Price Index, rose 0.2% in August to an annualized pace of 2.4%.1,2

 

RETAIL SALES STAGE A LATE-SUMMER RETREAT

Americans cut back on retail purchases during August. Retail sales declined 0.2%, a disappointment after the 0.3% July gain. The silver lining: the core number, minus gasoline and auto buying, rose 0.2%.2

  

CONSUMER SENTIMENT INDEX DIPS SLIGHTLY

The University of Michigan’s twice-monthly barometer of the American consumer’s mood fell 1.5 points in its initial September edition. At a mark of 95.3, the index was still 4.5% above where it was a year earlier. While the index’s current conditions component hit its highest level in nearly 17 years, 9% of survey respondents believed that Hurricanes Irma and Harvey had hurt the overall economy.3

 

A MILESTONE FOR THE S&P 500

Recording its highest close ever, the broad equities benchmark settled at 2,500.23 Friday, capping off a 5-day gain of 1.58% and attaining its third round-number highpoint of 2017. The Nasdaq Composite advanced 1.39% for the week to 6,448.47. Setting the pace for the big three, the Dow Jones Industrial Average added 2.16% last week to close Friday at 22,268.34. The Russell 2000 had an even better week, rising 2.31% to 1,431.71; the CBOE VIX again neared historic lows, dropping 16.09% in five days to 10.17.4,5

   

THIS WEEK: On Monday, Steelcase shares quarterly results. Earnings calls Tuesday include announcements from Adobe Systems, AutoZone, Bed Bath & Beyond, and FedEx, and investors will also look at the Census Bureau’s August report on new residential construction. Wednesday, the Federal Reserve could reveal plans for unwinding its balance sheet as it wraps up a monetary policy meeting; Wall Street will also consider August existing home sales numbers and Q3 results from General Mills. A new initial unemployment claims report arrives Thursday. CarMax and Finish Line present earnings Friday.

 

% CHANGE

Y-T-D

1-YR CHG

5-YR AVG

10-YR AVG

DJIA

+12.68

+22.27

+12.76

+6.57

NASDAQ

+19.79

+22.84

+20.51

+14.78

S&P 500

+11.68

+16.44

+14.11

+6.85

REAL YIELD

9/15 RATE

1 YR AGO

5 YRS AGO

10 YRS AGO

10 YR TIPS

0.35%

0.22%

-0.76%

2.20%

 

 


Sources: wsj.com, bigcharts.com, treasury.gov - 9/15/175,6,7,8

Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly. These returns do not include dividends. 10-year TIPS real yield = projected return at maturity given expected inflation.

 

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. The information herein has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. Investments will fluctuate and when redeemed may be worth more or less than when originally invested. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All market indices discussed are unmanaged and are not illustrative of any particular investment. Indices do not incur management fees, costs and expenses, and cannot be invested into directly. All economic and performance data is historical and not indicative of future results. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The NASDAQ Composite Index is a market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Standard & Poor's 500 (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. NYSE Group, Inc. (NYSE:NYX) operates two securities exchanges: the New York Stock Exchange (the “NYSE”) and NYSE Arca (formerly known as the Archipelago Exchange, or ArcaEx®, and the Pacific Exchange). NYSE Group is a leading provider of securities listing, trading and market data products and services. The New York Mercantile Exchange, Inc. (NYMEX) is the world's largest physical commodity futures exchange and the preeminent trading forum for energy and precious metals, with trading conducted through two divisions – the NYMEX Division, home to the energy, platinum, and palladium markets, and the COMEX Division, on which all other metals trade. Additional risks are associated with international investing, such as currency fluctuations, political and economic instability and differences in accounting standards. This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. MarketingPro, Inc. is not affiliated with any person or firm that may be providing this information to you. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional.

  

Citations.

1 - cnbc.com/2017/09/14/us-consumer-price-index-aug-2017.html [9/14/17]

2 - investing.com/economic-calendar/ [9/15/17]

3 - sca.isr.umich.edu/ [9/15/17]

4 - bloomberg.com/news/articles/2017-09-15/u-s-stocks-reach-another-milestone-as-s-p-500-vaults-past-2-500 [9/15/17]

5 - markets.wsj.com/us [9/15/17]

6 - bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=9%2F15%2F16&x=0&y=0 [9/15/17]

6 - bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=9%2F15%2F16&x=0&y=0 [9/15/17]

6 - bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=9%2F15%2F16&x=0&y=0 [9/15/17]

6 - bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=9%2F14%2F12&x=0&y=0 [9/15/17]

6 - bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=9%2F14%2F12&x=0&y=0 [9/15/17]

6 - bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=9%2F14%2F12&x=0&y=0 [9/15/17]

6 - bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=9%2F14%2F07&x=0&y=0 [9/15/17]

6 - bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=9%2F14%2F07&x=0&y=0 [9/15/17]

6 - bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=9%2F14%2F07&x=0&y=0 [9/15/17]

7 - treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyield [9/15/17]

8 - treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyieldAll [9/15/17]

Damian Rothermel is an investment adviser representative of, and securities and advisory services are offered through, USA Financial Securities Corp., Member FINRA/SIPC. www.finra.org A Registered Investment Adviser located at 6020 E. Fulton St., Ada, MI 49301. Rothermel Financial Services is not affiliated with USA Financial Securities.

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