The Markets (as of market close February 22, 2019)
The benchmark indexes listed here posted modest gains last week, led by the small caps of the Russell 2000. With another weekly gain, the Dow has enjoyed its longest streak in almost 25 years. Volatility was moderate last week as the Cboe Volatility Index® hit its lowest level in several months. Long-term bond prices moved very little as yields have remained stable for much of this month. For the year, investors have been bullish on small-cap stocks which seemed to be leading all indexes for the year.
LAST WEEK’S ECONOMIC HEADLINES
- New orders for manufactured durable goods in December increased $3.0 billion, or 1.2%, to $254.4 billion, according to the latest Census Bureau report. This increase, up two consecutive months, followed a 1.0% November increase. Excluding transportation, new orders increased 0.1%. Excluding defense, new orders increased 1.8%. However, a closer look at the report reveals that business investment in new orders for durable capital goods is lagging. New orders for core capital goods (excluding defense and transportation) fell 0.7% in December, following a revised November drop of 1.0%. Capital goods include buildings, machinery, vehicles, tools, and equipment.
- Sales of existing homes fell for the third consecutive month in January, according to the National Association of Realtors®. Of the four major geographical regions of the United States, only the Northeast saw sales climb higher in January over December. Overall, sales fell 1.2% for the first month of the year and are now down 8.5% from a year ago. The median existing-home price in January was $247,500, up 2.8% from January 2018 ($240,800), but down from December’s median price of $253,600. According to the report, home price growth is the slowest since February 2012. Inventory for existing homes for sale edged up from 3.7 months in December to 3.9 months in January.
- For the week ended February 16, there were 216,000 new claims for unemployment insurance, a decrease of 23,000 from the previous week’s level. According to the Department of Labor, the advance rate for insured unemployment claims remained at 1.2% for the week ended February 9. The advance number of those receiving unemployment insurance benefits during the week ended February 9 was 1,725,000, a decrease of 55,000 from the prior week’s level.
EYE ON THE WEEK AHEAD
With the threat of another government shutdown apparently behind us, several economic reports are out during the last week of the month, not the least of which is the gross domestic product report for the fourth quarter of 2018. Inflation has been held in check at the consumer level, a trend that is likely to be reflected in the latest report on personal income and outlays. Delayed by the shutdown, January figures on income will be available, but spending and savings information is available only for December. The market has moved mostly off of the federal reserve being more dovish in the first part of 2019. Additionally, the trade relationship between the US & China is more optimistic leading to more optimism.