Last Friday’s strong jobs report provided the impetus for a strong finish to the week, as the indexes were able to recoup some of their early week losses. The small-cap Russell 2000 and the tech-heavy Nasdaq led the way, posting solid weekly gains. On the other hand, the large-cap Dow declined, as did the Global Dow. The broader S&P 500 managed to close last week ahead. The week was full of mixed news for investors, starting with the potential for tariff negotiations between the United States and some of its long-standing trade partners. Investor uneasiness was also attributable to political drama in Italy and, to a lesser degree, Spain. In Italy, after much political wrangling, a coalition government took control, naming a political novice, Giuseppe Conte, as prime minister. Spain also ushered in a new government after removing Prime Minister Mariano Rajoy and replacing him with Pedro Sanchez.
LAST WEEK’S ECONOMIC HEADLINES
- May proved to be a big hiring month with 223,000 new jobs added, while the unemployment rate edged down 0.1 percentage point to 3.8%
- Gross domestic product increased at an annual rate of 2.2% in the first quarter of 2018 and in the fourth quarter of 2017, GDP increased at an annual rate of 2.9%. Gross domestic income increased 2.8% in the first quarter, compared with an increase of 1.0% in the fourth quarter.
- Consumers’ income and spending increased in April. Much of the increase in consumer spending is attributable to rising gas prices, as core PCE (less food and energy) increased by only 0.2%.
- According to the IHS Markit final U.S. Manufacturing Purchasing Managers’ Index™ (PMI™) report, the manufacturing sector followed its April surge with sharp increases in new orders, new business, and output in May. The rate of growth for new orders was the second-fastest since September 2014 (after April 2018).
- The May 2018 Manufacturing ISM® Report On Business® was in line with the Markit results. Manufacturing expanded in May over April, as did new orders, production, employment, prices, and deliveries. As expected with greater demand, inventories fell a bit.
- The international trade deficit in April was down from March.
- The Conference Board Consumer Confidence Index® increased in May and consumers were modestly more positive about the short-term economic outlook last month.
EYE ON THE WEEK AHEAD