The major stock market benchmark indexes suffered their worst showing last week since December. Hardest hit was the Russell 2000, which fell over 4.0%. Unsettling global economic news had investors scrambling for cover from stocks. The prospects of a trade deal with China suddenly took a turn for the worse after several weeks of promising rhetoric. Adding to this was last Thursday’s decision by the European Central Bank to offer additional stimulus to spur economic activity in the European Union. In addition, Chinese exports fell and U.S. job growth was marginal in February. All these factors led to a fear that the economy may be slowing. While stock prices dropped, long-term bond prices rose, as did the price of gold and oil.
LAST WEEK’S ECONOMIC HEADLINES
Note: Due to the government shutdown, some affected federal agencies are providing reports for December, while others have information available for January. These monthly reporting differences are noted below.
- Total employment gained only 20,000 new hires in February compared to 311,000 in January, according to the latest report from the Bureau of Labor Statistics. The unemployment rate fell 0.2 percentage point to 3.8% as the number of unemployed persons decreased by 300,000 to 6.2 million. Over the year, average hourly earnings have increased by 3.4%.
- For January, the government budget enjoyed an $8.7 billion surplus. For the first four months of the fiscal year, the government is running at a $310.3 billion deficit ($175.7 billion over the same period last fiscal year).
- Housing starts gained some ground in January, jumping up 18.6% over December’s paltry total. Home completions climbed 27.6% from December and building permits increased by 1.4% in January.
- This week’s report from the Census Bureau on new residential sales covers December. Next week’s report will be for January. In December, sales of new single-family homes increased by 3.7% over November’s total. New home sales are still 2.4% below their December 2017 rate.
- The international trade deficit for goods and services was $59.8 billion in December, up $9.5 billion from November. Final figures for 2018 showed trade surpluses with some countries, including Hong Kong ($31.1 billion), Netherlands ($24.8 billion), Australia ($15.2 billion), and Belgium ($14.2 billion). Trade deficits were recorded with other trade partners, with the largest including China ($419.2 billion), European Union ($169.3 billion), Mexico ($81.5 billion), Germany ($68.3 billion), and Japan ($67.6 billion).
- Economic activity in the non-manufacturing (services) sector expanded in February, according to the latest Non-Manufacturing ISM® Report On Business®. Business activity and new orders grew over January.
EYE ON THE WEEK AHEAD
Government reporting agencies are playing a bit of “catch-up” with economic data following the partial government shutdown. The Consumer Price Index is for February (current), while the retail sales report is for January (delayed). As such, it’s a bit harder to compare current consumer spending with retail sales. Also available this week is the first of two reports on new home sales. This week’s report covers December, while next week’s information will be for January.
There are some recent competing statistics that caused an overall short-term sputter for stocks last week. At BWFA, we keep a long-term perspective to seek to build wealth for our clients.