Despite a closing rally last Friday, large caps closed the week down from the prior week. The tech-heavy Nasdaq and the small caps of the Russell 2000 fared better with both being up for the week. The jobs report sent mixed messages to investors, with the lowest unemployment rate in several years being offset by minuscule wage growth. Mixed corporate earnings reports coupled with the Fed’s decision to maintain interest rates raised the question of whether economic growth is slowing. Meanwhile, the rhetoric following trade talks between the United States and China seemed positive. Actions may speak louder than words, however, as China shut off all imports of U.S. soybeans in apparent retaliation for U.S. tariffs. The price of crude oil (WTI) continues tracking higher, while the price of gold (COMEX) fell from the prior week.
LAST WEEK’S ECONOMIC HEADLINES
- While noting that the labor market has continued to strengthen, and that economic activity has been rising at a moderate rate, the Federal Open Market Committee nevertheless decided to maintain the federal target rate range at 1.50% to 1.75%, essentially due to moderated household spending. The Committee expects further gradual increases in the federal funds rate but did not indicate whether rates would be increased following its next meeting in June.
- There were 164,000 new jobs added in April, according to the latest employment figures from the Bureau of Labor Statistics. But the big news is that the unemployment rate dropped to 3.9% – the lowest it’s been since December 2000. Wages didn’t gain much, increasing a scant 0.1% last month. Over the past 12 months, wages have increased 2.6%, which equates to a mere $0.67 – certainly not a sign of building inflationary pressures. The average workweek was unchanged at 34.5 hours.
- According to the latest report from the Bureau of Economic Analysis, consumer income and spending increased in March, the same increase as February.
- According to the Bureau of Economic analysis, the international trade in goods and services deficit was down from February.
- Manufacturing conditions continued to improve in April, as evidenced by the IHS Markit final U.S. Manufacturing Purchasing Managers’ Index™, which registered its highest level since September 2014.
- The latest Non-Manufacturing ISM® Report On Business® revealed business activity slowed in that sector during April, “respondents have expressed concern regarding the uncertainty about tariffs and the effect on the cost of goods. Overall, the respondents remain positive about business conditions and the economy.”
EYE ON THE WEEK AHEAD