The Markets (as of market close March 29, 2019)
Stocks rebounded last week to close the final week of March and the first quarter of 2019 in the black. Each of the major stock benchmark indexes gained over 1.0% for the week, except the Global Dow, which inched ahead less than 0.2%. Year-to-date, the tech-heavy Nasdaq leads the way, followed by the small caps of the Russell 2000, the S&P 500, the Dow, and the Global Dow. Technology shares jumped, as did energy stocks, on the heels of rising oil prices. While stock prices rose, long-term bond yields fell (yields fall as bond prices rise) as investors’ demand pushed bond prices higher. Oil prices climbed higher last week, while the price of gold (COMEX) fell for the first time in several weeks.
LAST WEEK’S ECONOMIC HEADLINES
- The economy slowed at the end of last year. The third and final estimate of the gross domestic product for the fourth quarter of 2018 showed the economy grew at an annual rate of 2.2%. The third-quarter GDP advanced by 3.4%. Consumer spending, business investment, and state and local government spending all slowed during the fourth quarter. Net income generated in the production of goods and services, as measured by gross domestic income, increased 1.7% in the fourth quarter, compared with an increase of 4.6% in the third quarter. The average of GDP and GDI, a supplemental measure of U.S. economic activity that equally weights GDP and GDI, increased 1.9% in the fourth quarter, compared with an increase of 4.0% in the third quarter. After-tax corporate profits fell 1.7% in the fourth quarter — the first such decline since 2017. For 2018, the GDP increased 2.9% (2.2% in 2017).
- The latest report on consumer income and spending (personal income and outlays) combines estimates for January and February, due to the partial government shutdown. February’s estimates account only for income — information on outlays will be available with April’s report. That said, for January, consumer income fell 0.1% and disposable (after-tax) income dropped 0.2%. Consumer spending increased only 0.1%. The prices consumers paid for goods and services (personal consumption price index) fell 0.1%. In February, personal income increased 0.2%, as did disposable personal income.
- New home sales advanced in February, climbing 4.9% over January’s estimate. The median sales price of new houses sold in February was $315,300. The average sales price was $379,600. The estimate of new houses for sale at the end of February was 340,000. This represents a supply of 6.1 months at the current sales rate.
- Still trying to catch up from the temporary government shutdown, the latest information on housing starts is for February. According to the Census Bureau, housing starts fell by 8.7% in February from January. Building permits were also down, falling 1.6%, although new home completions were up a solid 4.5% in February. Cold and stormy weather played a part in February’s figures, which are expected to improve in March.
- The latest information from the Bureau of Economic Analysis on international trade is also a bit dated. Nevertheless, for January, the trade deficit for goods and services was $51.1 billion — down $8.8 billion, or 14.6%, from the December deficit. Year-over-year, the goods and services deficit decreased $1.9 billion, or 3.7%, from January 2018. Of interest, the trade-in-goods deficit with China decreased $5.5 billion to $33.2 billion; the balance with Canada had a $1.4 billion surplus; and the deficit with the European Union was $13.1 billion.
EYE ON THE WEEK AHEAD
There are plenty of important economic reports on tap this week, led by March’s employment figures. Job gains were moderate in February, and some experts expect March to show a sizable boost in new hires. Also, manufacturing and industrial production reports are available this week, particularly the February figures for durable goods orders.