Stocks moved higher last week as favorable inflation data added to investor hopes that the Federal Reserve would relax its monetary policy, despite the Fed Chair’s statement that at least two more rate hikes are in the offing prior to the end of the year. The small caps of the Russell 2000 performed the best, followed by the S&P 500, the Global Dow, the Nasdaq, and the Dow. Bond prices declined as investors focused on stocks. The dollar inched higher, while gold prices fell for the third straight week. Crude oil prices closed higher, following the prior week’s plunge.
Last Week’s Economic News
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The economy expanded at an annualized rate of 2.0%, according to the third and final estimate of first-quarter gross domestic product. GDP expanded at an annualized rate of 2.6% in the fourth quarter of 2022. Compared to the fourth quarter, the deceleration in real GDP in the first quarter primarily reflected a downturn in private inventory investment and a slowdown in nonresidential fixed investment that was partly offset by an acceleration in consumer spending, an upturn in exports, and a smaller decrease in residential fixed investment. Imports climbed higher. The personal consumption expenditures (PCE) price index increased 4.1%, revised down 0.1 percentage point. The PCE price index excluding food and energy prices increased 4.9%, a downward revision of 0.1 percentage point from the fourth quarter.
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Personal income and disposable (after-tax) income rose 0.4% in May, according to the latest report from the Bureau of Economic Analysis. Consumer spending inched up 0.1%, after rising 0.6% in April. Consumer prices for goods and services advanced 0.1% in May, following a 0.4% increase in April. Consumer prices, excluding food and energy rose 0.3%. Over the last 12 months, consumer prices have increased 3.8%, while prices less food and energy rose 4.6%.
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New orders for manufactured durable goods rose for the third consecutive month in May, after climbing 1.7%. Transportation equipment, also up three consecutive months, led the increase, up 3.9% in May. Excluding transportation, new orders increased 0.6%. Excluding defense, new orders increased 3.0%. New orders for capital goods advanced 2.8% in May, bolstered by new orders for nondefense capital goods, which rose 6.7%. New orders for defense capital goods fell 14.7% in May.
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Sales of new single-family homes rose for the third straight month after increasing 12.2% in May. The median sales price of new houses sold in May 2023 was $416,300. The average sales price was $487,300. Inventory for available new single-family homes for sale sat at a 6.7-month supply at the current sales pace.
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The advance report on the international trade in goods balance for May showed a 6.1% decline in the trade deficit from the prior month. Exports fell 0.6%, while imports decreased 2.7%.
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The national average retail price for regular gasoline was $3.571 per gallon on June 26, $0.006 per gallon lower than the prior week’s price and $1.301 less than a year ago.
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For the week ended June 24, there were 239,000 new claims for unemployment insurance, a decrease of 26,000 from the previous week’s level, which was revised up by 1,000. According to the Department of Labor, the advance rate for insured unemployment claims for the week ended June 17 was 1.2%, unchanged from the previous week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended June 17 was 1,742,000, a decrease of 19,000 from the previous week’s level, which was revised up by 2,000.
Eye on the Week Ahead
The employment figures for June are out this week. The labor sector has continued to show strength this year, averaging nearly 290,000 new jobs per month. Also out this week are the results from the monthly survey of purchasing managers for manufacturing and services. May saw manufacturing slip, while services expanded.
Have a nice week!
Sincerely,
Robert G. Carpenter