Best January since 1987.

Stocks and bonds saw broad-based gains this week. The Dow rising 1.3%, the Nasdaq adding 1.4%, and the Russell 2000 up 1.3%. Energy, real estate, staples, utilities industrials, and healthcare all gained more than 2%. The US bond aggregate gained 0.52% while higher grade corporates gained 0.92% and the high yield bonds added 0.72%.

The January FOMC meeting was held this week. There was a unanimous vote to keep the fed funds target rate range unchanged at 2.25 -2.50%. Showing a more dovish stance than in prior meetings, Fed Chair Powell on Wednesday indicated they are content with being patient on its policy approach. U.S. and China resumed trade talks and a host of earnings reports that were generally mixed but were not as bad as anticipated push markets higher.

The US Economy added 304k nonfarm jobs in January while the unemployment rate increased to 4%. Initial unemployment claims jumped to the highest levels since July 17’, up 53k. The more closely watched 4-week moving average rose 5k to 220k. December manufacturing PMI increased by 2.3% to 56.6%. Sales of new single-family homes increased by 16.9% to 657k, seasonally adjusted and showed a supply of 6.0 months at the current sales rate. The consumer confidence index declined to 120.2 down from 126.6 in December. Employment Cost index for civilian workers increased 2.9% a 0.2%  increase y/y.

This coming week over 100 S&P 500 components will report earnings while multiple fed reserve presidents will be making public policy statements including Fed chair Powel speaking Wednesday. Still waiting on the backlog of economic data that was not reported due to the shutdown. This includes personal income, the final estimate of 3rd quarter GDP, U.S. trade balance, US Auto Sales, and U.S. construction spending.

Go Rams!

 Fixed Income –

FOMC January Statement     Federal Reserve Dot Plots Dec 18     US Debt Measurement   December Meeting Minutes    US Corporate Debt Tops $6 Trillion. yields

 Global Bond Yields –  The yield curve flattened and became more inverted this week as the 1 year US treasury now yields more than the 2, 3 or 5 years.


Foreign Exchange Market

Energy Complex

Crude oil bottomed at $50.77 Dec 26, Since then it has rallied 22%. Brent crude oil fell 40% from Oct3 to Dec 24th.  $85.98 – $50.77

The Baker Hughes rig count fell by 14 this week. There are 1045 oil and gas rigs operating in the US – Up 99 over last year.

  • Brent Crude Oil rose by 1.80% this week closing at $62.75/bbl
  • WTI Crude Oil gained 2.92% this week to close at $55.26/bbl
  • Heating Oil rose 1.38% this week closing at $1.913/gallon
  • Natural Gas  fell 11.10% this week closing at $2.734 per million BTUs
  • Unleaded Gas rose 3.42% this week at closing at $1.437/gallon

Metals Complex

Gold continues to creep higher, trading up 3.3% in 6 days.

  • Gold rose 1.85% this week closing at $1322.10/oz
  • Silver gained 1.48 on the week closing at $15.93/oz
  • Palladium fell 0.47% this week closing at $1313.60/oz
  • Platinum rose 1.03% this week closing at 826.70/oz
  • Copper rose 1.61% this week closing at $2.773 /lb

Employment Picture

January Jobs Report –  BLS Summary – Released 2/1 – The US Economy added 304k nonfarm jobs in January and the Unemployment rate increased to 4%. Hourly earnings rose  The December report was revised down 90k though. Hiring highlights to include Education and Health care +55kLeisure and Hospitality +74k, Professional and Business Services +30k, Construction +52k, and Transportation and Warehousing +27k.

  • Average hourly earnings increased by 3 cents/ 0.11% in January y/y hourly earnings are up 3.2%.
  • U3 unemployment edged upward by 0.1% to 4.0%. U6 unemployment rate increased 0.5% at 8.1%.
  • The labor force participation rate increased slightly from 63.1% to 63.2%.
  • The average workweek was unchanged at 34.5 hours.

Employment Cost Index – Released 1/31/19 – Compensation costs for civilian workers increased 2.9% for the 12-month period ending in December 2018 compared with a compensation costs increase of 2.6% in December 2017. Wages and salaries were up 3.1%, versus 2.5% for the 12-month period ending December 2017. Benefit costs increased 2.8%, versus 2.5% in December 2017. For private industry workers, compensation costs increased 3.0% year-over-year, versus 2.6% for the 12 months ending December 2017. Wages and salaries increased 3.1% year-over-year, versus 2.8% for the 12 months ending December 2017. Benefit costs increased 2.6%, versus 2.3% for the 12 months ending December 2017. This report is published quarterly.

Weekly Unemployment Claims – Released Thursday 1/31 – In the week ending January 26th, initial claims were 253,000, an increase of 53,000 from the previous week’s revised level. This marks the highest level for initial claims since September 30, 2017. The 4-week moving average was 220,250 an increase of 5,000 from the previous week’s revised average.

Job Openings & Labor Turnover Survey – JOLTS Released Monday 1/8 – The number of job openings fell to 6.9 million on the last business day of November, the U.S. Bureau of Labor Statistics reported. Over the month, hires edged down to 5.7 million, quits edged down to 3.4 million, and total separations were little changed at 5.5 million. Within separations, the quits rate and the layoffs and discharges rate were unchanged at 2.3 percent and 1.2 percent, respectively.


This Week’s Economic Data

Links take you to the data source

PMI Manufacturing ISM Index – Released 2/1 – December PMI increased 2.3% to 56.6% from December’s reading of 54.3%. The New Orders Index was up 6.9% to 51.3%. The Production Index registered 60.5% up 6.4%. 

New Residential Sales – Released 1/31 – Last month sales of new single-family homes increased by 16.9% to 657k, seasonally adjusted. The median sales price of new homes sold in November was $302.40k with an average sales price of $362.40k. At the end of November, the seasonally adjusted estimate of new homes for sale was 330k. This represents a supply of 6.0 months at the current sales rate.

Chicago PMI – Released 1/31 – Chicago PMI decreased 7.1 points in January easing to 56.7, down from 63.8 in December. The Prices Paid indicator was unchanged for the month ending a five consecutive monthly decline.

Consumer Confidence – Released 1/29 – The Consumer confidence index declined in January. The Index now shows a reading of 120.2 down from 126.6 in December. Despite the decline in January and despite weakened expectations regarding job prospects and business conditions, consumer confidence levels suggest economic conditions remain favorable.  Expectations declined sharply due to financial market volatility and the government shutdown. Consumers’ assessment of the current conditions was little changed. This marks three months in a row of decline in consumer confidence. Back to back declines in Consumer Confidence reflect a growing concern of a moderating pace of economic growth in 2019.


Recent Economic Data

Links bring you to the data source

Personal Income – Released 1/21 – (Delayed release due to gov’t shutdown)  Personal Income increased 0.2% in November according to the BEA. The majority of this increase was due to increases in wages and salaries and increases in farm proprietor’s income. Real PCE (the Feds preferred inflation gauge) increased 0.3%. Real disposable personal income increased 0.2%.  Real Personal Consumption Expenditures (PCE) has risen 1.8% y/y.

3rd Estimate of 3rd Quarter GDP  – Released 1/21 – (Delayed release due to gov’t shutdown)  According to the third estimate released by the Bureau of Economic Analysis, Real Gross Domestic Product (Real GDP) increased at an annual rate of 3.4% in the third quarter of 2018. This result is slightly lower by 0.1% from 3.5% seen in the second estimate. The general outlook of real GDP remains roughly the same. The third estimate data provided an upward revision to private inventory investment. Downward revisions were reflected in personal consumption expenditures (PCE) and exports.

Existing Home Sales – Released 1/22 – Existing home sales decreased 6.4% in December. Sales decreased to a seasonally adjusted rate of 4.99 million. Sales are currently down 10.3% from one year ago. Housing inventory declined to 3.7 months of inventory and the existing homes for sale declined to 1.55 million. The median sales price for all types of homes was $253,600, up 2.9% year/y. 

Durable Goods Released 1/25 – (Delayed Release due to gov’t shutdown)  December – New orders for manufactured durable goods increased $1.9 billion or 0.8% to $250.8 billion in November. This increase follows two consecutive months of decline. Transportation equipment, up 2.9%, drove the increase by $2.5 billion to $87 billion.

Consumer Price Index – Released 1/11 – The Consumer Price Index declined 0.1% in December, core CPI, which excludes food and energy increased 0.2%. The monthly changes left total CPI up 1.9% year-over-year, versus 2.2% in November, and core CPI up 2.2%. The decline in total CPI in December was fueled by the energy index and gasoline index. A 0.3% increase in the shelter index drove the increase in core CPI, which was offset somewhat by a 0.2% decline in the price index for used cars and trucks. 

Consumer Credit – Released 1/8 – Total outstanding consumer credit increased by 22.2 billion in November. Nonrevolving credit increased by $17.3 billion and revolving credit increased by $4.8 billion. Consumer credit increased at a seasonally adjusted annual rate of 6.75% in November, with revolving credit increased at an annual rate of 5.5% and nonrevolving credit increased at an annual rate of 7.00%.

PMI Non-Manufacturing Index (ISM Services)  – Released 1/7 – There was a deceleration in non-manufacturing in December. The ISM Non-Manufacturing Index registered 57.6 points, falling from last months’ 60.7%. This represents continued growth in the non-manufacturing sector, at a slightly slower rate.

 U.S. Trade Balance – Released 1/8 – (Delayed release due to gov’t shutdown) – The trade deficit rose $0.9 billion in October to – $55.5 billion. Exports were $211.0 billion while imports were $266.5 billion.

US Light Vehicle Sales  – Released 1/6 – (Delayed release due to gov’t shutdown) – U.S. light vehicle sales were at a seasonally adjusted annual rate (SAAR) of 17.40 million units in November versus a SAAR of 17.49 million units in October. The November run rate was down 0.7% from the SAAR of 17.52 million units for November 2017.

U.S. Construction Spending Released 1/3 – (Delayed release due to gov’t shutdown) –  Last month construction spending decreased slightly by 0.1% in October measuring at a seasonally adjusted annual rate of $1,308.8 billion. The October figure is 4.9% above the October 2017 estimate. Private construction spending was 0.4% below the revised September estimate.

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Data Sources:

Bureau of Economic Analysis (BEA)
Congressional Budget Office (CBO)
U.S. Bureau of Labor Statistics (BLS)
Federal Reserve Economic Data (FRED Charts)

CME Fed Watch
U.S. Treasury – Yields
U.S. Census Bureau
Institute for Supply Management (ISM)
Weekly DOL Employment Data
BLS Monthly Jobs Report

US Energy Admn (EIA)
BLS Consumer Price Index CPI
BLS Producer Price Index PPI
Atlanta Fed GDPNOW
NY Fed Nowcast GDP
US Census Bureau Housing Starts

Consumer Credit
USCB Retail Sales
Construction Spending
Federal Reserve Dot Plots
NY Empire Index
Philadelphia Federal Reserve
P/E Ratio Data -Yardeni Research

Technical Analysis Info: – Financial Charts
Exponential vs Simple moving average

Other Links:

1973 Arab Oil Embargo
Hunt Brothers Silver
Long-Term Capital bailout