The short term trend turned decidedly negative this week as the equity markets had to start digesting the expanding coronavirus. Friday saw the heaviest volume of the year, with the Dow falling 2.1%. The S&P currently sits 3.12% off the highs of Jan 17th. Helping the negativity was a flat 4th Quarter GDP of 2.1%. For the full year 2019, GDP grew at 2.3%, the lowest level since 2016. Furthering the growth worries on Friday was the Chicago PMI, coming in 6 points lower in January declining to 42.9, down from 48.9 in December. The index is now in contractionary territory for five consecutive months and sitting at the lowest level since December 2015.
I am re-upping this chart from last week with the nearer term support levels. We’re currently resting on the first level around 3220.
Forgetting the current pandemic, the market has done exceptionally well since the bottom in December of 2018. Trough to peak up more than 40%.
Global Bond Yields
US Treasuries are inverted with the one year and shorter higher than the 2, and 5 year.
Foreign Exchange Market
The Baker Hughes rig count was lost 4 this week. There are 790 oil and gas rigs operating in the US – down 255 over last year.
- Brent Crude Oil lost 6.71% this week closing at $56.62/bbl
- WTI Crude Oil lost 4.85% this week to close at $51.56/bbl
- Heating Oil lost 6.27% this week closing at $1.63/gallon
- Natural Gas lost 1.55% this week closing at $1.84 per million BTUs
- Unleaded Gas lost 1.43% this week closing at $1.50/gallon
- Gold gained 1.02% this week closing at $1587.90/oz
- Silver lost 0.56% on the week closing at $18.01/oz
- Palladium lost 3.95% this week closing at $2224.70/oz
- Platinum lost 4.82% this week closing at $961.90/oz
- Copper lost 6.22% this week closing at $2.52/lb
Employment Cost Index – Released 1/31/2020 – Compensation costs for civilian workers increased 0.7% for the 3-month period ending in December 2019. The 12 month period ending in December 2019 saw compensation costs increase by 2.7%, 0.2% less than the 12 month period ending December 2018. Wages and salaries were up 2.9% for the 12-month period ending December 2019 compared to 3.1% for the 12 month period ending December 2018. Benefit costs increased 2.2% for the 12-month period ending December 2019. For private industry workers, compensation costs increased 2.7% year-over-year, versus 3.0% for the 12 months ending December 2018. This report is published quarterly.
Weekly Unemployment Claims – Released Thursday 1/30/2020 – In the week ending January 25th, initial claims were 216,000, a decrease of 7,000 from the previous week’s revised level. The 4-week moving average was 214,500 a decrease of 1,750 from the previous week’s revised average.
Job Openings & Labor Turnover Survey JOLTS – Released 1/17/2020 – The U.S. Bureau of Labor Statistics reported the number of job openings declined from 7.3 million to 6.8 million on the last business day of November. Over the month, hires and separations were little changed at 5.8 million and 5.6 million, respectively. Within separations, the quits rate was unchanged at 2.3%. The layoffs and discharges rates were little changed at 1.1%.
December Jobs Report – BLS Summary – Released 1/10/2020 – The US Economy added 145k nonfarm jobs in December and the Unemployment rate remained at 3.5%. Average hourly earnings increased by 3 cents. Hiring highlights include Retail Trade +41k, Education and Health Services +36k, Construction +20k, Manufacturing -12k.
- Average hourly earnings increased by 3 cents in December, y/y hourly earnings are up 2.9%.
- U3 unemployment rate was unchanged at 3.5%. U6 unemployment rate decreased 0.2% to 6.7%.
- The labor force participation rate was unchanged in December at 63.2% (Unchanged year/y).
- Average workweek was unchanged at 34.3 hours.
This Week’s Economic Data
Links take you to the data source
Chicago PMI – Released 1/31 – Chicago PMI fell 6 points in January declining to 42.9, down from 48.9 in December. This decline follows two months of gains and marks the lowest level since December 2015. The index is now in contractionary territory for five consecutive months. All five of the major components were down on the month with Order Backlogs leading the way followed by New Orders.
Personal Income – Released 1/31 – Personal Income increased 0.2% in December according to the BEA. The majority of the increase in December was due to increases in compensation of employees and personal interest income that was partially offset by a decline in farm proprietor’s income. Real PCE (the Feds preferred inflation gauge) increased 0.1% in December. Real disposable personal income decreased 0.1% in December.
Advance Estimate of 4th Quarter and Year 2019 GDP – Released 1/30 – According to the Advance Estimate released by the Bureau of Economic Analysis, Real Gross Domestic Product (Real GDP) increased at an annual rate of 2.1% in the fourth quarter of 2019. The advance estimate is based on data that are incomplete or subject to further revision. The fourth-quarter increase in real GDP observed positive contributions from personal consumption expenditures (PCE), federal gov’t spending, state and local gov’t spending, residential fixed investment, and exports that were partly offset by negative contributions from private inventory investment, nonresidential fixed investment, and imports (which decreased). The Second Estimate of fourth-quarter GDP growth, which is based on more complete data, will be released on February 27, 2020.
Consumer Confidence – Released 1/28 – The Consumer confidence index increased in January following a moderate increase in December. The Index now shows a reading of 131.6 which is up from 128.2 in December. Consumers’ confidence increased in January primarily due to a more positive assessment of the current job market.
New Residential Sales – Released 1/27 – Sales of new single-family homes declined 0.4% to 694k, seasonally adjusted, in December. The median sales price of new homes sold in December was $331.4k with an average sales price of $384.5k. At the end of December, the seasonally adjusted estimate of new homes for sale was 327k. This represents a supply of 5.7 months at the current sales rate.
Durable Goods – Released 1/27 – New orders for manufactured durable goods decreased $5.7 billion or 2.4% to $245.5 billion in December. The increase in December follows a 3.1% decrease in November. Transportation equipment drove the increase; up $5.9 billion or 7.6%.
Recent Economic Data
Links take you to the data source
Existing Home Sales – Released 1/22 – Existing home sales increased in December. Sales increased 3.6% to a seasonally adjusted rate of 5.54 million. Sales are currently up 10.8% from one year ago. Housing inventory declined from 3.7 months of inventory to 3.0 months of unsold inventory and the total housing inventory declined from 1.64 million to 1.40 million. The median sales price for all types of homes was $274,500, up 7.8% year/y.
Housing Starts – Released 1/17 – New home starts in December were at a seasonally adjusted rate of 1.608 million; up 16.9% above November and 40.8% above last December’s rate. Building Permits were at a seasonally adjusted rate of 1.416 million, down 3.9% compared to November but up 5.8% over last year.
Industrial Production and Capacity Utilization – Released 1/17 – In December Industrial production declined 0.3%. A large decrease in the demand for heating in December resulted in a 5.6% decline in utilities that outweighed increases of 0.2% in manufacturing and 1.3% in mining. Industrial production declined at an annual rate of 0.5% for the fourth quarter. Total capacity utilization declined 0.4% to 77.0% in December which is 2.8% below its long-run average.
Retail Sales – Released 1/16 – U.S. retail sales for December increased 0.3% to $529.6 billion. U.S. retail sales are up 5.8% year/y.
Producer Price Index – Released 1/15 – The Producer Price Index for final demand was little changed in December increasing 0.1%. Core PPI was up 0.1%. Year over year the index for final demand rose 1.3%.
Consumer Price Index – Released 1/14 – The Consumer Price Index gained 0.2% in December. Core CPI, which excludes food and energy increased 0.1%. The monthly changes left total CPI up 2.3% year-over-year and core CPI up 2.3%.
Consumer Credit – Released 1/8 – Consumer credit increased at a seasonally adjusted annual rate of 3.5% in November. Revolving and nonrevolving credit decreased at annual rates of 2.75% and increased 5.75% respectively. Total Outstanding consumer credit is currently at $4.176 trillion.
U.S. Trade Balance – Released 1/7 – According to the U.S. Census Bureau of Economic Analysis the goods and services deficit declined in November to $43.1 billion. This decline is $3.9 billion lower than the deficit recorded in October. November exports were $208.6 billion, $1.4 billion more than October exports. November imports were $251.7 billion, $2.5 billion less than October imports. The goods and services deficit has declined $3.9 billion or 0.7% year to date. Year to date exports and imports decreased $0.1 billion or 0.1% and decreased $3.9 billion or 0.1% respectively.
PMI Non-Manufacturing Index (ISM Services) – Released 1/7 – Economic activity in the non-manufacturing sector grew in December for the 119th consecutive month. ISM Non-Manufacturing registered 55 percent, which is 1.1 percentage points above the November reading of 53.9 percent. This represents continued growth in the non-manufacturing sector, at a faster rate.
PMI Manufacturing ISM Index – Released 1/3 – December PMI remains in contraction territory as PMI decreased by 0.9% to 47.2% from November’s reading of 48.1%. The New Orders Index was down 0.4% from November’s reading of 47.2% to 46.8%. The Production Index registered 43.2% down 5.9%.
U.S. Construction Spending – Released 1/3 – Construction spending increased by 0.6% in November measuring at a seasonally adjusted annual rate of $1,324.1 billion. The November figure is 4.1% above the November 2018 estimate. Private construction spending was 0.4% above the revised October estimate at $985.5 billion. Public construction spending was 0.9% above the revised October estimate at $338.6 billion.
US Light Vehicle Sales – Released 9/4 – U.S. light vehicle sales were at a seasonally adjusted annual rate (SAAR) of 17.07 million units in August versus a SAAR of 16.82 million units in July.
Next week we get data on Construction Spending, ISM Services, Consumer Credit, the PMI Manufacturing ISM Index, the U.S. Trade Balance, and the January Jobs Report.