U.S. and World News
- Italy’s new Prime Minister Enrico Letta was sworn in this week. The country struggled to install a government and teetered on the edge of political gridlock following inconclusive elections in February and five additional presidential votes earlier this month.
- The Federal Reserve signaled flexibility in the amount of committee’s asset purchases by adding language indicating they are “prepared to increase or reduce the pace of its purchases to maintain appropriate policy accommodation as the outlook for the labor market or inflation changes.” Consensus belief is that the new language suggests that an increase in the size of monthly asset purchases may be in the cards.
- As expected, the European Central Bank cut its benchmark rate by 25 basis points, as rising Eurozone unemployment and low inflation provided an impetus for further monetary easing. The President of the ECB, Mario Draghi, also suggested he was open to taking the deposit rate into negative territory.
- Stock markets extended their rallies with the S&P 500 Index gaining 2.0%, closing at 1,614. The Dow Jones Industrial Average also rose and was up 1.8% to close at 14,974. Adding this week’s gains, the S&P and the Dow are up 13.2% and 14.3% respectively year to date.
- Treasury yields spiked up on the positive employment report, as the 5 year and 10 year treasury finished the week at 0.73% and 1.74% respectively.
- The spot price of WTI Crude Oil was up again this week, rising by 2.7%, closing at $95.49 per barrel. On the year, oil prices are up 2.1%.
- The spot price of Gold rose by 0.5% this week, closing at $1470.02/ounce. Despite this week’s gains, gold is down 12.3% for the year.
- Weekly Initial Jobless Claims fell by 15,000 this week and came in lower than expected at 324,000 vs. consensus expectations of 345,000. This is the lowest level of claims since January 2008. The 4-week moving average of jobless claims moved down to 342,500. The Labor Department noted that there was nothing unusual in the claims data so this is being viewed as a very positive report.
- The Case-Shiller home price index rose by 1.24% for February, better than consensus expectations of 0.9%. The index is now up 9.3% on a year over year basis, which is the fastest growth since May 2006 (albeit from a much lower base).
- The April employment report was broadly better than expected. Non-farm payrolls increased by a larger than expected 165,000 vs. consensus expectations of 140,000. The report also included large upward revisions for the previous two months.
o The unemployment rate declined to 7.5% and for the first time in months, the decline in the unemployment rate wasn’t due to a drop in the labor participation rate, which was unchanged for the month.
Fact of the Week
- Since 1950, the highest marginal tax bracket for individuals has ranged from a high of 92% in 1953 to a low of 28% in 1990. The highest individual tax bracket today is 39.6%.
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