U.S. and World News
- The agreement reached last week to de-escalate the situation in Ukraine doesn’t appear to have been of much use. Gun fights have broken out in Eastern Ukraine causing President Obama to have to warn of additional sanctions on Russia if Putin doesn’t act to ease tensions. Russia has not heeded these warnings and has begun military exercises on the Ukrainian border after five pro-Russian rebels were killed during attempts to reassert Russian control over the eastern part of the country.
- S&P has reduced Russia’s debt rating by a notch to BBB-, or just one grade above junk status. S&P also kept the country’s outlook at negative as the tensions with Ukraine continue to ratchet up.
- Japan has overhauled the investment committee of its $1.26 trillion Government Pension Investment Fund (GPIF), the world’s largest pension fund. Prime Minister Shinzo Abe wants the fund to improve returns by making higher risk investments (stocks) and reducing its reliance on low-yielding government bonds. The revamp is part of Abe’s “third arrow” of economic reform and an attempt to lift Japan out of deflation.
- The S&P 500 dipped slightly by 0.81% for the week, closing at 1,863.The Dow Jones followed suit by falling 0.85%, closing at 16,361. So far in 2014, the S&P is up 0.81% and the Dow Jones is down 1.30%.
- Treasury yields fell this week in conjunction with lower stock prices. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.73% and 2.66%, respectively.
- The spot price of WTI Crude Oil ended the week down 2.64%, closing at $100.64 per barrel. Year to date, Oil prices have climbed 3.45%.
- The spot price of Gold rose by 0.69% this week, closing at $1,303.25 per ounce. Year to date, Gold prices are up 8.46%.
- Initial jobless claims rose by 25,000 from last week, coming in at 329,000 vs. consensus estimates of 315,000. The Labor Department noted that seasonal adjustment presents difficulties during the Easter holiday and spring break from schools. The four week moving average for claims moved up to 317,000 after seeing several weeks of decline.
- New home sales dropped by 14.5% in March vs. expectations of them rising by 2.3%. This was the largest decline in this measure since July 2013 shortly after last year’s sharp jump in mortgage rates. While it’s possible that adverse weather earlier in the winter had a lagged effect on March new home sales by delaying home searches, this is being viewed as a legitimately disappointing report.
- China’s manufacturing sector has contracted for a fourth consecutive month in April as the HSBC PMI gauge registered another sub-50 (50 is breakeven) reading at 48.3. Given China’s slowing economy, many analysts believe that the Chinese government will add to its recent stimulus measures.
Fact of the Week
- The U.S. government had a streak of 42 consecutive monthly deficits through 3/31/2012, an all-time record. Since then, 7 of the last 24 months have actually generated a surplus (tax receipts greater than expenditures). Higher taxes collected due to economic improvements and stock market gains, as well as reduced spending through measure like the sequester have helped to balance the budget.
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