U.S. and World News
- President Trump delivered his first State of the Union address this week in which he touched on five major policy areas: the economy, infrastructure, immigration, trade and national security. On the economy, Trump said, “Since the election we have created 2.4 million jobs, we are seeing rising wages, unemployment claims have hit a 45-year low and the stock market has smashed one record after another.” Trump also announced the “end of the war on American energy…the time to rebuild our crumbling infrastructure…and finally turn the page on decades of unfair trade deals.”
- As widely expected, the Federal Reserve left interest rates unchanged in Janet Yellen’s final meeting as Fed Chair. The post-meeting statement generally upgraded it descriptions of economic activity, noting gains in employment, consumption and investment. The Committee also noted an expectation for inflation to pick up from its currently low levels. Leadership of the U.S. Central Bank will now shift to incoming Chairman Jerome Powell. The market is currently pricing in a 93% probability of a rate hike at the March meeting.
- Markets retracted significantly this week, capped off by a steep Friday sell-off. The S&P fell 3.82%, closing at 2,762. The Dow Jones lost 4.11% for the week, closing at 25,520. Since the beginning of 2018, the S&P is up 3.44% and the Dow is up 3.34%.
- Interest rates spiked this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 2.58% and 2.84%, respectively.
- The spot price of WTI Crude Oil dipped by 1.83% this week, closing at $65.02 per barrel. Oil has started 2018 with a gain of 7.62%.
- The spot price of Gold fell by 1.34%, closing at $1,331.09 per ounce. In 2018, gold prices are up 2.17%.
- Initial jobless claims declined 1,000 from last week, coming in at 230,000, lower than expectations. The largest decreases were in Michigan, New Jersey and Ohio which all fell -2K during the week. The four week moving average for claims fell to 235,000.
- The January employment report showed a gain of 200,000 jobs during the month, more than the forecasted 180,000. The prior two months’ figures were revised down a total 24,000 which brings the three month average for job gains to 192,000.
- The headline unemployment rate held at 4.1% as expected. The labor force participation rate also held steady at 62.7%.
- Average hourly earnings rose 0.3% during the month, beating expectations of 0.2%. With revisions to the prior months, over the last 12 months wages have increased 2.9%.
- The Case-Shiller home price index rose by 0.7% in November, slightly more than expectations of 0.6%. Prices rose in all 20 cities measured with San Francisco (+1.8%), Las Vegas (+1.1%), and Tampa (+1.0%) saw the largest monthly increases. Over the last 12 months, home prices as measured by the index have risen by 6.4%.
Fact of the Week
- The S&P 500 has now gone 404 trading days without a peak-to-trough 5% pullback (6/28/2016 through 2/2/2018), the longest run of this kind in the history of the index. The current run overtook the previous record of 394 trading days which went from 12/21/1994 to 7/12/1996. With the drop this week, the current pullback in the S&P 500 has amounted to 3.8%. (Source: Pension Partners)
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