U.S. stocks dropped significantly in this holiday shortened week. Geopolitical concerns played a significant role on Thursday, especially over expectations of a North Korea missile or nuclear test on Saturday during the founder’s birthday celebration. Yet, as of this writing on late Saturday night in North Korea, neither a missile test nor a nuclear test has happened. Rather, North Korea displayed samples of new missiles at a parade. These appear to be more advanced than previous missiles but it is not known it they real or mockups. International stocks generally saw smaller declines.
The International Energy Agency commented that supply and demand was now nearly balanced. However, it lowered its demand forecast for the rest of 2017. Indications are that OPEC likely will extend production cuts after June as some members appear to be targeting $60 oil. Keep in mind that Saudi Aribia is planning to list 5% of the state-owned Aramco in 2018 and has an incentive to raise prices. Oil prices ended the week higher.
The dollar fell based on geopolitical concerns, weak March inflation data and comments from President Trump that the dollar is too strong. Also, he announced that he now favors reappointing Janet Yellen to chair the Federal Reserve despite comments to the contrary on the campaign trail. If inflation starts to trend lower, the FED likely will delay interest rate increases and/or delay unwinding its balance sheet. Treasury yields plummeted (and prices rose) this week on geopolitical concerns and weak inflation data. The 10-year treasury yield which has hit a high of 2.641% closed Thursday at 2.234%.
Looking ahead to this coming week, the pace of earnings announcements will accelerate as earnings season gets into full gear.
In the numbers this week:
- The U.K reported that inflation in March is 2.3% above March 2016, again exceeding the central bank’s target of 2.0%. The increase was mainly due to food, alcohol and clothing, while air fares fell. While the U.K. central bank expects inflation to hit 2.75% early next year it is willing to overshoot its target to maintain stability during Brexit.
- Eurostat reported that industrial production fell 0.3% in February but is 1.2% above last February.
- China’s National Bureau of Statistics reported
- Consumer prices rose 0.9% in March up from 0.8% in February.
- Producer prices were 7.6% higher than a year ago in March down from 7.8% in February.
- Exports rose 16.4% in March from last March and 14.8% in the first quarter due to strong global demand.
- Imports rose 20.3% in March and 31.1% in the first quarter. Higher commodity prices played a large part in the increase in imports.
- The Commerce Department reported
- U.S. Import prices dropped 0.2% in March after rising 0.4% in February. The decline was mainly due to the cost of imported oil. Year over year import prices in March were up 4.2%.
- Retail sales fell 0.2% in March following a revised decrease of 0.3% in February. This was the weakest in two months since the beginning of 2015. Auto sales and gasoline were the main causes of the declines. Excluding autos and gasoline retail sales were up .1% in March. This stands in contrast to very high levels of consumer confidence.
- The Energy Information Administration’s Weekly Petroleum Data report is here: wpsrsummary.
- The Energy Information Administration reported
- Weekly field production of crude oil increased 36,000 barrels per day in the prior week.
- Natural gas in storage rose 10 Bcf from the prior week.
- Baker Hughes reported that oil drilling rigs rose 11 to 683. Gas drilling rigs fell 3 to 162.
- The Labor Department reported
- Initial claims for unemployment fell 1,000 to a seasonally adjusted 234,000. The prior week was revised to 235,000. The four-week moving average of claims, designed to smooth out weekly fluctuations, fell 3,000 to 247,250.
- Its producer price index fell 0.1% in March from April, mainly due to declining energy prices. This was the first decline since August.
- Its consumer price index fell 0.3% in March, the first decline since January 2010. Excluding volatile food and energy prices, consumer prices still fell 0.1% in March. From a year ago, consumer prices were up 2.4%. Besides a decline in gasoline prices, motor vehicles, clothing and wireless telephone prices fell in March while food, medical care and shelter costs rose.
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Loren C. Rex, CFP®, AIF®, MA Erik Smith
President Managing Partner
Generations Financial Planning & Wealth Management 269-441-4143
77 E. Michigan Ave, Suite 140
Battle Creek, MI 49017
Carrie Fuce, Assistant 269-441-4091
Toll Free: 800-513-8180
Visit our Website: www.genfinplan.com
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These are the opinions of Loren Rex and Erik Smith and are not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice. Indices mentioned are unmanaged and cannot be invested into directly. Past performance is not a guarantee of future results