Stock indices rebounded sharply on Monday after last week’s selloff and continued to rise for the week. Fed chair Powell’s comments reassured markets that the current rate of inflation will likely to subside.
Speaking of inflation, we look at two different measures of inflation. One is the Labor department’s consumer price index (CPI) which was up 5% in May from a year earlier and the other is the Commerce Department’s personal consumption expenditures (PCE) price Index which was up only 3.9% in May from a year earlier. The FED’s preferred measure of inflation is the PCE index. The two indices measure inflation differently. The CPI is gauged more towards urban consumers out of pocket expenditures. The PCE includes more rural areas and costs paid by government and non-profits for consumers like Medicaid and Medicare and employer-sponsored health care premiums. Medical care accounts about 20% of the PCE index and less than 10% of the CPI Index. Housing accounts for 40% of CPI and only 20% of PCE. Understanding these differences we believe they both provide insight to inflation.
Treasury yields rose with the 30-year bond yield closing at 2.154% and the 10-Year note closing at 1.531%. Crude oil rose to $73.99 a barrel and natural gas rose to $3.524 per MMBTUs. The U.S. dollar index rose to 91.78 and gold fell to $1779.30 an ounce.
In the economic numbers this week:
- The National Association of Realtors reported
- Existing home sales fell 0.9% in May from April. The drop was attributed to low inventories of existing homes. From a year earlier May existing home sales were up 44.6%.
- The median price of existing homes sold hit a record of $350,300 in May, a 23.6% increase from last May.
- The Commerce Department reported:
- New home sales fell 5.9% in May. The decrease was attributed to shipping bottlenecks and higher input prices. Keep in mind that new homes only account for about 10% of home sales.
- The average price for a new home rose to $374,400.
- Personal spending was unchanged in May following a revised 0.9% increase in April. Spending on services increased while spending on goods declined.
- The personal consumption expenditures price index, the FED’s preferred measure if inflation, rose 0.4% in May following a 0.6% increase in April.
- Personal incomes declined 2% in May after a large surge in March from stimulus payments.
- The Labor Department reported:
- A seasonally adjusted 411,000 workers filed initial claims for unemployment in the week ending June 19th down from a revised 418,000 the week before.
- The 4-week moving average of claims, designed to smooth out volatility, rose to 396,250.
- Continuing claims were nearly unchanged at 3.5MM in the week ending June 12th.
- A broader measure of claims including extended benefits, pandemic assistance and other programs was nearly unchanged at 14.8MM in the week ending June 5th.
- For the full unemployment report go here: https://www.dol.gov/ui/data.pdf .
- The EIA weekly oil report is here: http://ir.eia.gov/wpsr/wpsrsummary.pdf . Also, the EIA reported in the prior week:
- Field production of crude fell from 11.2MM BPD to 11.0MM BPD.
- Natural gas storage rose 55BN cubic feet and is below the average level at this time of year during the past five years.
- Baker Hughes reported the number of active oil rigs fell 1 to 372. The number of active natural gas rigs increased 1 to 98.
Please call us if you have any questions.
Loren C. Rex, CFP®, MA Erik A Smith AIF®
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
Registered Representative of and securities offered through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Cambridge and Generations Financial Planning & Wealth Management are separate companies and are not affiliated.
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. The Indices mentioned are unmanaged and cannot be invested into directly.