Stock indices ended the week mixed with the Nasdaq 100 Index posting modest gains and emerging markets and the Dow 30 industrials posting modest losses.
The Senate passed a $250BN bill on a bi-partisan basis to improve the U.S. competitiveness with China. The bill focuses on technology research and development as well as boosting chip production. The House will need to pass their version of the bill and resolve any differences with the Senate bill before the legislation can be signed into law. The U.S. has been spending less than 1% of GPD on research and development, the lowest level before the space race.
May’s consumer-price inflation rate fell slightly from April but the year over year rate came in at 5%. At this point, we expect the inflation rate will be lower before year end and are monitoring the situation closely. The Federal Reserve likely will lay out criteria for tapering their bond purchases at their meeting next week but we are not expecting any action in the next few months.
The European Central Bank met and decided to keep buying bonds at an accelerated rate through the end of summer. They had increased the rate of bond buying at their last meeting.
Treasury yields fell with the 30-year bond yield closing at 2.141% and the 10-Year note closing at 1.453%. Crude oil rose to $70.85 a barrel and natural gas rose to $3.285 per MMBTUs. The U.S. dollar index rose to 90.51 and gold fell to $1877.80 an ounce.
In the economic numbers this week:
- China reported:
- Imports in May rose 51.5% from a year earlier, the largest increase in 10 years, driven largely by raw materials.
- Exports in May rose 27.9% from a year ago, down from 32.3% year over year in April. Auto processing products and parts fell 4% year over year in May due to shutdowns due to chip shortages.
- The Commerce Department reported:
- The U.S. trade deficit fell 8.2% in April from a record $75BN in March due to supply chain issues such as a shortage in semiconductor chips. Imports fell and exports rose.
- The consumer-price index rose 0.6% in May and is up 5% from a year ago. Core prices, excluding volatile food and energy rose 0.7% in May. The largest increase again was in used car prices, at 7.3%, as the supply of new vehicles is limited due to chip shortages. Air fares, apparel and furniture prices also saw large increases.
- The Labor Department reported:
- A seasonally adjusted 376,000 workers filed initial claims for unemployment in the week ending June 5th down from 385,000 the week before.
- The 4-week moving average of claims, designed to smooth out volatility, fell to 402,500.
- Continuing claims fell from 3.8MM to 3.5MM in the week ending May 29th.
- A broader measure of claims including extended benefits, pandemic assistance and other programs fell from 15.4MM to 15.3MM in the week ending May 22nd.
- 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 rose from 10.8MM BPD to 11.0MM BPD.
- Natural gas storage rose 98BN 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 rose 6 to 365. The number of active natural gas rigs fell 1 to 96.
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.