U.S. Stocks rose in the first part of the week as investors seemed to like the Fed’s cautious tone on raising rates. However, as the week went on weak corporate earnings and weak Q1 growth fueled a selloff leaving stocks modestly down for the week and down slightly for the month of April. Intermediate treasury rates fell and the dollar fell while commodities including oil were up again. We are less concerned about the weak gross domestic product numbers as this initial number frequently has large revisions and some data is pointing to somewhat of a pickup in April. Earnings are a bigger concern for stocks but in our view are likely to stabilize in Q2 but those earnings won’t start coming out until July.
In economic news this week:
- The Labor department reported:
- First time claims for unemployment rose 9,000 to 257,000 in the prior week matching expectations. The four week moving average of claims actually fell by 4,750 to 256,000. This was the 60th week with claims below 300,000, the longest since 1973.
- The employment cost index rose a seasonally adjusted 0.6% during the first quarter. From a year earlier total compensation rose 1.9%, slightly less than the 2% gain in the prior three quarters.
- The S&P Case Shiller Home Price Index rose 5.3% in February from a year ago.
- The Commerce Department reported
- Sales of newly built homes fell 1.5% in March. This is the third month in a row of declines.
- Durable goods orders rose 0.8% in March, less than expected. February’s durable goods orders were revised to negative 3.1%. The March increase was due to an increase in defense spending. Excluding defense and aircraft durable goods orders were unchanged. For the first three months of 2016 durable goods orders were 1.4% above the same period a year ago.
- The first estimate of gross domestic product in Q1 showed that the economy grew at an annual rate of 0.5%. Keep in mind that the first estimate of GDP is revised a couple of times and often the first revision is large. In the fourth quarter, GDP was revised from 0.7% to 1.4%. The decline in GDP was attributed mainly to a 5.9% annualized decrease in business investment. Excluding business investment, GDP would have grown at a 1.26% annual pace. Personal consumption grew at a 1.9% annual pace. Personal services grew at a 2.7% pace.
- The percentage of people owning their own homes was 63.5% in the first quarter down from 63.8% in the fourth quarter. There were 363,000 new renter households and 177,000 new homeowner households in the first quarter.
- The EU statistics agency reported that gross domestic product rose at a 1.6% annual pace in the first quarter.
- The Energy Information Administration reported
- Crude oil inventories rose 2 million barrels in the prior week.
- US crude oil production fell 15,000 barrels to 8.938 million.
- The Federal Reserve reported that the personal-consumption expenditures price index rose 0.1% in March after falling 0.1% in February. From a year ago the index has risen 0.8%. Excluding volatile food and energy prices the index rose 0.1%in March and 1.6% from a year earlier. The Fed’s goal is for this index to rise to 2.0%.
- Factset reported that with 62% of S&P 500 companies reporting earnings have declined 7.6% in the first quarter.
Please call us if you have any questions.
Loren C. Rex, CFP®, AIF® Erik Smith
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.