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Weekly Market Snapshot

May 17, 2019

Market Commentary
by Scott J. Brown, Ph.D., Chief Economist

The financial markets continued to react to shifting perceptions on trade policy. Any signs of progress are taken positively by the stock market, while anything that pulls the two sides apart is viewed as a negative. The threatened broader expansion of tariffs against Chinese goods would apply mostly to consumer goods, raise inflation in the short term, and dampen overall growth – but the cumulative impact of tariffs is not enough (by itself) to push the U.S. economy into a recession.

April figures on retail sales and industrial production disappointed. While not a disaster, much of the economic data have been consistent with a lackluster to moderate pace of growth in 2Q19.  The University of Michigan’s Consumer Sentiment Index hit a 15-year high in the mid-May reading, driven by improvement in expectations – however, the survey failed to fully reflect the recent escalation in trade tensions. The softer economic data, combined with mild inflation figures, helped to boost the market odds of a Fed rate hike by the end of the year.

Next week, trade policy perceptions will likely remain the driving force. While the federal funds futures market has been signaling a greater chance of a Fed rate cut by the end of the year, we haven’t received such a signal from the Fed – and we’re unlikely to see that in the minutes of the April 30-May 1 Federal Open Market Committee meeting. Lower aircraft orders should dominate the durable goods orders data on Friday.


Indices

  Last Last Week YTD return %
DJIA 25862.68 25828.36 10.87%
NASDAQ 7898.05 7910.59 19.03%
S&P 500 2876.32 2870.72 14.74%
MSCI EAFE 1868.61 1861.04 8.65%
Russell 2000 1557.24 1570.06 15.47%

Consumer Money Rates

  Last 1 year ago
Prime Rate 5.50 4.75
Fed Funds 2.38 1.69
30-year mortgage 4.15 4.79

Currencies

  Last 1 year ago
Dollars per British Pound 1.280 1.352
Dollars per Euro 1.117 1.180
Japanese Yen per Dollar 109.85 110.77
Canadian Dollars per Dollar 1.346 1.281
Mexican Peso per Dollar 19.126 19.740

Commodities

  Last 1 year ago
Crude Oil 62.87 71.49
Gold 1286.20 1289.40

Bond Rates

  Last 1 month ago
2-year treasury 2.17 2.39
10-year treasury 2.37 2.58
10-year municipal (TEY) 2.66 3.03

Treasury Yield Curve – 05/17/2019

Chart

As of close of business 05/16/2019


S&P Sector Performance (YTD) – 05/17/2019


Chart

As of close of business 05/16/2019


Economic Calendar

May 21  —  Small Business Optimism (April)
May 22  —  FOMC Minutes (April 30-May 1)
May 23  —  NJobless Claims (week ending May 18)
 —  New Home Sales (April)
May 24  —  Durable Goods Orders (April)
May 27  —  Memorial Day Holiday (markets closed)
May 28  —  CB Consumer Confidence (May)
June 3  —  ISM Manufacturing Index (May)
June 7  —  Employment Report (May)
June 19  —  FOMC Policy Decision
July 31  —  FOMC Policy Decision

 

All expressions of opinion reflect the judgment of the Research Department of Raymond James & Associates, Inc. and are subject to change. There is no assurance any of the forecasts mentioned will occur or that any trends mentioned will continue in the future. Investing involves risks including the possible loss of capital. Past performance is not a guarantee of future results. International investing is subject to additional risks such as currency fluctuations, different financial accounting standards by country, and possible political and economic risks, which may be greater in emerging markets. While interest on municipal bonds is generally exempt from federal income tax, it may be subject to the federal alternative minimum tax, and state or local taxes. In addition, certain municipal bonds (such as Build America Bonds) are issued without a federal tax exemption, which subjects the related interest income to federal income tax. Municipal bonds may be subject to capital gains taxes if sold or redeemed at a profit. Taxable Equivalent Yield (TEY) assumes a 35% tax rate.

The Dow Jones Industrial Average is an unmanaged index of 30 widely held stocks. The NASDAQ Composite Index is an unmanaged index of all common stocks listed on the NASDAQ National Stock Market. The S&P 500 is an unmanaged index of 500 widely held stocks. The MSCI EAFE (Europe, Australia, Far East) index is an unmanaged index that is generally considered representative of the international stock market. The Russell 2000 index is an unmanaged index of small cap securities which generally involve greater risks. An investment cannot be made directly in these indexes. The performance noted does not include fees or charges, which would reduce an investor's returns. U.S. government bonds and treasury bills are guaranteed by the US government and, if held to maturity, offer a fixed rate of return and guaranteed principal value. U.S. government bonds are issued and guaranteed as to the timely payment of principal and interest by the federal government. Treasury bills are certificates reflecting short-term (less than one year) obligations of the U.S. government.

Commodities trading is generally considered speculative because of the significant potential for investment loss. Markets for commodities are likely to be volatile and there may be sharp price fluctuations even during periods when prices overall are rising. Specific sector investing can be subject to different and greater risks than more diversified investments. Gross Domestic Product (GDP) is the annual total market value of all final goods and services produced domestically by the U.S. The federal funds rate (“Fed Funds”) is the interest rate at which banks and credit unions lend reserve balances to other depository institutions overnight. The prime rate is the underlying index for most credit cards, home equity loans and lines of credit, auto loans, and personal loans. Material prepared by Raymond James for use by financial advisors. Data source: Bloomberg, as of close of business May 16, 2019.

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