U.S. stocks were mixed for the week with the Nasdaq posting significant gains and the Dow 30 posting significant losses. The S&P 500 was nearly unchanged and foreign stock indexes ended the week with significant losses.
President Trump met with North Korean dictator, Kim Jong Un, where they issued a vague agreement aiming towards peace and denuclearization. Following the meeting Trump put the next Korean military exercises on hold to help facilitate peace negotiations. Secretary of State Mike Pompeo secured assurances from China, Japan and South Korea that sanctions should remain in place until such time as denuclearization is complete. On Friday, Trump announced tariffs on $50BN worth of high tech Chinese goods and China retaliated with tariffs on an equal amount of U.S. goods, including agricultural, seafood and energy products. The tariffs are set to take place in July.
The ten-year treasury note was little changed despite the FED raising the Fed Funds Rate a quarter of a percent to 1.75 – 2.0%, as the yield curve continues to flatten. The U.S. dollar gained significantly against a basket of foreign currencies. Commodities were mixed for the week with energy and precious metals higher and grains mostly lower.
This week saw central bank meetings in the U.S., Europe and Japan.
- The Federal Reserve raised short term interest rates 0.25%, as expected, and predicted a total of four hikes, up from three predicted at the last meeting.
- The ECB announced that it will extend its bond buying program currently scheduled to end in September to the end of 2018, albeit at a smaller pace of 15BN Euros down from 30BN Euros. More importantly, the ECB indicated that maturing debt will be reinvested for an extended period of time and that short term rates will remain low at least through the summer of 2019.
- The Bank of Japan chose not to change its monetary policy with no end date to or reduction of quantitative easing and no deadline to achieve its 2% inflation rate.
In the numbers this week:
- The Commerce Department reported Retail sales rose 0.8% in May. Excluding auto sales which are volatile, retail sales rose 0.9%.
- The Federal Reserve reported that industrial production fell 0.1% in May. The decline was attributed to a fire at a Ford supplier that shut down production of the F150 pickup truck. Industrial production includes manufacturing, mining and utilities. While manufacturing fell 0.7%, mining rose 1.8% due to increased oil and gas production and utilities rose 1.1% due to the hottest May on record.
- The Labor department reported
- First time claims for unemployment fell 4,000 to a seasonally adjusted 218,000 in the prior week. The four week moving average of claims rose 1250 to a seasonally adjusted 224,250.
- The consumer-price index rose 0.2% in May. Excluding volatile food and energy prices, the so called core prices also rose 0.2%. From a year earlier, consumer prices rose 2.8% in May.
- Inflation-adjusted average weekly earnings rose 0.1% in May.
- The producer-price index rose 0.5% in May. Excluding volatile food and energy, producer prices rose 0.3%.
- The Energy Information Administration weekly report is here wpsrsummary (1). Also the EIA reported:
- Weekly field production of crude oil rose 100 thousand barrels per day.
- Storage of Natural Gas rose 96BN cubic feet.
- According to Baker Hughes, In the past week the number of active oil rigs rose 1 to 863 and the number of active gas rigs fell 4 to 194.
Please call us if you have any questions.
Loren C. Rex, CFP®, AIF®, MA Erik A 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
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.