The Federal Reserve met and chose to leave its benchmark interest rate unchanged. While the FED indicated that rate cuts were likely this year, Chairman Powell ruled out the possibility of a cut during the next meeting in March which caused a selloff on Wednesday. However, markets mostly recovered by week’s end on strong economic numbers and corporate earnings and major market indices ended the week mixed.
On Friday the Labor Department released a much stronger than expected jobs number, supporting the FED’s view that the current level of tightening may need to last longer to move inflation sustainably towards 2.0%
A court in Hong Kong ordered troubled China Evergrande Group to liquidate. Evergrande was once China’s largest property developer but has struggled with paying debts for the past couple of years due to overbuilding and subsequent weakness in China’s property market.
The Bank of England met and chose to leave its benchmark interest rate unchanged.
Treasury bond yields fell with the 30-year bond yield at 4.221% and the 10-Year note at 4.031%. Freddie Mac reported that the average 30-year mortgage rate fell to 6.63%. Crude oil fell to $72.14 a barrel and natural gas fell to $2.089 per MMBTUs. The U.S. dollar index rose to 103.91 and gold rose to $2053.40 an ounce.
- The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index rose 5.1% in November from a year ago, up from 4.7% year over year in October.
- S&P Global released its manufacturing purchasing manager’s indices for January. Keep in mind that anything over 50 represents expansion and anything under 50 represents contraction.
- U.S. manufacturing PMI rose from 47.9 to 50.7.
- China manufacturing PMI was unchanged at 50.8.
- Mexico manufacturing PMI fell from 52.0 to 50.2.
- Canada manufacturing PMI rose from 45.4 to 48.3.
- Japan manufacturing PMI rose from 47.9 to 48.0.
- Europe manufacturing PMI rose from 44.4 to 46.6.
- The Commerce Department reported factory orders rose 0.2% in December following a revised 2.6% in November.
- The Labor Department reported:
- The U.S. added 353,000 jobs in January and the unemployment rate remained at 3.7%.
- The labor force participation rate was unchanged at 62.5%.
- Average hourly earnings rose 0.6% in January and are up 4.5% from a year ago.
- Job openings, hires and total separations (including quits) changed little in December.
- Labor productivity rose 3.2% in the fourth quarter and 2.7% from a year ago. Productivity gains are important to support wage increases while lessening the effect on inflation. Also in the fourth quarter:
- Output increased 3.7%.
- Hours worked rose 0.4%.
- Unit labor costs rose 0.5%.
- Seasonally adjusted first-time claims for unemployment were 224,000 an increase from the previous week’s revised level of 215,000.
- The 4-week moving average of claims, designed to smooth out volatility, was 207,750, an increase of 5250 from the previous week’s revised level.
- For the full unemployment report go here: https://www.dol.gov/ui/data.pdf .
- The U.S. added 353,000 jobs in January and the unemployment rate remained at 3.7%.
- 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 oil rose from 12.3MM BPD to 13.0MM BPD.
- Natural gas storage fell 197BN cubic feet and was above the average during the past five years at this time of year.
- Baker Hughes reported the number of oil rigs was unchanged at 499 and the number of natural gas rigs fell 2 to 117.
- Factset reported with 72% of S&P 500 companies reporting 4th quarter earnings, the blended earnings increase was 1.6%.
Please call us if you have any questions.
Loren Rex – Emeritus
Erik A Smith, AIF® – President & C.E.O.
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. The Dow Jones Industrial Average, Dow Jones, or simply the Dow, is a stock market index of 30 prominent companies listed on stock exchanges in the United States. The DJIA is one of the oldest and most commonly followed equity indexes. The Nasdaq Composite is a stock market index that includes almost all stocks listed on the Nasdaq stock exchange (more than 2500 stocks).
Sources:
https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=WCRFPUS2&f=W
https://ir.eia.gov/ngs/ngs.html
https://www.freddiemac.com/pmms
https://www.wsj.com/market-data?mod=nav_top_subsection
https://bakerhughesrigcount.gcs-web.com/na-rig-count
https://www.census.gov/economic-indicators
