Stock indices ended another volatile week mixed with the small cap Russell 2000 gaining and all other major indices declining. The Nasdaq 100 index had the biggest losses. A continued increase of inflation in January caused some economists to increase their estimates for the size and speed of FED interest rate hikes.
Federal Reserve Bank of St. Louis President, James Bullard, said in an interview on Thursday that he favors a full percentage increase by July and to start shrinking the FEDs balance sheet in the second quarter.
The situation between Russia and Ukraine continues to deteriorate this week, despite diplomatic efforts.
Treasury yields rose with the 30-year bond yield at 2.236% and the 10-Year note at 1.921%. Crude oil rose to $93.91 a barrel and natural gas fell to $3.999 per MMBTUs. The U.S. dollar index rose to 96.01 and gold rose to $1865.10 an ounce.
In the economic numbers:
- The Commerce Department reported the U.S. trade deficit rose 1.8% in December and hit a record for calendar year 2021.
- The United Kingdom reported that its gross domestic product fell 0.2% in December mainly due to a 0.5% contraction in services from the Omicron variant. For the calendar year, the U.K. grew 7.5% in 2021, the highest since 1941. Still the U.K.’s GDP is below 2019 levels.
- The Treasury Department reported that in the month of January, the federal government had a surplus of $119 billion, the first monthly surplus since September, 2019. From a year earlier, revenue in January increased 21% due to employment and investment gains and spending fell 37% due to the winding down of pandemic relief. The monthly surplus/deficit numbers can swing greatly from one month to the next. Boosting the January revenue was the payment of quarterly estimated taxes.
- The Labor Department reported :
- The consumer-price index rose at a 7.5% annual rate in January, a 40 year high.
- Excluding volatile food and energy, prices rose 6.0%.
- Food prices rose at a 7% annual rate.
- Used car prices have risen 40.5% in January from a year ago on low new car production due to supply chain issues.
- Energy prices rose 27% over the past year.
- First time claims for unemployment were 223,000, down from the prior week’s revised 239,000.
- The 4-week moving average of claims, designed to smooth out volatility, fell to 253,250 down from the revised 251,250 in the prior week.
- Continuing claims were 1.621MM in the week ending January 29th .
- For the full unemployment report go here: https://www.dol.gov/ui/data.pdf .
- The consumer-price index rose at a 7.5% annual rate in January, a 40 year high.
- 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 11.5MM BPD to 11.6MM BPD.
- Natural gas storage fell 222BN cubic feet and is below the 5-year average at this time of year.
- Baker Hughes reported the number of active oil rigs rose 19 to 516. The number of active natural gas rigs was rose 2 to 118.
- Factset reported with 72% of S&P 500 companies reporting earnings, the blended earnings increase is 30.3% from a year ago.
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Loren C. Rex, CFP®, MA Erik A Smith, AIF®
Founder / Emeritus President & C.E.O.
269-441-4143 517-795-2025
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.
