Major stock indices ended the week substantially lower on inflation fears as consumer spending and the personal consumption expenditures price index rose sharply in January.

Treasury bond yields rose with the 30-year bond ending at 3.934% and the 10-Year note at 3.945%.  30-year mortgage rates rose to 6.5%.  Crude oil rose to $76.58 a barrel and natural gas rose to $2.504 per MMBTUs.  The U.S. dollar index rose to 105.25 and gold fell to $1818.60 an ounce.

• Japan reported consumer inflation of 4.0% in January from a year earlier.
  • Excluding volatile food prices were up 4.2%.
  • Japan has maintained short term interest rates near zero despite rising inflation.
• The National Association of Realtors reported that existing home sales fell 0.7% in January and were down 39.6% from a year ago.
  • January was the slowest month for existing home sales since October 2010.
  • The median price of an existing home sale was $359,000, up 1.3% from a year earlier but down sharply from the peak of $413,800 in June.
• The Commerce Department reported:
  • 4^th Quarter gross domestic product was revised down from 2.9% to 2.7%, lower than 3.2% in the third quarter.
  • Personal consumption expenditures rose 1.8% in January following modest declines in November and December.
  • Personal incomes rose 0.6% in January.
  • Personal consumption expenditure prices, the FED’s preferred measure of inflation, rose 0.6% in January and 5.4% from a year earlier.
    • This was up from 0.2% in December and 5.3% year over year.
    • Excluding volatile food and energy, core prices, also rose 0.6% and were up 4.7% from last January.  This was up from 0.2% in December and 4.6% from last December.
  • New home sales were 7.2% above December’s rate.
    • The median sale price of a new home was $427,500.
• The Labor Department reported:
  • Seasonally adjusted first-time claims for unemployment were 192,000 down from a revised 195,000 in the prior week.

• • • The 4-week moving average of claims, designed to smooth out volatility, was 191,250 up from a revised 189,750 in the prior week.
    • For the full unemployment report go here:  https://www.dol.gov/ui/data.pdf .
• 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 was unchanged at 12.3MM BPD.
  • Natural gas storage fell 71BN cubic feet and is above the 5-year average at this time of year.
• Baker Hughes reported the number of active oil rigs fell 7 to 600.  The number of active natural gas rigs was unchanged at 151.
• Factset reported, with 94% of S&P500 companies reporting, that the blended Q4 earnings decline was 4.8%.

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Loren C. Rex, CFP^®, MA                                                                     Erik A Smith, AIF®

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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.