Major U.S. stock indices ended the week lower, despite a strong Friday rally.  Developed international and emerging markets indices had slight gains for the week.  Driving the stock selloff were fears of an economic slowdown from a trade war as well as a possible government shutdown.  The markets rallied on Friday when it appeared a shutdown will likely be averted.  In economic news, both the consumer price index and the producer price index came in better than expected, although still above the FED’s target.  However, traders and consumers fear inflation will reignite due to tariffs.

We want to take a moment to address the recent market volatility.  Over the last couple of years, we have experienced lower volatility and although corporate earnings have been growing, the stock prices have been growing faster, which can sometimes create greater sensitivity to market influences.  Historically, the markets have averaged a 10% correction annually and a 25% bear market every four years.  That does not mean that these events are easily predictable or happen on a regular schedule.  However, the trajectory we were on, of stock prices continuing to go up much faster that corporate earnings was likely unsustainable.  Short-term market movements are often influenced by investor sentiment and reactions to external events.

If you have concerns about market conditions, your financial goals, or your risk tolerance, we encourage you to reach out. We’re happy to discuss your strategy and determine if any adjustments may be beneficial.

Treasury bond yields were mixed with the 30-year bond yield at 4.633% and the 10-Year note at 4.319%.  Freddie Mac reported that the average 30-year mortgage rate rose to 6.65%.  Crude oil rose to $67.53 a barrel and natural gas fell to $4.127 per MMBTUs.  The U.S. dollar index fell to 103.75 and gold rose to $2945.70 an ounce.

In economic reports last week:

• The Treasury Department reported that in the month of February:
  • Total receipts were $296BN and total outlays were $603BN for a deficit of $307Bn.
  • Since the beginning of the fiscal year in October, total receipts were $1.893TN, total outlays were $3.039TN for a deficit of $1.147TN.
• The Labor department reported for January:
  • Job openings rose 232,000 to 7.74MM up from a revised 7.51MM in December.
  • The number of job openings per unemployed person rose from 1.03 to 1.09.

• • The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.2 percent on a seasonally adjusted basis in February, after rising 0.5 percent in January.
    • From a year earlier the CPI rose 2.8%.
    • Excluding volatile food and energy, the CPI rose 3.1%, this is the FED’s preferred measure of inflation.

• • The producer price index was unchanged in February. 
    • Goods prices rose 0.3%.
    • Services prices fell 0.2%.
    • From a year earlier the PPI rose 3.2%.

                Source: U.S. Bureau of Labor Statistics

• • Seasonally adjusted first-time claims for unemployment were 220,000, a decrease of 2,000 from the previous week’s revised level.  
    • The 4-week moving average of claims, designed to smooth out volatility, was 226,000 an increase of 1500 from the previous week’s revised level.
    • For the full unemployment report go here:  https://www.dol.gov/ui/data.pdf .
• The EIA weekly oil report is here: Weekly Petroleum Status Report.  Also, the EIA reported in the prior week:
  • Field production of crude oil rose from 13.508MM BPD to 13.575MM BPD.
  • Natural gas storage fell 62BN cubic feet and was below its average level during the past five years at this time of year.
• Baker Hughes reported the number of oil rigs rose 1 to 487 and the number of natural gas rigs fell 1 to 100.

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

https://www.bls.gov/news.release/pdf/cpi.pdf

https://www.bls.gov/news.release/ppi.nr0.htm

https://www.fiscal.treasury.gov/reports-statements/mts/current.html