Week of February 25 - March 1, 2019

Maureen Kelliher, CFA

Maureen Kelliher, CFA

March 5, 2019

Weekly Economic Review

Weekly Macro Updates

Initial Jobless Claims (Feb 23) 220k est., 225k actual, 217k prior
Continuing Claims (Feb 16) 1737k est., 1805k actual, 1726k prior
S&P CoreLogic CS 20-City Price YoY (Dec) 4.50% est., 4.18% actual, 4.58% prior: R-
Richmond Federal Reserve Manufacturing Index (Feb) 5 est., 16 actual, -0.2 prior
Chicago Purchasing Manager (Feb) 57.5 est., 64.7 actual, 56.7 prior
Kansas City Federal Reserve Manufacturing Activity (Feb) 6 est., 1 actual, 5 prior
Retail Inventories MoM (Dec) 0.2% est., 0.9% actual, -0.4% prior
Factory Orders Ex Transportation (Dec) -0.6% actual, -1.3% prior: R+
Pending Homes Sales MoM (Jan) 1.0% est., 4.6% actual, -2.3% prior
GDP Annualized QoQ (4Q A) 2.2% est., 2.6% actual, 3.4% prior
Personal Consumption (4Q A) 3.0% est., 2.8% actual, 3.5% prior
PCE Core YoY (Dec) 1.9% est., 1.9% actual, 1.9% prior
Personal Income (Jan) 0.3% est., -0.1% actual, 1.0% prior
Real Personal Spending (Dec) -0.3% est., 0.6% actual, 0.5% prior: R+

 Strong or Improving
 Inconclusive or lacking trend
 Weak or declining
R+ Revised up
R- Revised down

Capital Market Implications

The government released its “initial” report for gross domestic product in the fourth quarter last week and it was better than expected.  The economy increased 2.6% during the quarter, which was slower than the prior quarter’s 3.4%, but sufficient to propel growth in 2018 above 3.0% for the first time since 2005.  During the quarter, consumption held up well at 2.8% while business investment and exports also contributed to growth.  In addition to GDP last week, there were several releases that painted a more sanguine picture of the economy.  They included pending home sales in January which surged 4.6% and regional manufacturing indexes which were positive.

Last week, as U.S./China trade negotiations appeared to play out as expected (i.e., tariffs are resolved for now while disputes over property rights linger), markets didn’t react to the news and ended the week relatively unchanged.  Week over week, the Dow Jones Industrial Average ended flat while the S&P 500 Index gained 0.5%.  Energy, technology and financial stocks did well, up about 1.0%, but they were offset by poor performances from staple, consumer discretionary and health care companies.  It was a mixed bag in the foreign markets as well, as developed countries increased 0.6% but emerging markets fell -0.7%.  Boosted by faster than expected economic growth in the U.S., interest rates headed higher last week.  The 10-year Treasury note’s yield climbed to 2.8%, close to its highest level of the year.  Rising rates put pressure on bond prices therefore the Barclays U.S. Aggregate Index sank -0.4% for the week and U.S. corporate bonds fell -0.3%.  Due to SALT, there has been strong demand for municipal bonds so they held up well while high yield bonds were the week’s only gainers, increasing 0.5%.