Week of May 27 - 31, 2019

Maureen Kelliher, CFA

Maureen Kelliher, CFA

June 5, 2019

Weekly Economic Review

Weekly Macro Updates

Initial Jobless Claims (May 25) 214k est., 215k actual, 211k prior
Continuing Claims (May 18) 1662k est., 1657k actual, 1683k prior
Gross Domestic Product Annualized QoQ (1Q S) 3.0% est., 3.1% actual, 3.2% prior
Core PCE QoQ (1Q S) 1.3% est., 1.0% actual, 1.3% prior
PCE Core Deflator YoY (Apr) 1.6% est., 1.6% actual, 1.5% prior: R+
Wholesale Inventories MoM (Apr P) 0.1% est., 0.7% actual, 0.0% prior: R-
Pending Home Sales MoM (Apr) 0.5% est., -1.5% actual, 3.9% prior: R+
Pending Home Sale NSA YoY (Apr) 0.1% est., 0.4% actual, -3.1% prior: R+
Personal Income (Apr) -0.3% est., 0.5% actual, 0.1% prior
Real Personal Spending (Apr) 0.0% est., 0.0% actual, 0.9% prior: R+
ISM Manufacturing (May) 53.0 est., 52.1 actual, 52.8 prior
ISM New Orders (May) 52.7 actual, 51.7 prior
Construction Spending MoM (Apr) 0.4% est., 0.0% actual, 0.1% prior
Wards Total Vehicle Sales (May) 16.90m est.,17.30m actual, 16.40m prior

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

Capital Market Implications

Last week’s economic releases reinforced recent trends.  The labor markets remained healthy, but manufacturing due to slower global growth and trade war worries continued to struggle.  Although ISM manufacturing in May at 52.1 indicated the economy was still expanding, it was nevertheless a 31-month low in the index.  Additionally, ISM at this level is more consistent with GDP below 2.0% annualized, which suggests the economy has slowed significantly from the 3.1% pace we enjoyed earlier in the year.  Finally, the Federal Reserve’s preferred inflation gauge continued to moderate during the first quarter and the month of April and thus the inflation rate is unlikely to hit the Fed’s target of 2.0% anytime soon.

The outlook for capital markets darkened last week, when it became apparent the administration intended to use tariffs to force Mexico to assist with US immigration issues.  With the potential for trade wars on two fronts, stocks tanked on Friday and for the week.  As such, the Dow Jones Industrial Average plummeted -2.9% while the S&P 500 Index slumped -2.6%.  All sectors of the market declined last week with energy taking the hardest hit, off -4.4%.  Foreign markets fared better, as emerging markets rallied, up 1.2%, while developed international stocks declined less than -2.0%.  Investors continued to pile into bonds last week, which drove the yield on the 10-year Treasury below 2.2%.  For the week overall, the US Barclay’s Aggregate bond Index and corporate bonds rose 1.0% while 10-year municipals gained 0.4%. In sympathy with stocks, high yield bonds fell again and closed the week down -0.5%.