Week of May 6 - 10, 2019

Maureen Kelliher, CFA

Maureen Kelliher, CFA

May 15, 2019

Weekly Economic Review

Weekly Macro Updates

Initial Jobless Claims (May 4) 220k est., 228k actual, 230k prior
Continuing Claims (Apr 27) 1670k est., 1684k actual, 1671k prior
JOLTS (Apr) 7350 est., 7488 actual, 7142 prior: R+
PPI Final Demand YoY (Apr) 2.3% est., 2.2% actual, 2.2% prior
PPI Ex Food & Energy YoY (Apr) 2.5% est., 2.4% actual, 2.4% prior
CPI YoY (Apr) 2.1% est., 2.0% actual, 1.9% prior
CPI Ex Food & Energy YoY (Apr) 2.1% est., 2.1% actual, 2.0% prior
Real Average Hourly Earnings YoY (Apr) 1.2% actual, 1.3% prior
Real Average Weekly Earnings YoY (Apr) 0.9% actual, 1.4% prior: R+
NFIB Small Business Optimism (Apr) 102.0 est., 103.5 actual, 101.8 prior
Import Price Index MoM (Apr) 0.7% est., 0.2% actual, 0.6% prior
Import Price Index YoY (Apr) 0.3% est., -0.2% actual, 0.1% prior: R+
Export Price Index MoM (Apr) 0.6% est., 0.2% actual, 0.6% prior: R-
Export Price Index YoY (Apr) 0.3% actual, 0.6% prior

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

Capital Market Implications

Major economic releases last week were dominated by inflation gauges.  Both headline and core consumer prices and producer prices for April were unchanged from the previous month and either below or in line with estimates.  So inflation both here and abroad continued to moderate last month.  Indeed, although popular measures of wage inflation have risen, real average hour earnings over the last year were up just 1.2% through April and that was below March’s level of 1.3%.  Of course, trade wars and tariffs are inherently inflationary and therefore, should the US – China trade issue escalate, the current moderating trend in inflation could reverse.

With the US claiming a bait and switch by the Chinese, the US-China trade talks ended without a resolution last week and thus the US slapped additional tariffs on Chinese goods.  As market participants had come to believe the trade talks would be fruitful, investors took the news badly and punished stocks throughout the week.  As such, the Dow Jones Industrial Average slumped -2.0% and the S&P 500 Index sank -2.1%.  Not surprisingly, the sectors most sensitive to trade were hit the hardest including technology, materials and industrials, which were off more than -2.5%. Foreign markets were not spared either, as developed foreign stocks fell -2.6% and emerging markets (including China) plunged -4.5%. Bonds often benefit when there is turmoil in the stock market and that was the case last week as bonds ended the week ahead.  The Barclays US Aggregate Bond Index, corporate bonds and 10-year municipal bonds all rallied last week while only high yield bonds, which have equity like characteristics, declined.