Market Commentary - Week ending June 1st

U.S. stocks finished the week modestly higher after recovering from a sell-off early in the week that was triggered by worries about Italy and the stability of the Eurozone. 

U.S. Markets:   The Dow Jones Industrial Average finished the week down 117 points closing at 24,635, a loss of -0.5%.  The technology-heavy NASDAQ Composite, however, followed last week’s 1% gain with a further 1.6%.  Smaller cap stocks outperformed large caps as the small cap Russell 2000 and mid cap S&P 400 gained 1.3% and 0.6%, respectively, while the large cap S&P 500 rose a lesser but still respectable 0.5%. 

International Markets:  Canada’s TSX finished down for a second week, falling -0.2%.  In Europe, the United Kingdom’s FTSE was off -0.4%, while on Europe’s mainland France’s CAC 40 retreated -1.4%, Germany’s DAX fell ‑1.7%, and Italy’s Milan FTSE ended down -1.3%.  In Asia, China’s Shanghai Composite retreated a second week falling -2.1%, while Japan’s Nikkei ended down -1.2%.  As grouped by Morgan Stanley Capital International, developed markets finished the week down -0.3%, while emerging markets were off -0.2%.

Commodities:  Precious metals were mixed following last week’s gains.  Gold fell -0.9% on the week while the often-more-volatile Silver rose 0.1%.  Energy retreated for a second consecutive week giving up most of its recent gains as West Texas Intermediate crude oil fell -3.2% to $65.71 per barrel.  The industrial metal copper, viewed by some analysts as a barometer of world economic health due its variety of industrial uses, rose 0.5%.

 

Indices-23

May Summary:  May was a strong month for U.S. markets, with the Dow Jones Industrial Average adding 1.1% and the Nasdaq Composite surging 5.3%.  By market cap, the large cap S&P 500 added 2.2%, the mid cap S&P 400 rose 4.0%, and the small cap Russell 2000 vaulted 5.9%.  Canada’s TSX rose 2.9%, while in Europe the UK’s FTSE added 2.2%.  Major markets on Europe’s mainland finished the month lower with France’s CAC 40 down -2.2%, Germany’s DAX off -0.1%, and Italy’s Milan FTSE plunging -9.2%.  In Asia, China’s Shanghai Composite added 0.4% while Japan’s Nikkei retreated -1.2%.  For the month, developed markets retreated -1.9%, and emerging markets fell -2.6%.  Gold fell for a second consecutive month by slipping -1.6%, while silver managed a gain of 0.3%.  Crude oil finished the month down -2.1%, and copper finished May off -0.3%.

U.S. Economic News:  The number of people seeking new unemployment benefits dropped last week as the recent upturn in jobless claims ceased and layoffs remain at historic low levels.  The Labor Department reported initial jobless claims fell by 13,000 to 221,000, below expectations of a 225,000 reading.  The less-volatile monthly average of new claims rose slightly to 222,250.  Layoffs remain near a 50-year low, and there’s no indication that they will reverse anytime soon.  Economists estimate that jobless claims are likely to remain around the 220,000-level for the foreseeable future.  The U.S. labor market continues to get stronger with unemployment below 4% for the first time since 2000 and job openings at a record high.  Continuing claims, which counts the number of people already receiving unemployment benefits also dropped by 16,000 to 1.73 million. 

Non farm payrolls in the United States increased by 223 thousand in May of 2018, following a downwardly revised 159 thousand in April and well above market expectations of 189 thousand. Employment continued to trend up in several industries, including retail trade, health care, and construction.

 

The upward trajectory of home prices showed no signs of slowing down, according to the latest reading from the S&P/Case-Shiller national home price index.  The Case-Shiller home price index rose a seasonally-adjusted 0.4% in March and was up 6.5% compared to the same time a year ago.  The more narrowly focused 20-city index was up a seasonally-adjusted 0.5% and was 6.8% higher than the same time last year.  Demand continues to be strong as supply is short and favorable economic conditions continue to make conditions in which bidders drive prices up.  Of note, year-over-year gains in the 20-city index have been up every month since last June.  In addition, the annual gain in the March report was the strongest since mid-2014.  Home prices in Seattle continued to lead the way with a 13% increase over a year ago, followed by Las Vegas at 12.4% and San Francisco at 11.3%.

 

Our Short Term Indicator remains Bullish. Guages_1.3-02

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