Weekly Economic Update 1/9/2017

RISING WAGES, MODERATE HIRING IN DECEMBER

The Department of Labor’s latest employment report shows the average hourly wage at $26.00 last month, up 2.9% in a year. That is the largest annualized wage increase seen since June 2009. Payrolls expanded by 156,000 additional hires in December, leaving total 2016 job growth at a 5-year low of 2.2 million. (This could be a sign of the labor market reaching full employment.) The headline jobless rate ticked up to 4.7%, while the U-6 rate encompassing the underemployed was at 9.2%.1    

MANUFACTURING ACTIVITY PICKED UP AS 2016 ENDED

Investors liked what they saw in the Institute for Supply Management’s December purchasing manager indices. ISM’s manufacturing PMI rose 1.5 points to 54.7, its best reading in two years. The Institute’s service sector PMI held steady at an impressive 57.2 last month.2,3   

FED OUTLOOK: CAUTIOUSLY OPTIMISTIC

Minutes from the December Federal Reserve policy meeting noted that Federal Open Market Committee members were reasonably confident about the economy for 2017, while citing some “uncertainty about the timing, size and composition” of future policy moves. In other words, the Fed may or may not ultimately follow through on its 2017 forecast of three interest rate hikes. FOMC members saw “only a modest risk” of a “sharp acceleration in prices” this year.4      

DOW ENDS WEEK AT 19,964

The blue chips hit an intraday high of 19,999.63 Friday on the way to a 1.02% weekly advance to 19,963.80. As the Dow flirted with history, the S&P 500 and Nasdaq made history, respectively closing at record peaks of 2,276.98 and 5,521.06. The S&P gained 1.70% for the week; the Nasdaq, 2.56%. Dropping 19.37% in five days, the CBOE VIX “fear index” finished the trading week at 11.32.5,6 

THIS WEEK: On Monday, Acuity Brands, Alcoa, and WD-40 report Q4 results. Nothing significant is scheduled on Tuesday. KB Home and SuperValu announce earnings Wednesday. Thursday, the latest initial jobless claims report appears, Federal Reserve chair Janet Yellen addresses teachers at a Washington, D.C. town hall meeting, and Delta Air Lines shares Q4 results. The week’s major news items all arrive Friday – investors will consider the December retail sales report from the Census Bureau, December’s Producer Price Index, the initial January University of Michigan consumer sentiment index, and earnings reports from Bank of America, BlackRock, JPMorgan Chase, PNC, and Wells Fargo.  

% CHANGE Y-T-D 1-YR CHG 5-YR AVG 10-YR AVG
DJIA +1.02 +18.08 +12.30 +6.10
NASDAQ +2.56 +14.17 +21.29 +12.68
S&P 500 +1.70 +14.41 +15.64 +6.15
REAL YIELD 1/6 RATE 1 YR AGO 5 YRS AGO 10 YRS AGO
10 YR TIPS 0.46% 0.65% -0.11% 2.38%

Sources: wsj.com, bigcharts.com, treasury.gov – 1/6/176,7,8,9

Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly. These returns do not include dividends. 10-year TIPS real yield = projected return at maturity given expected inflation.

WEEKLY QUOTE              

“One must know oneself, if this does not serve to discover truth, it at least serves as a rule of life and there is nothing better.”     

– Blaise Pascal          

WEEKLY TIP             

Child care costs for working parents can be steep. Fortunately, some employee benefit plans offer dependent care flexible spending accounts. Parents can pay for qualified child care expenses and get a tax break at the same time by using these FSAs, which can be funded with pre-tax dollars.      

WEEKLY RIDDLE            

It lacks fingers, yet it points. It lacks feet, yet it constantly runs. It lacks arms, yet it may periodically strike. What is it?  

Last week’s riddle:

Kylie tells her friend Danielle that she knows of a place where Valentine’s Day comes after the Fourth of July. Where is this place?     

Last week’s answer:

In the dictionary.

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Weekly Economic Update 1-9-2017

Securities and Advisory Services offered through Triad Advisors Member FINRA/SIPC.    

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. The information herein has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. Investments will fluctuate and when redeemed may be worth more or less than when originally invested. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All market indices discussed are unmanaged and are not illustrative of any particular investment. Indices do not incur management fees, costs and expenses, and cannot be invested into directly. All economic and performance data is historical and not indicative of future results. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The NASDAQ Composite Index is a market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Standard & Poor’s 500 (S&P 500) is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. NYSE Group, Inc. (NYSE:NYX) operates two securities exchanges: the New York Stock Exchange (the “NYSE”) and NYSE Arca (formerly known as the Archipelago Exchange, or ArcaEx®, and the Pacific Exchange). NYSE Group is a leading provider of securities listing, trading and market data products and services. The New York Mercantile Exchange, Inc. (NYMEX) is the world’s largest physical commodity futures exchange and the preeminent trading forum for energy and precious metals, with trading conducted through two divisions – the NYMEX Division, home to the energy, platinum, and palladium markets, and the COMEX Division, on which all other metals trade. Additional risks are associated with international investing, such as currency fluctuations, political and economic instability and differences in accounting standards. This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. MarketingPro, Inc. is not affiliated with any person or firm that may be providing this information to you. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional.

Citations.

1 – blogs.wsj.com/briefly/2017/01/06/december-jobs-report-the-numbers-3/ [1/6/17]

2 – tradingeconomics.com/united-states/business-confidence [1/4/17]

3 – tradingeconomics.com/united-states/non-manufacturing-pmi [1/5/17]

4 – nytimes.com/2017/01/04/business/economy/federal-reserve-minutes-interest-rates.html [1/4/17]

5 – cnbc.com/2017/01/06/us-markets.html [1/6/17]

6 – markets.wsj.com/us [1/6/17]

7 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=1%2F6%2F16&x=0&y=0 [1/6/17]

7 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=1%2F6%2F16&x=0&y=0 [1/6/17]

7 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=1%2F6%2F16&x=0&y=0 [1/6/17]

7 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=1%2F6%2F12&x=0&y=0 [1/6/17]

7 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=1%2F6%2F12&x=0&y=0 [1/6/17]

7 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=1%2F6%2F12&x=0&y=0 [1/6/17]

7 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=1%2F5%2F07&x=0&y=0 [1/6/17]

7 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=1%2F5%2F07&x=0&y=0 [1/6/17]

7 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=1%2F5%2F07&x=0&y=0 [1/6/17]

8 – treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyield [1/6/17]

9 – treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyieldAll [1/6/17]

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