Weekly Economic Update 5/31/2016

TWO HOUSING INDICATORS HIT MULTIYEAR HIGHS

While monthly real estate indicators are often later revised, the latest numbers for new home buying and pending home sales are impressive, indeed. The Census Bureau reported a 16.6% jump in new home sales in April, putting them at an 8-year peak. Housing contract activity surged 5.1% last month, according to the National Association of Realtors, reaching a level unseen since February 2006. The Wall Street Journal had forecast just an 0.7% April gain for the NAR’s pending home sales index.1

Q1 GDP REVISED UP; DURABLE GOODS ORDERS UP 3.4%

How much did the economy grow in the first quarter? In the second estimate of the Bureau of Economic Analysis, 0.8%. (The BEA originally estimated 0.5% growth.) Minus transportation orders, the Department of Commerce still found hard goods orders advancing 0.4% in April.2

HOUSEHOLD SENTIMENT INDEX RISES IN MAY

The University of Michigan’s consumer sentiment index lost 1.1 points from its preliminary May reading to post a final May mark of 94.7. Still, that was far better than its final April reading of 89.0.2,3

BULLS RUN FREELY

Federal Reserve Chair Janet Yellen’s Friday remark that an interest rate hike could be appropriate in the coming months took very little momentum out of the market last week. From May 23-27, the Dow rose 2.13% to 17,873.22; the S&P 500, 2.28% to 2,099.06; and the Nasdaq, 3.44% to 4,933.50 (the Nasdaq had its best week in more than three months). Oil ended the trading week at $49.33; gold, at $1,216.70.3

THIS WEEK: Monday is Memorial Day, so U.S. financial markets will be closed. Tuesday offers the April personal spending report, the April core PCE price index, the March S&P/Case-Shiller home price index, and earnings from TiVo. On Wednesday, the latest manufacturing PMIs from China and the European Union appear, plus the May manufacturing PMI from the Institute for Supply Management and a new Beige Book from the Federal Reserve; earnings news will come from Cracker Barrel, Land’s End, and Michael Kors. Earnings from Broadcom, Five Below, Hovnanian, and Navistar are out Thursday, plus a new initial claims report. In addition to the Department of Labor’s May employment report, Friday also presents the May ISM service sector PMI, the May factory orders report and earnings from Sears Hometown.

% CHANGE Y-T-D 1-YR CHG 5-YR AVG 10-YR AVG
DJIA +2.57 -1.60 +8.73 +5.85
NASDAQ -1.48 -3.39 +15.28 +12.32
S&P 500 +2.70 -1.15 +11.54 +6.40
REAL YIELD 5/27 RATE 1 YR AGO 5 YRS AGO 10 YRS AGO
10 YR TIPS 0.27% 0.34% 0.79% 2.44%

Sources: wsj.com, bigcharts.com, treasury.gov – 5/27/164,5,6,7

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

“The foolish man seeks happiness in the distance, the wise man grows it under his feet.”

– James Oppenheim

WEEKLY TIP

In your fifties, make sure to check up on your retirement goals. Does it appear you have viable financial paths to achieve them? Test out different financial scenarios (with professional input) to see if your retirement strategy may need adjusting.

WEEKLY RIDDLE

I descend softly, fade away gently, change the color of the ground, but I never go up the way I come down. What am I?

Last week’s riddle:

It is a word in the English language, written using only two letters of the alphabet. You can say this word merely by using one letter of the alphabet, and that letter is a vowel. What word is this?

Last week’s answer:

Eye.

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This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. 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. 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 indices are unmanaged and are not illustrative of any particular investment. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The NASDAQ Composite Index is an unmanaged, 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 an unmanaged group of securities considered to be representative of the stock market in general. It is not possible to invest directly in an index. 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. Past performance is no guarantee of future results. Investments will fluctuate and when redeemed may be worth more or less than when originally invested. All economic and performance data is historical and not indicative of future results. Market indices discussed are unmanaged. Investors cannot invest in unmanaged indices. 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 – constructiondive.com/news/pending-home-sales-wallop-expectations-climb-to-10-year-high/419905/ [5/26/16]

2 – investing.com/economic-calendar/ [5/27/16]

3 – cnbc.com/2016/05/27/us-markets.html [5/27/16]

4 – markets.wsj.com/us [5/27/16]

5 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=5%2F27%2F15&x=0&y=0 [5/27/16]

5 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=5%2F27%2F15&x=0&y=0 [5/27/16]

5 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=5%2F27%2F15&x=0&y=0 [5/27/16]

5 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=5%2F27%2F11&x=0&y=0 [5/27/16]

5 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=5%2F27%2F11&x=0&y=0 [5/27/16]

5 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=5%2F27%2F11&x=0&y=0 [5/27/16]

5 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=5%2F26%2F06&x=0&y=0 [5/27/16]

5 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=5%2F26%2F06&x=0&y=0 [5/27/16]

5 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=5%2F26%2F06&x=0&y=0 [5/27/16]

6 – treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyield [5/27/16]

7 – treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyieldAll [5/27/16]

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