2018 Year End Economic Update

New York Stock Exchange
New York Stock Exchange
New York Stock Exchange

2.6 million new jobs were added in 2018 as unemployment dropped to a 40-year low – The Bureau of Labor Statistics reported that U.S. employers added 312,000 new
jobs in December. This shocked analysts that had forecasted 178,000 new jobs. 
There were 2.6 million jobs added in 2018, up from 2.2 million new jobs in 2017. The unemployment rate rose to 3.9% from 3.7% in November, a 40-year low, as 419,000 new workers entered the workforce. Optimism about finding an acceptable job and
higher wages were credited with expanding the workforce. Wages rose 3.2% from
one year earlier, matching October’s year over wage gains which marked the largest
year over year wage gain since April 2009. 

Stock markets ended the year lower in 2018 – After hitting all-time highs in
September, which marked the longest bull market in history, stocks took a downturn in the last quarter of the year. December marked the worst December drop since the Great Depression as fears of a trade war, political uncertainty, slowing economic activity overseas, and higher interest rates made investors more cautious. The Dow Jones Industrial Average ended 2018 at 23,327.46, down from 24,719.22 at the close of 2017.The S&P 500 closed the year at 2,506.85, down from 2,673.51 at the end of 2017. The NASDAQ closed at 6,635.28, down from 6,903.39 on December 31, 2017. 

U.S. Treasury Bond Yields higher in 2018 – The 10-year U.S. treasury bond closed the year at a 2.69% yield, up from 2.40% on December 31, 2017. The 30-year treasury yield ended the year at 3.02%, up from 2.74% on December 31, 2017.Mortgage Rates higher in 2018 – The December 28, 2017 Freddie Mac Primary Mortgage Survey  reported that the 30 year fixed mortgage rate average was 4.55%, up from 3.99% on December 29, 2017. The 30-year fixed rate was over 5% in October before
declining in November and December. The 15-year fixed was 4.01%, up from 3.44% . last December. The 5-year ARM was 4.00%, up from 3.55% at the close of 2017. Fortunately, rates dropped in the final quarter. The 30-year hit 5% in September. 

Year over year price gains moderated in 2018 after 7 years of price gains. For the first 7 months of the year we saw the same month year over year price increases of
6-8%, but by years end those prices were just 1.5% above the same month one year earlier – The California Association of Realtors reported that existing home sales 
totaled 372,260 in December on a seasonally adjusted annualized basis. That was 
down 11.6% from last December. It marked the fewest sales in a month since January 2015. The statewide median price was $557,600, up 1.4% from December 2017.
On a regional basis Los Angeles County’s median-price of $588,140 was up 1.8% 
from last December. Orange County had a median price of $785,000, down 0.1%
from December 2017. Ventura County’s median price of $640,000 was down 0.8% from last December. Inventory levels also continued to rise. Active listings have
increased 30% from 2017. The unsold inventory index hit record lows before moving up steadily in the last 9 months of 2018. There was a3.5-month supply of homes
listed in California, up from a 2.5-month supply in December 2017. It should be noted that a “normal market” has a six-month supply of homes listed, so inventory levels
which are well above the all-time lows of 2017 are still at low historical levels.
 Los Angeles County had a 3.5-month supply, up from a 2.4-month supply last
December. Orange County had a 4-month supply, down from 2.6 months last
December. Ventura County had a 5.5-month supply, up from a 4-month supply in
December 2017.

Stocks rise with climbing oil prices and weaker dollar

Mary Altaffer / Associated Press

Stocks are rising Wednesday morning as machinery and chemical companies get a boost from the weaker dollar. Energy companies are edging higher as the price of oil continues to rise. Payment terminal maker VeriFone is tumbling after cutting its expectations and saying it will eliminate jobs.

The Dow Jones industrial average edged up 45 points, or 0.3%, to 17,983 as of 10:20 a.m. EDT. The Standard & Poor’s 500 index rose 2 points, or 0.1%, to 2,114. The Nasdaq composite was flat at 4,962.

ENERGY: Benchmark U.S. crude climbed 71 cents, or 1.4%, to $51.07 per barrel in New York. Brent crude, used to price international oils, climbed 81 cents, or 1.6%, to $52.25 per barrel in London. Anadarko Petroleum advanced 55 cents, or 1%, to $55.77 and Marathon Oil rose 20 cents, or 1.4%, to $14.82.

U.S. crude has risen over the last few days as the dollar weakened. On Tuesday, U.S. crude closed at more than $50 a barrel for the first time since July.

CURRENCY: The dollar declined to 106.64 yen from 107.31 yen late Tuesday. The euro edged up to $1.1409 from $1.1361.

The dollar has lost some of its strength in the wake of Friday’s disappointing jobs report. That’s helped energy companies as well as mining companies and chemicals and machinery makers because a weaker dollar makes U.S. goods more affordable in other countries.

Machinery maker Caterpillar jumped $1.34, or 1.7%, to $78.15 and engine maker Cummins ticked up $2.09, or 1.8%, to $119.24. Gold and copper producer Freeport-McMoRan advanced 53 cents, or 4.7%, to $11.77, gold producer Newmont Mining climbed 92 cents, or 2.6%, to $35.87 and aluminum company Alcoa rose 19 cents, or 1.9%, to $9.98.

PLAY ON: Restaurant chain Dave & Buster’s climbed $3.53, or 8.4%, to $45.39 after the company reported strong first-quarter results and raised its outlook for the year.

PAY UP: VeriFone Systems, which makes terminals used for electronic payments, slashed its annual forecast after it reported disappointing quarterly results. The company said it will eliminate jobs and review some of its struggling businesses. The stock dived $8.25, or 29.2%, to $19.98.

OXFORD ROCKED: Oxford Industries, the owner of Tommy Bahama, Lilly Pulitzer and other clothing lines, slumped after its first-quarter results disappointed investors. The stock fell $3.92, or 6%, to $61.21.

OVERSEAS: Germany’s DAX was down 1% and France’s CAC-40 shed 0.8%. Britain’s FTSE 100 added 0.1%. Tokyo’s Nikkei 225 gained 0.9% and Seoul’s Kospi advanced 0.8%.

GLOBAL GROWTH: The World Bank cut its forecast for this year’s global economic growth to 2.4% from the 2.9% pace projected in January. It cited sluggish growth in advanced economies, stubbornly low commodity prices, weak global trade and diminishing capital flows. It said half the revision was prompted by the struggle of commodity-exporting economies to adapt to lower prices for oil and other key commodities.

BONDS: U.S. government bond prices rose. The yield on the 10-year U.S. Treasury note fell to 1.70% from 1.72%.

Article by Associated Press. 

Economic update for the week ending April 16, 2016


Stocks up for the week – Stocks rallied on better than expected Chinese trade data which indicated that the China’s economy may not be hitting the “hard landing” investors has feared.  At the same time U.S. manufacturing output unexpectedly dropped in March, as factory output dropped 0.3% in March. This held back the gains. The Dow Jones Industrial Average closed the week at 17,897.46, up from 17,576.96 last week. The S&P 500 closed the week at 2,080.73, up from 2,047.60 last week. The NASDAQ closed Friday at 4,938.72, up from 4,850.69 last week.

Bond yields lower for the week – The 10 year U.S. Treasury bond closed Friday yielding 1.76%, almost unchanged from 1.72% last week. The 30 year U.S. Treasury bond closed Friday yielding 2.56%, unchanged from 2.55% last week. Mortgage rates follow bond yields so we watch bonds carefully. 

Mortgage rates remain near three year low -The Freddie Mac Primary Mortgage Survey released on April 7, 2016 showed that average mortgage rates from lenders surveyed for the most popular products were as follows: The 30 year fixed average rate was 3.58%. The 15 year fixed average rate was 2.86%. The 5/1 ARM average rate was 2.84%.

Have. Great weekend!