Market Summary
Positive U.S. economic reports this past week, including continued job market strength and lower than anticipated inflation growth, pushed the stock market to its best weekly gain since March. For the week, the S&P 500 advanced 2.4%, while the Dow and Nasdaq posted gains of 2.3% and 2.7%, respectively. The strongest sector performers within the S&P that supported the rally were energy, financials, technology, and industrials, which each rose over 3.0%. Energy’s leading performance was aided by the surge in crude oil prices to $71/barrel after Trump announced that the U.S. would pull out of the 2015 Iran nuclear deal and reintroduce sanctions on Iran, a major oil producer, thus potentially straining global oil supply. However, the U.S. has not imported any oil from Iran since 1992, so the direct impact on the domestic oil market may be limited.
As a whole, the stock market resurgence comes on the back of soft inflation data from last week’s producer and consumer price indices, reassuring investors that prices aren’t growing at a rate that will force the Fed’s hand in pursuing a more aggressive interest rate hike path. Jobs data also continued to trend positively, hitting a major milestone in the U.S. in which there is a job available for every citizen seeking employment.
The positive market sentiment has extended into this week’s early trading, as trade tensions eased slightly between the U.S. and China over the weekend. Trump extended an olive branch to struggling Chinese mobile phone manufacturer ZTE on Sunday, tweeting that he and President Xi are working to get the company back in business quickly, despite security concerns. ZTE had been in danger of failing due to a ban on buying U.S. components for its phones. For its part, China announced it had restarted its review of U.S. chipmaker Qualcomm’s purchase of NXP Semiconductor, which it had previously delayed as a result of trade tensions. Concessions from both sides may pave the way for more positive trade talks, as a Chinese delegation prepares to visit D.C. this week. The news came as the country reported trade figures for April. China's trade surplus with the U.S. expanded to $22.19B - compared with a surplus of $15.43B in March.
NAFTA renegotiation faces a hard deadline of May 17th in order to get a deal through Congress, with all sides scrambling to address controversial rules around automobile production. Additionally, other economic results due this week will provide some important insight on the state of retail and housing markets.
Economic Highlights
- Inflation: The US Consumer Price Index (CPI) and Producer Price Index (PPI) grew 2.1% and 2.6% year-over-year, respectively, per May’s reading, coming in below expectations of 2.5% and 2.8% year-over-year growth.
- Employment: Last Tuesday, the Labor Department reported 6.6 million openings, which is enough—for the first time in the history of the data—to provide a job to every unemployed job seeker in the country.
- Consumer Sentiment: May’s reading of the University of Michigan survey came in at 98.8, unchanged from the prior month reading and above consensus expectations of 98.0 for the month.
US Economy - The Week Ahead
Tuesday, 5/15/2018
Retail Sales (MoM) – Consensus Estimate: +0.3%, Prior Month: +0.6%
Wednesday, 5/16/2018
Housing Starts – Consensus Estimate: 1.325 Million (+1.9% MoM), Prior Month: 1.319 Million (+0.5% MoM)
US Industrial Production (MoM) – Consensus Estimate: +0.6%, Prior Month: +0.5%
Thursday, 5/17/2018
Initial Jobless Claims – Consensus Estimate: 215,000 (+1.9% WoW), Prior Week: 211,000 (0.0% WoW)
Leading Economic Index – Consensus Estimate: +0.4% MoM, Prior Month: +0.3% MoM
Friday, 5/18/2018
No Data
