The U.S. stock market finished the week moderately higher as trade talk optimism sparked stocks higher later in the week.  Interest rates were virtually unchanged as the 10-year treasury yield dropped from 2.66% to 2.65%.  However, the spread between the 10-year treasury yield and the 2-year treasury yield narrowed by three basis points to 0.15%.  The price of gold increased 0.48% to $1,331 an ounce while the U.S. dollar index dropped from 96.92 to 96.55 amid U.S. and China trade talk optimism.  The price of crude oil continues to rise as it increased 2.4% to $57.17 a barrel amid global production cuts.

Index               Started Week         Ended Week         Change         Change %         YTD %
DJIA 25,764.0025,585.69-178.31-0.69%9.68%
Nasdaq 7,816.287,637.01-179.27-2.29%15.10%
S&P 500 2,859.532,826.06-33.47-1.17%12.73%
Russell 2000 1,535.761,514.11-21.65-1.41%12.28%

This Week’s Economic Highlights

  • The Federal Open Market Committee (FOMC) meeting minutes showed that officials were divided on future rate hikes at their January meeting.  Several officials disputed that further rate hikes may be needed if inflation increases higher than expected.  Other officials argued that rate hikes may be needed later in the year if the economy continues to grow as expected.  At this time, it is expected that the Fed will continue to hold off on rate hikes for the time being.  The Fed is expected to make two more rate hikes this year.
  • Initial unemployment claims fell a sharp 23,000 to 216,000 to a seasonally adjusted total of 216,000 for the week ending February 16th.  However, initial claims less the volatile four-week average rose 4,000 as initial claims are coming off one-year highs.
  • December durable goods orders, which were delayed due to the government shutdown, increased by 1.2% as automobiles and airplanes boosted it higher.  However, excluding transportation goods (which includes automobiles and airplanes) orders only increased 0.1%.  Transportation goods tend to exaggerate durable goods orders due to their inconsistent demand from month to month.
  • The Philadelphia Fed manufacturing index fell sharply below zero to -4.1 in February from 17 the month prior.  Any indication below zero indicates deteriorating manufacturing conditions.  Driving the index lower was a sharp drop in new orders and shipments.
  • January existing home sales decreased by 1.2% to a seasonally adjusted annual rate of 4.94 million, its lowest level in three years.  The median price of existing home sales is up 2.8% from a year ago at $247,500, its slowest pace in nearly seven years.

Quote

“Chains of habit are too light to be felt until they are too heavy to be broken.”

– Warrant Buffett

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