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U.S. Market Weekly Summary – Week Ending 02.15.2019

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The Standard & Poor’s 500 index rose 2.5% this week in a broad advance led by the energy and industrial sectors as investors were encouraged by signs of easing trade tensions between the US and China.

The market benchmark ended the week at 2,775.60, up from last week’s closing level of 2,707.88. The climb came as the US and China appeared to be moving closer to a trade agreement, agreeing to more talks next week in Washington following a week of talks in Beijing.

The energy sector had the largest percentage increase of the week, up 4.8%, followed by the industrial sector, up 3.5%. Materials and health care were also up by more than 3%. Just one sector ended the week in the red versus last Friday’s close: utilities, down 0.2%.

The jump in energy shares came as crude-oil futures were boosted not only by the hopes for improving trade relations with China but also amid an Energy Information Administration report showing total US oil imports fell to 6.2 million barrels a day last week, down by nearly 1 million barrels a day versus the week before. Investors took the report as a sign the Organization of the Petroleum Exporting Countries cutting production is following through on the pledge it made in late 2018 to cut production.

Among the energy sector’s gainers, shares of Exxon Mobil (XOM) rose 5.0% this week as Macquarie upgraded its outlook on the oil company, citing its scale in the Permian, its larger Guyana opportunities and its expansion in natural gas.

In the industrial sector, gainers included Union Pacific (UNP), whose shares jumped 5.3% this week as a Stifel analyst said after a meeting with Rob Knight, the rail company’s chief financial officer, that its volumes are up so far in Q1 amid increases in shipments of industrial and premium goods.

In the utilities sector, which tends to move in the opposite direction as energy, decliners included Duke Energy (DUK), whose shares fell 3.1% this week amid the company’s report of weaker-than-expected Q4 adjusted earnings per share despite higher-than-expected revenue.

CONSUMER PRICE INDEX –JANUARY 2019

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The Consumer Price Index for All Urban Consumers (CPI-U) was unchanged in January on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported.  Over the last 12 months, the all items index increased 1.6 percent before seasonal adjustment.

The energy index declined for the third consecutive month, offsetting increases in the indexes for all items less food and energy and for food. All the major energy component indexes declined in January, with the gasoline index falling 5.5 percent. The food index increased 0.2 percent, with the index for food at home rising 0.1 percent and the food away from home index increasing 0.3 percent.

The index for all items less food and energy increased 0.2 percent in January for the fourth consecutive month. The indexes for shelter, apparel, medical care, recreation, and household furnishings and operations were among the indexes that rose in January, while the indexes for airline fares and for motor vehicle insurance declined. 

The all items index increased 1.6 percent for the 12 months ending January, the smallest increase since the period ending June 2017. The index for all items less food and energy rose 2.2 percent over the last 12 months, the same increase as the 12 months ending November and December 2018. The food index rose 1.6 percent over the past year, while the energy index declined 4.8 percent.

PRODUCER PRICE INDEXES - JANUARY 2019

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The Producer Price Index for final demand edged down 0.1 percent in January, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Final demand prices also fell 0.1 percent in December and inched up 0.1 percent in November. (See table A.) On an unadjusted basis, the final demand index advanced 2.0 percent for the 12 months ended in January.

In January, the decline in the final demand index can be traced to a 0.8-percent decrease in prices for final demand goods. In contrast, the index for final demand services increased 0.3 percent.

The index for final demand less foods, energy, and trade services rose 0.2 percent in January following no change in December. For the 12 months ended in January, prices for final demand less foods, energy, and trade services moved up 2.5 percent.


Final Demand

Final demand goods: The index for final demand goods fell 0.8 percent in January, the largest decrease since dropping 1.2 percent in September 2015. Over three-quarters of the January decline can be traced to prices for final demand energy, which moved down 3.8 percent. The index for final demand foods fell 1.7 percent. Conversely, prices for final demand goods less foods and energy climbed 0.3 percent.

Product detail: Forty percent of the decrease in the index for final demand goods is attributable to a 7.3-percent decline in gasoline prices. The indexes for fresh and dry vegetables, diesel fuel, fresh fruits and melons, basic organic chemicals, and jet fuel also moved lower. In contrast, prices for construction machinery and equipment rose 1.7 percent. The indexes for processed poultry and residential electric power also increased.

Final demand services: The index for final demand services advanced 0.3 percent in January following no change in December. Over 80 percent of the rise can be traced to margins for final demand trade services, which increased 0.8 percent. (Trade indexes measure changes in margins received by wholesalers and retailers.) Prices for final demand transportation and warehousing services climbed 0.5 percent. The index for final demand services less trade, transportation, and warehousing was unchanged. 

Product detail: Half of the advance in prices for final demand services is attributable to margins for apparel, jewelry, footwear, and accessories retailing, which rose 6.3 percent. The indexes for health, beauty, and optical goods retailing; machinery, equipment, parts, and supplies wholesaling; chemicals and allied products wholesaling; hospital inpatient care; and transportation of passengers (partial) also moved higher. Conversely, prices for portfolio management fell 5.2 percent. The indexes for automotive fuels and lubricants retailing and for physician care also decreased.

REAL EARNINGS–JANUARY 2019

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All employees

Real average hourly earnings for all employees increased 0.2 percent from December to January, seasonally adjusted, the U.S. Bureau of Labor Statistics reported. This result stems from a 0.1-percent increase in average hourly earnings combined with no change in the Consumer Price Index for All Urban Consumers (CPI-U).

Real average weekly earnings increased 0.1 percent over the month due to the change in real average hourly earnings combined with no change in the average workweek. 

Real average hourly earnings increased 1.7 percent, seasonally adjusted, from January 2018 to January 2019. The change in real average hourly earnings combined with a 0.3-percent increase in the average workweek resulted in a 1.9-percent increase in real average weekly earnings over this period.


Production and nonsupervisory employees

Real average hourly earnings for production and nonsupervisory employees increased 0.2 percent from December to January, seasonally adjusted. This result stems from a 0.1-percent increase in average hourly earnings combined with a 0.1-percent decrease in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).

Real average weekly earnings increased 0.2 percent over the month due to the change in real average hourly earnings combined with no change in average weekly hours.

From January 2018 to January 2019, real average hourly earnings increased 2.1 percent, seasonally adjusted. Combining the change in real average hourly earnings with a 0.3-percent increase in the average workweek resulted in a 2.4-percent increase in real average weekly earnings over this period.

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