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05/09/2017
Market Update

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The Federal Reserve (Fed) left interest rates unchanged in May despite moderate economic expansion, citing weakened consumer spending and low unemployment. The central bank gave no indication on the timing of the next hike; two or three are expected before the end of the year.
This Week
  • The Federal Reserve (Fed) left interest rates unchanged in May despite moderate economic expansion, citing weakened consumer spending and low unemployment. The central bank gave no indication on the timing of the next hike; two or three are expected before the end of the year.
  • The U.S. economy added 211,000 jobs in April, exceeding the forecasted 185,000, led by business services. Unemployment declined by 0.1% to 4.4%, the lowest level since May 2001. Average hourly wages grew by a modest 0.3%, but were 2.5% higher compared to a year ago. The strong overall report increases the likelihood of an interest-rate hike at the next Fed meeting.
  • Initial jobless claims decreased by 19,000 to 238,000 in the week ending April 29. The four-week moving average (considered a more reliable gauge of unemployment) rose by 750 to 243,000. Continuing claims for the week ending April 22 declined by 23,000, while the four-week moving average of continuing claims fell by 18,000 to a 17-year low of 1.989 million,.
  • Personal incomes improved by 0.2% in March, while consumer spending was unchanged against expectations for a boost. Personal consumption expenditures―the Fed’s preferred inflation measure―fell below the central bank’s 2% target, to 1.8% year over year.
  • The Institute for Supply Management’s manufacturing purchasing managers’ index (PMI) expanded by less than expected in April, despite strength within new export orders and production. A similar report from Markit showed that manufacturing was solid but may be losing momentum, as new orders, production and purchasing activity all declined during the month.
  • Construction spending moved 0.2% lower in March, but was 3.6% higher year over year. Both the private non-residential and public components were surprisingly weak for the month, while private residential gained on continued demand for new housing.
  • Mortgage purchase applications increased by 4.0% in the week ending April 28, as home buyers returned to the market. Refinancing applications dropped by 5.0% in response to higher mortgage rates.
  • The trade deficit eased to $43.7 billion in March from a revised $43.8 billion in February. Imports contracted by 0.7% on diminished demand for capital goods; exports reduced by 0.9%, partly due to drops in industrial supplies, autos and consumer goods shipments.
  • The eurozone economy expanded by 0.5% in the first quarter, the fastest pace in a year, according to preliminary estimates.
  • Economic growth in China cooled during April, according to the PMI composite reading. Output and new-order growth slowed within the manufacturing sector, as did business activity and new orders in the services sector.
  • Japan’s PMI composite dipped in April from a 19-month high recorded in March; both manufacturing and service-sector activity nevertheless remained in expansion territory.

 

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