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Last week was a pretty robust week as the S&P 500 and the Dow were up. While the Ukraine situation influenced the markets, investors should also look at four reports from last week.
- Retail Sales
- Producer Price Index
- Industrial Production
- Housing starts
Retail sales, which measures half of consumer spending, was disappointing in January but revised up in April. This tells us that consumer spending is still on track and looking good for the second quarter.
The Producer Price Index, which measures how inflation is affecting corporations and how it is translated to the consumer, was up mostly in the energy sector. This tells us that manufacturing is pretty healthy.
We track the industrial production reports because it tells investors about trends in manufacturing and it is another gauge for inflation. This started off as a disappointment this year but was later revised up.
The trend in housing starts is beginning to slip a little. Investors should watch this because it affects other areas of the economy. For example, when houses start to sell, people need to buy other things to go in those houses.
Janet Yellen’s comments
Every thing Janet Yellen commented on last week was very expected. Although she made some comments about biotechnology stocks, it is common for biotech stocks to become pricey when there is quantitative easing. It is something we are watching closely but we don’t feel like investors need to be worried about it at this time.
How the Ukraine situation affected the markets
The Middle East events and the Ukraine situation impacted the markets last week. We saw the market react to the news and then automatically rebound. This is a sign of a healthy market. What investors and traders did is what is called, “buying the dips.” This is where they are waiting for the prices to go down and, seeing it as an opportunity, begin buying stocks which drive prices back up. This is not unusual and we believe it is somewhat healthy.
The Ukraine situation will dominate this week
This week is a little lighter in market data but still very important. The Consumer Price Index numbers will show if producers (See Producer Price Index above) will be able to transfer inflation to the consumer. If not, that will hurt their profits which affects corporate earnings. Corporate earnings help drive stock market valuations.
This week investors should watch the reports on new home sales, existing home sales, and durable goods because it gives us a feel for the trends in manufacturing. All this will be overshadowed this week by the Ukraine situation and investors need to keep an eye on how events unfolding there are affecting the markets.
Please send me your comments or questions and we will be happy to address those in our next video or directly with you.
fi-Plan Partners is an independent investment firm in Birmingham, AL, serving clients across the nation through financial planning, wealth management and business consulting. fi-Plan Partners creates strategies in the best interest of their clients using both fee based investing and transactional investing.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
The S&P 500 index is a measure of performance of the broad domestic economy through 500 stocks from major industries. The Dow Jones Industrial Average measures the average price of a group of 30 high value stocks.
Stock investing involves risk including potential loss of principal. Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price.