Weekly Economic Update
June 18, 2018
FED, NEW TARIFFS GET WALL STREET’S ATTENTION
As expected, the Federal Reserve adjusted the target range on the federal funds rate to 1.75%-2.00% on Wednesday. The central bank’s latest dot-plot projection, however, raised some eyebrows: it showed four interest rate increases planned for 2018 instead of three. The median forecast of Fed officials puts the benchmark interest rate at 2.4% at the end of this year, on the way to a peak of 3.4% in 2020. Friday morning, the Trump administration announced new 25% tariffs on at least $34 billion of Chinese imports. Hours later, China retaliated, declaring that it would levy 25% import taxes on a minimum of $34 billion of goods from America. The U.S. and China both plan to implement their new tariffs on July 6. 1,2
YEARLY INFLATION REACHES 2.8%
The latest Consumer Price Index shows the highest 12-month inflation reading in six years; the core CPI (which leaves out food and fuel costs) rose 2.2% in the year ending in May. Both the headline and core CPI were up 0.2% last month. Wholesale inflation, as measured by the Producer Price Index, increased 0.5% in May. 3,4
AN IMPRESSIVE ADVANCE FOR RETAIL SALES
According to the Department of Commerce, the May gain was 0.8% (0.9% with car and truck buying factored out). This follows an April improvement of 0.4% (revised up from 0.3%). 4
A MIXED WEEK FOR THE MAJOR INDICES
Once again, the Nasdaq Composite outran the Dow Jones Industrial Average and S&P 500. Last week, the tech benchmark added 1.32% to settle at 7,746.38 at Friday’s closing bell. The S&P 500 ended up flat for the week (+0.01%) at 2,779.42. At Friday’s close, the Dow Jones Industrial Average had slipped 0.89% in five days to 25,090.48. 5
THIS WEEK : Nothing major is slated for Monday. Wall Street considers earnings from FedEx, La-Z-Boy, and Oracle on Tuesday, along with the latest Census Bureau snapshot of housing construction activity. Federal Reserve Chairman Jerome Powell discusses monetary policy at a European Central Bank forum on Wednesday morning; investors will also eye earnings from Micron Technology, Steelcase, and Winnebago, and a National Association of Realtors report on existing home sales. Thursday, the Conference Board issues its May leading indicators index, a new initial jobless claims report arrives, and Barnes & Noble, Darden Restaurants, Kroger, and Red Hat present earnings. Friday, Blackberry, and CarMax offer Q1 results.
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