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Rising oil prices and falling anxiety over the prospect of an increase in the Federal Funds rate sparked a late-month turnaround in market sentiment, leading the major indices to overcome earlier-month losses.
For the month, the Dow Jones Industrial Average inched 0.08 percent higher, while the Standard & Poor's 500 Index rose 1.53 percent and the NASDAQ Composite gained 3.62 percent.1
Stocks began the month in retreat as domestic economic numbers and corporate earnings disappointed, while slow global growth cast a pall over overseas equity markets. Stocks continued to edge lower in the face of falling oil prices and a Fed warning that it could hike interest rates as early as June.
As month-end approached, however, markets reversed direction and surged amid generally positive economic reports, rising oil prices-which broke the $50 per barrel mark-and investors' reconsideration of the potential impact of higher rates.
The performance of S&P 500 sectors was mixed. Sectors that turned in a positive performance included Consumer Staples (+1.22 percent), Financials (+0.51 percent), Technology (+2.46 percent) and Utilities (+1.31 percent). Consumer Discretionary (-0.43 percent), Energy (-2.19 percent), Health Care (-0.08 percent), Industrials (-1.95 percent) and Materials (-1.38 percent) each lost ground in May.2
Overseas markets were mixed in May, leaving the MSCI-EAFE Index with a loss of 1.44 percent for the month.3
Continuing concerns about the health of China's economy, the overhang of Britain's possible exit from the EU and volatility in the Japanese yen influenced trading in the European markets.4
Japan's tepid economic growth, along with the questions surrounding China's growth were the main drivers of trading in the Pacific region. Australia and Japan notched solid gains, while Hong Kong closed lower.5
Gross Domestic Product: GDP growth was revised upward, from 0.5 percent to 0.8 percent. While the economic slowdown was less than originally estimated, GDP growth in the first quarter, nevertheless, reflected a weak start to the 2016.6
Employment: Nonfarm payrolls posted their weakest performance since September, increasing by just 160,000 jobs. The unemployment rate remained at 5.0 percent. While the labor market slowed, wage growth accelerated, rising 0.3 percent. Wages advanced 2.5 percent in the last 12 months—a rate above the roughly 2.0 percent annual growth since 2010.7
Retail Sales: Sales surged in April, rising 1.3 percent-the largest gain in a year. The jump in consumer spending was primarily seen in autos, gasoline stations and online shopping.8
Industrial Production: Output by U.S. industries jumped by 0.7 percent, the fastest pace in more than a year. Higher demand for electricity and natural gas, along with demand for goods spurred factories to increase production.<9
Housing: After getting off to a slow start in the first quarter, housing starts increased by 6.6 percent, propelled by construction in the Midwest and multifamily construction.10
Sales of existing homes rose for the second straight month, climbing 1.7 percent. The increase was the highest level since January, though affordability remains a hurdle as the median sales price jumped 6.3 percent to $232,500-the 50th-straight month of year-over-year gains.11
New home sales posted the sharpest increase in eight years, soaring 16.6 percent from the prior month.12
CPI: Consumer prices leaped by 0.4 percent, reaching a level not seen in more than three years. Core inflation (i.e., excluding the more volatile food and energy categories) was 2.1 percent higher over a year earlier. This was the fifth consecutive month of annual growth above 2 percent, making it the longest such streak in four years.13
Durable Goods Orders: Propelled by a surge in civilian aircraft orders, orders for durable goods posted a 3.4 percent increase. Excluding transportation, new orders eked out a small gain of just 0.4 percent, as nondefense capital goods (excluding aircraft), a key measure of business investment, declined 0.8 percent.14
In an attempt to send a message to the markets, minutes from the April meeting of the Federal Reserve Open Market Committee indicated that an interest rate increase in June may be possible if the data continued to point to a strengthening economy. The Fed did, however, leave itself the flexibility to delay any rate hike.15
While the markets will be watching closely to see if the Fed raises rates in June, investors may also want to cast an eye across the pond as Britain votes in a referendum on June 23 to decide whether the country should remain in the European Union.
Big business in Britain is generally in favor of staying in the EU because it makes it easier to move money, people and products across borders. Any vote to leave is expected by many to have significant economic, social and political impact on Britain and across the European continent.
For investors, the impact is unclear. Markets tend to price in the anticipation of events, so a vote to leave the EU may already be at least partially priced into British stocks and the pound sterling.
The pound sterling steadily declined against the euro in 2016 on fears of what an exit from the EU might mean, though it has recovered some lost ground since April as hopes grew that the vote to remain in the EU might prevail.
Meanwhile, the U.K. stock market is essentially flat on the year. A withdrawal from the EU could benefit Britain's stock market if the pound moves lower since a falling currency will make British products more competitive and overseas earnings more valuable when converted to a weaker pound. Having said that, increased political uncertainty could weigh down equities over the longer term.
Total number of dads in the U.S.: 70 million16
Number of stay-at-home dads: 211,00016
Percent of fathers who say they have fewer than 5 hours a week to themselves: 31%17
Where dads go to treat themselves: Movie or nice dinner 51%17
Annual total spent on Father's Day gifts: $12.7 billion18
Average amount spent per Dad: $9119
Percent of Americans who plan to celebrate Father's Day: 75%18
What Dad wants most: Time with family17
What Dad wants second most: Gift cards17
Father's Day gift most often given: An experience (such as tickets to a ballgame) (43%)18
Gift given second most often: Clothing (40%)18
Most expensive necktie on Amazon: $32,47020
Cheapest necktie on Amazon: $0.0120
Number of men's clothing stores in the U.S.: 7,15716
Number of hardware stores: 15,25316
Number of electronics stores: 38,90016
Percent of fathers who say they spend more time with their kids than their parents spent with them: 46%21
Percent of fathers who say Father's Day improved their relationship with their child: 71%19
Percent of Americans who, if they had to choose a TV dad for their father, would choose "Full House's" Jesse Katsopolis: 20%17
Percent of Americans who would choose "Modern Family's" Phil Dunphy: 13%17
The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite, LLC, is not affiliated with the named representative, broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security.
Investing involves risks, and investment decisions should be based on your own goals, time horizon and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost.
Any companies mentioned are for illustrative purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Any investment should be consistent with your objectives, time frame and risk tolerance.
The forecasts or forward-looking statements are based on assumptions, may not materialize and are subject to revision without notice.
The market indexes discussed are unmanaged and generally considered representative of their respective markets. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results.
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Copyright 2016 FMG Suite.
1. The Wall Street Journal, May 31, 2016
2. Interactive Data Managed Solutions, May 31, 2016
3. MSCI.com, May 31, 2016
4. MSCI.com, May 31, 2016
5. MSCI.com, May 31, 2016
6. The Wall Street Journal, May 27, 2016
7. The Wall Street Journal, May 6, 2016
8. The Wall Street Journal, May 13, 2016
9. The Wall Street Journal, May 17, 2016
10. The Wall Street Journal, May 17, 2016
11. The Wall Street Journal, May 20, 2016
12. The Wall Street Journal, May 24, 2016
13. The Wall Street Journal, May 17, 2016
14. The Wall Street Journal, May 26, 2016
15. The Wall Street Journal, May 18, 2016
16. U.S. Census Bureau, June 12, 2015
17. PRNewswire.com, June 9, 2015
18. National Retail Federation, June 8, 2015
19. StatisticBrain.com, March 18, 2015
20. Amazon.com, April 21, 2016
21. Pew Research Center, June 18, 2015