Market Commentary, 05/31/16
Last week the Dow Jones Index closed at 17,873, representing its first weekly increase in six weeks. The S&P 500 also posted a weekly gain to close at 2,099 on Friday. Stocks were largely flat Monday, Thursday, and Friday on relatively low volume, but surged on Tuesday and Wednesday.
These gains were likely spurred by positive U.S. economic news. According to the Labor Department, the number of Americans filing for first-time unemployment benefits came in at 268,000, which was below the expected 275,000. The decline indicates the labor market is somewhat healthy and the economy appears to be regaining some momentum after a difficult first quarter.
Perhaps the broadest and most reliable gauge of the state of the job market can be gleaned from taxes withheld from paychecks for federal income and employment taxes. Analysis of daily Treasury statement funds by Investors Business Daily (IBD) revealed that the job market grew 4.5% from a year ago. It was the fastest pace in 6 months and supports the view that the economy is strengthening after two weak quarters.
On Friday, Federal Reserve Chair, Janet Yellen, said that ongoing improvement in the U.S. economy would warrant another rate increase “in the coming months,” stopping short of giving a definite timeline of when the central bank might act. This increase would be the second since the seven years of near zero borrowing began; more information should be available when the Fed meets again on June 14 and 15.
The potential for a rate hike has increased volatility in the market and is most likely the reason for across the board declines in the market today, as the Dow closed down 86.09 and the S&P down 2.11.
Our indicator is still well below the 55.00 needed to mark a confirmed bull market, but has increased slightly as a result of last week’s gains. We will continue to monitor the market and focus on downside protection until the momentum indicator provides an entry point.
Jeremiah Patterson, CFP®
Copelin Financial Advisors
514 Brooks Street
Sugar Land, TX 77478
Phone: 281 240-2902
Fax: 281 240-2856
Securities offered through ProEquities, Inc., a Registered Broker-Dealer and Member FINRA & SIPC Advisory Services offered through Harvest Investment Services, LLC., a Registered Investment Advisor Copelin Financial Advisors, Inc and Harvest Investment Services, LLC are independent of ProEquities, Inc.