Wall Street was absorbed with the possibility that the U.K. may exit the European Union, with a referendum scheduled for Thursday. Not to mention the usual harangue of slow global growth and the move by the Bank of Japan holding near zero interest rates intact. The economic and interest rate cautions sent bonds higher as yields fell on the heels of remarks by a number of Federal Reserve presidents. The predictability for the central bank to decide on the direction of the economy and its overall credibility are in a sad state of affairs. To wit, gold traded over $3,000/oz. – a two-year high – before settling back to close at $1,292.50, $19/oz. above last week’s closing level as tensions grow. Only two market sectors were in the green for the week: Interest sensitive and safe-haven telecommunication stocks and utilities. In all, equities were lower by about 1% and the NASDAQ by 2%, as traders shied away from technology and bio-technology stocks.
In economic news, U.S. producer prices rose for a second straight month in May as the cost of energy products and services increased, but the lingering effects of a strong dollar and low energy prices will likely keep inflation tame for a while. The Labor Department said the producer price index increased 0.4 percent last month after rising only 0.2 percent in April. In the 12 months through May, the PPI slipped 0.1%. Economists had forecast the PPI gaining 0.3 percent last month. U.S. industrial production fell more than expected in May (negative 0.4% vs. estimates of minus 0.2%) on a decline in utilities output and auto manufacturing, a sign that the economy may be losing some steam in the second quarter.
While caution remains for equities, low yields make a strong case for stocks. I believe global markets will remain volatile until the Brexit issue is resolved later in the week. And if you maintain being an ardent Fed watcher, Janet Yellen testifies (i.e. senseless chatter) before Congress on Tuesday and Wednesday, but don’t expect anything new. In the meantime, enjoy the rest of the Father’s Day weekend.
Here is the answer to last week’s trivia question: Last month which two office supply companies called off their planned merger after a federal judge blocked the deal on antitrust concerns? Office Max and Office Depot; Staples and Office Depot; W.B. Mason and Staples or Office Depot and Boise-Cascade. Answer: Staples and Office Depot.
Today’s Trivia Question: The Boeing Company, founded in Seattle, Washington in 1919, moved its corporate headquarters from its home town for over eighty years to what city? Denver, Everett (WA), Dallas or Chicago.