The Markets

Domestic equities had a mixed week. The small-cap stocks of the Russell 2000 managed to reclaim positive territory for the year while the Nasdaq continued to lead the pack year-to-date. The large caps didn’t fare quite as well, though the S&P 500 has now managed to erase all but 12 points of the 5.7% it had lost since January 15.

Last Week’s Headlines

• January’s dismal weather across much of the country helped cut housing starts by 16% and building
permits for future construction by 5.4%, according to the Commerce Department. The worst declines
were seen in the Midwest, while starts actually rose in the Northeast.

• Consumer prices rose 0.1% in January, according to the Bureau of Labor Statistics, largely because of
home energy demands connected to the brutal winter over much of the country. The BLS said the 1.8%
increase in the cost of electricity was the biggest since March 2010, while natural gas and heating oil
also were up sharply. Wholesale prices rose 0.2% during the month; that was a slight acceleration from
December and put the year-over-year increase at 1.2%.

• Home resales didn’t escape winter’s ill effects. According to the National Association of Realtors®,
weather plus higher mortgage rates and the ongoing shortage of homes for sale brought January sales
down 5.1% during the month to their lowest level since July 2012. Sales also were 5.1% lower than the
previous January.

• China’s manufacturing sector shrank for the second straight month, according to February’s
Markit/HSBC Purchasing Managers’ Index, which fell to 48.3 (any number below 50 represents
contraction). However, the extended Lunar New Year festival traditionally has slowed manufacturing
there at this time of year. U.S. manufacturing reports also showed a decline. The Philly Fed survey fell
from 9.4 in January to -6.3, and though the Fed’s Empire State survey remained positive at 4.5, it was
down 8 points for the month.

Read more:  Market Week 02242014

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