We examine the latest developments in commodity markets.
Commodities were mixed this week as palladium and soybeans outperformed, while energy underperformed. Gold ended the session fractionally higher, but remains volatile amid much uncertainty. Stocks, as measured by the S&P 500, ended the period close to unchanged, leaving the year-to-date gain near 16 percent.
The focus for traders this week was interest rate movements. In particular, a surge in the yield on the U.S. 10-year Treasury note has many worried for its potential dampening effect on housing and other segments of the economy. The yield reached as high as 2.23 percent—the highest level in over a year.
Bond traders have been selling Treasurys (sending yields higher) on speculation that the Federal Reserve could pare back or end its quantitative easing programs in the coming months.
Of course, the Fed said it would only end QE if the economy showed signs of a self-sustaining recovery. In that regard, this week’s data was mixed.
Housing remains a bright spot. S&P/Case-Shiller reported that its U.S. home price index rose by 1.12 percent in March, the 14th-straight monthly increase. On a year-over-year basis, home prices were up by 10.87 percent, the fastest pace of growth since 2006. Meanwhile, pending home sales in the U.S. in April were up 13.9 percent year-over-year and at the highest level in three years.
Data on income and spending were more disappointing. The Bureau of Economic Analysis said that personal income in the United States was unchanged in April, underperforming the 0.1 percent increase that was expected. Personal spending dipped by 0.2 percent, worse than the unchanged reading that was anticipated.
Finally, across the Atlantic in Europe, Eurostat reported that the unemployment rate in the eurozone ticked up from 12.1 to 12.2 percent—a euro-era record.
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