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The 2.9% move in the S&P 500 Index this past week erased the previous week’s 2.0% decline. The market shrugged off global economic worries and posted its best single week since last November. The U.S.-China trade meter shifted back to optimism this week.
Oil continued its advance as well. WTI Crude was +4.4% for the week. OPEC led production cuts have tightened supply and supported prices. A decline is U.S. inventories also helped support prices this past week. U.S. production continues to be robust and rig counts have fallen only slightly. Wholesale gasoline prices are +40.5% since the beginning of the year. While the decrease in gasoline prices in the 4th quarter (down 37% between September 30th and December 31st) were a tailwind to consumers during the holiday shopping season, the recent run up may present a tailwind to the Summer driving season.
The FOMC meets on Wednesday and we do not expect any change to the interest rate target. A slow week for potential market moving news could focus extra speculation on any comments, words, or facial expressions out of the FOMC. Any posture outside of “patience” will catch the market’s attention.
Financial Market Update
Dissecting Headlines: Gasoline Prices
When most consumers think of gasoline prices, they think of the price they see at the pump. The national average retail price for regular gasoline this past week was $2.55 gallon. The average wholesale price last week were $1.86 gallon. What makes up the difference? While the major input to gasoline is crude oil, which typically makes up approximately 53% of cost. Refining costs make up another 8% of input costs and transportation and retail mark-up make up approximately 18%. Twenty-one percent of gasoline prices are excise taxes.
Federal excise tax is 18.3 cents per gallon and total taxes average 52 cents per gallon nationwide. Additional excise and sales taxes vary widely by state. The highest taxes (combined Federal and State) are in Pennsylvania (77 cents per gallon) and California (73 cents per gallon). The lowest taxes are in Alaska (33 cents per gallon) and Missouri (36 cents per gallon).
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