THE WEEK ON WALL STREET
Stocks edged lower in the final week of May as fresh news on economic growth and inflation failed to inspire investors.
FACT OF THE WEEK
At approximately 4:00 a.m. on June 4, 1896, in the shed behind his home on Bagley Avenue in Detroit, Henry Ford unveils the “Quadricycle,” the first automobile he ever designed or drove.
Ford was working as the chief engineer for the main plant of the Edison Illuminating Company when he began working on the Quadricycle. On call at all hours to ensure that Detroit had electrical service 24 hours a day, Ford was able to use his flexible working schedule to experiment with his pet project—building a horseless carriage with a gasoline-powered engine. His obsession with the gasoline engine had begun when he saw an article on the subject in a November 1895 issue of American Machinist magazine. The following March, another Detroit engineer named Charles King took his own hand-built vehicle—made of wood, it had a four-cylinder engine and could travel up to five miles per hour—out for a ride, fueling Ford’s desire to build a lighter and faster gasoline-powered model.
MARKET MINUTE
Stocks Slide
Markets shrugged off news that the Q1 Gross Domestic Product was revised lower to 1.3 percent from the initial estimated 1.6 percent. Despite concerns that the economy was cooling faster than expected, investors didn’t believe the update was enough to influence the Fed’s decision about adjusting short-term rates.
On Friday, investors were on edge waiting for the update on inflation. The Fed’s preferred inflation indicator, called the Personal Consumption and Expenditures (PCE), rose 0.2 percent in April, which was in line with forecasts.
Stocks rose slightly in pre-market trading on the news but were under pressure throughout the day as investors digested the inflation update. But in the last hour of trading, stock staged a powerful rally led by the Dow, which had its best day of the year.
Is Bad News Good News?
On the economic front, last week's news was generally disappointing. The update on Q1 GDP was a bit discouraging, and several Fed officials gave seemingly more hawkish updates. Also, the Fed’s “Beige Book” revealed modest economic growth nationwide. Yet despite the drumbeat of bad news, stocks were resilient and closed only slightly lower for the holiday-shortened week.
FINANCIAL STRATEGY OF THE WEEK
The ABC’s of Auto Insurance
The questions around auto insurance center not so much on whether to have it—it’s mandated by state law, required by your lender, and serves to protect your assets—but what kind of coverage you should purchase.
Types of Coverage
A car owner may purchase several forms of coverage, some of which are required and others of which may be optional.
The coverage requirements in most states include:
- Bodily injury liability (pays for the cost of injuries you cause to another individual);
- Property damage liability (pays for the damage you cause to another’s car or to objects or structures you hit).
Some, but not all, states will require that you have coverage for:
- Uninsured and underinsured motorists (covers the costs associated with being hit by an uninsured or underinsured driver, or in the case of a hit-and-run accident),
- Medical payments or personal injury protection (PIP) (pays for medical treatment for you and your passengers). PIP coverage is available in “no-fault” states and may also cover lost wages and funeral costs.
If you borrowed to purchase your car, the lender may require collision and comprehensive coverage.
- Collision coverage reimburses you for damage to your car that results from a collision with another car, object, or structure, a pothole, or from flipping over.
- Comprehensive coverage is designed to pay for car damage not arising from a collision, e.g., theft, hail, windstorm, flood, fire, and hitting animals. This coverage may also pay for windshield repairs.
If you own your car outright, you may want to consider purchasing collision and comprehensive coverage if your car has a significant market value. You may find that the potential economic loss is sufficient to warrant the cost of collision and comprehensive protection.