A number of headwinds in play this week as equities were dragged lower this week by a couple of factors. Fedspeak leaned hawkish, with some officials continuing to push the “higher for longer” narrative despite recent signs of easing inflationary pressure. The yield curve also saw a further inversion, including the 3-month forward curve in 18 months (which Fed Chair Powell has previously said is a signal that the Fed has to cut). Even though Beijing has started to ease off its Covid policies, China also posted near-record case levels this week. While this week’s retail earnings were mixed, there was some concern around Target’s commentary on stressed consumers and a pullback in spending. There were also more high-profile layoff announcements this week and another batch of weak housing data, both of which highlighted the drag of Fed policy through the real economy. There were also more warnings about the 2023 earnings outlook, with Morgan Stanley’s Mike Wilson introducing a 2023 S&P price target of 3900, or roughly in line with current levels. However, Wilson warned that it won’t be a smooth ride, noting expectations that there will be an earnings-driven bust before a boom.
But not all was bad- The peak inflation narrative was confirmed this week by the softer October PPI print. There was a number of press articles suggesting the macro backdrop isn’t as dire as some predict and that recent softer inflation data, and relatively contained layoffs suggest increased odds for a soft landing. Washington Post said that despite the high-profile tech layoffs, it isn’t a harbinger of layoffs in other sectors. FT said that despite Target’s warning, other retailers’ results have shown a much better consumer backdrop, which was also backed by this week’s stronger than expected October retail sales report. And despite this week’s hawkish-leaning Fed speak, there was some more support around the peak-Fed narrative as officials, including Vice Chair Brainard, were fairly uniform in their calls for a slower pace of rate hikes.
The Baker Hughes rig count increased by 3 this week. There are 782 oil and gas rigs operating in the US – Up 219 over last year.
Metals Complex
Employment Picture
Weekly Unemployment Claims–Released Thursday 11/17/2022 – The week ending November 12th observed a decrease of 4k in initial claims decreasing to 222k. The four-week moving average of initial jobless claims increased 2k to 221k.
October Jobs Report–BLS Summary– Released 11/4/2022– The US Economy added 261k nonfarm jobs in October and the Unemployment rate increased 0.2% to 3.7%. Average hourly earnings increased 12 to $32.58. Hiring highlights include +79k Education and Health Services, +35k Leisure and Hospitality, and +39k Professional and Business Services.
Average hourly earnings increased 12 cents to $32.58.
U3 unemployment rate remained increased 0.2% to 3.7%. U6 unemployment rate increased 0.1% to 6.8%.
The labor force participation rate was little changed at 62.2%.
Average work week was unchanged at 34.5 hours.
Job Openings & Labor Turnover Survey – JOLTS – Released 11/1/2022 – The US Bureau of Labor Statistics reported the number and rate of job openings increased to 10.7 million on the last business day of September. Over the month, hires declined to 6.1 million and separations declined to 5.7 million. Within separations, quits were little changed at 4.1 million. The layoffs and discharges rates declined to 1.3 million.
Employment Cost Index – Released 10/28/2022 – Compensation costs for civilian workers increased 1.2% for the 3-month period ending in September 2022. The 12-month period ending in September 2022 saw compensation costs increase by 5%. The 12-month period ending September 2021 increased 3.7%. Wages and salaries increased 5.1% over the year and increased 4.2% for the 12-month period ending in September 2021. Benefit costs increased 4.9% over the year and increased 2.5% for the 12-month period ending in September 2021. This report is published quarterly.
This Week’s Economic Data
Links take you to the data source
Existing Home Sales– Released 11/18/2022– Existing home sales decreased in October marking nine consecutive months of declines. Sales declined 5.9% to a seasonally adjusted rate of 4.43 million in October. Sales decreased 28.4% year-over-year. Housing inventory sits at 1.22 million units. Down 0.8% from September’s inventory and down 0.8% over last year. Unsold inventory sits at a 3.3-month supply. The median existing home price for all housing types was $379,100 which is up 6.6% from October 2021. This marks 128 consecutive months of year-over-year increases, the longest-running streak on record.
Housing Starts– Released 11/17/2022– New home starts in October were at a seasonally adjusted annual rate of 1.425 million; down 4.2% below September, and 8.8% below last October’s rate. Building Permits were at a seasonally adjusted annual rate of 1.526 million, down 2.4% compared to September, and down 10.1% over last year.
Industrial Production and Capacity Utilization– Released 11/16/2022 – In October, Industrial Production decreased 0.1%, Manufacturing increased 0.1%, Utilities output decreased 1.5%, Mining output decreased 0.4%, Total Industrial Production was 3.3% higher in October than a year ago. Total Capacity Utilization decreased 0.2% in OCtober to 79.9% which is 0.3% above its long run average.
Retail Sales– Released 11/16/2022 – US retail sales for October increased 1.3% to $694.5 billion and retail sales are 8.3% above October 2021. US retail sales for the August 2022 through October 2022 period were up 8.9% from the same period a year ago.
Producer Price Index–Released 11/15/2022– The Producer Price Index for final demand increased 0.2% in October. PPI less food and energy declined 0.1%. The change in PPI for final demand has increased 8% year/y.
Recent Economic Date
Links take you to the data source
Consumer Price Index –Released 11/10/2022– Consumer prices increased less than expected, rising 0.4% m/m in October following a 0.4% increase in September. Consumer prices are up 7.7% for the 12-month period ending in October. Core consumer prices increased 0.3% m/m in October.
Consumer Credit –Released 11/7/2022– Consumer credit increased at a seasonally adjusted annual rate of 6.8% in the third quarter of 2022. Revolving credit increased at an annual rate of 12.9%, while nonrevolving credit increased at an annual rate of 4.9%. In September, consumer credit increased at an annual rate of 6.4%.
US Light Vehicle Sales – Released 11/4/2022 – US light vehicle sales were at a seasonally adjusted annual rate of 14.897 million units in October.
U.S. Trade Balance –Released 11/3/2022 – According to the US Census Bureau of Economic Analysis, the goods and services deficit increased in September by $7.6 billion to $73.3 billion. September exports were $258 billion, $2.8 billion less than August exports. September imports were $331.3 billion, $4.8 billion more than August imports. Year to date, the goods and services deficit increased $125.6 billion, or 20.2%, from the same period in 2021. Exports increased $378.1 billion or 20.2%. Imports increase $503.6 billion or 20.2%.
PMI Non-Manufacturing Index–Released 11/3/2022 – Economic activity in the non-manufacturing sector grew in October for the 29th consecutive month. ISM Non-Manufacturing registered 54.4%, which is 2.3 percentage points below the September reading of 56.7%.
PMI Manufacturing Index –Released 11/1/2022 – October PMI declined 0.7% registering 50.2%. The New Orders Index remained in contractionary territory at 49.2% up 2.1%. The Production Index registered 52.3%, up 1.7%.
U.S. Construction Spending– Released 11/1/2022– Construction spending increased 0.2% in September measuring at a seasonally adjusted annual rate of $1,811.1 billion. The September figure is 10.9% above the September 2021 estimate. Private construction spending increased 0.4% from the revised August estimate at $1,450.3 billion. Public construction spending was 0.4% below the revised August estimate at $360.9 billion.
Chicago PMI – Released 10/31/2022 – Chicago PMI remained in contraction territory and declined slightly in October from 45.7 to 45.2. This marks the lowest reading since June 2020.
Personal Income – Released 10/28/2022 – Personal income increased $78.9 billion or 0.4% in September according to estimates released today by the Bureau of Economic Analysis. Disposable Personal Income (DPI) increased $71.3 billion or 0.4% and Personal Consumption Expenditures (PCE) increased $113 billion or 0.6%.
Advance Estimate of 3rd Quarter 2022 GDP– Released 10/27/2022 – Real Gross Domestic Product (GDP) increased at an annual rate of 2.6% in the third quarter of 2022, according to the advance estimate released by the Bureau of Economic Analysis. GDP decreased 0.6% in the second quarter of 2022. The GDP estimate released today is based on source data that are incomplete or subject to further revision. The increase in real GDP reflected increases in exports, consumer spending, nonresidential fixed investment, federal government spending, and state and local government spending, that were partly offset by decreases in residential fixed investment and private inventory investment. Imports, which are a subtraction in the calculation of GDP, decreased.
Durable Goods– Released 10/27/2022 – New orders for manufactured durable goods in September increased $1 billion or 0.4% to $274.7 billion. Transportation equipment led the increase up $1.9 billion or 2.1% to $95.4 billion.
New Residential Sales– Released 10/26/2022 – Sales of new single-family homes decreased 10.9% to 603k, seasonally adjusted, in September. The median sales prices of new homes sold in September was $470,600 with an average sales price of $517,700. At the end of September, the seasonally adjusted estimate of new homes for sale was 462k. This represents a supply of 9.2 months at the current sales rate.
Consumer Confidence – Released 10/25/2022 – The Consumer confidence index decreased in October following an increase in September. The Index now stands at 102.5, down from 107.8 in September.
Next week we get data on New Residential Sales and Durable Goods.
Table of Contents
Good Life Advisors – Talking Points – Week 46
A number of headwinds in play this week as equities were dragged lower this week by a couple of factors. Fedspeak leaned hawkish, with some officials continuing to push the “higher for longer” narrative despite recent signs of easing inflationary pressure. The yield curve also saw a further inversion, including the 3-month forward curve in 18 months (which Fed Chair Powell has previously said is a signal that the Fed has to cut). Even though Beijing has started to ease off its Covid policies, China also posted near-record case levels this week. While this week’s retail earnings were mixed, there was some concern around Target’s commentary on stressed consumers and a pullback in spending. There were also more high-profile layoff announcements this week and another batch of weak housing data, both of which highlighted the drag of Fed policy through the real economy. There were also more warnings about the 2023 earnings outlook, with Morgan Stanley’s Mike Wilson introducing a 2023 S&P price target of 3900, or roughly in line with current levels. However, Wilson warned that it won’t be a smooth ride, noting expectations that there will be an earnings-driven bust before a boom.
But not all was bad- The peak inflation narrative was confirmed this week by the softer October PPI print. There was a number of press articles suggesting the macro backdrop isn’t as dire as some predict and that recent softer inflation data, and relatively contained layoffs suggest increased odds for a soft landing. Washington Post said that despite the high-profile tech layoffs, it isn’t a harbinger of layoffs in other sectors. FT said that despite Target’s warning, other retailers’ results have shown a much better consumer backdrop, which was also backed by this week’s stronger than expected October retail sales report. And despite this week’s hawkish-leaning Fed speak, there was some more support around the peak-Fed narrative as officials, including Vice Chair Brainard, were fairly uniform in their calls for a slower pace of rate hikes.
Fixed Income
Yield Curve
September FOMC Statement July Fed Minutes Balance Sheet Reduction Plan Credit, Liquidity and Balance Sheet Federal Reserve Dot Plots Treasury.gov yields FOMC Policy Normalization Statement Longer- Run Goals Jan 2022
Foreign Exchange Market
Energy Complex
The Baker Hughes rig count increased by 3 this week. There are 782 oil and gas rigs operating in the US – Up 219 over last year.
Metals Complex
Employment Picture
Weekly Unemployment Claims – Released Thursday 11/17/2022 – The week ending November 12th observed a decrease of 4k in initial claims decreasing to 222k. The four-week moving average of initial jobless claims increased 2k to 221k.
October Jobs Report – BLS Summary – Released 11/4/2022 – The US Economy added 261k nonfarm jobs in October and the Unemployment rate increased 0.2% to 3.7%. Average hourly earnings increased 12 to $32.58. Hiring highlights include +79k Education and Health Services, +35k Leisure and Hospitality, and +39k Professional and Business Services.
Job Openings & Labor Turnover Survey – JOLTS – Released 11/1/2022 – The US Bureau of Labor Statistics reported the number and rate of job openings increased to 10.7 million on the last business day of September. Over the month, hires declined to 6.1 million and separations declined to 5.7 million. Within separations, quits were little changed at 4.1 million. The layoffs and discharges rates declined to 1.3 million.
Employment Cost Index – Released 10/28/2022 – Compensation costs for civilian workers increased 1.2% for the 3-month period ending in September 2022. The 12-month period ending in September 2022 saw compensation costs increase by 5%. The 12-month period ending September 2021 increased 3.7%. Wages and salaries increased 5.1% over the year and increased 4.2% for the 12-month period ending in September 2021. Benefit costs increased 4.9% over the year and increased 2.5% for the 12-month period ending in September 2021. This report is published quarterly.
This Week’s Economic Data
Links take you to the data source
Existing Home Sales – Released 11/18/2022 – Existing home sales decreased in October marking nine consecutive months of declines. Sales declined 5.9% to a seasonally adjusted rate of 4.43 million in October. Sales decreased 28.4% year-over-year. Housing inventory sits at 1.22 million units. Down 0.8% from September’s inventory and down 0.8% over last year. Unsold inventory sits at a 3.3-month supply. The median existing home price for all housing types was $379,100 which is up 6.6% from October 2021. This marks 128 consecutive months of year-over-year increases, the longest-running streak on record.
Housing Starts – Released 11/17/2022 – New home starts in October were at a seasonally adjusted annual rate of 1.425 million; down 4.2% below September, and 8.8% below last October’s rate. Building Permits were at a seasonally adjusted annual rate of 1.526 million, down 2.4% compared to September, and down 10.1% over last year.
Industrial Production and Capacity Utilization – Released 11/16/2022 – In October, Industrial Production decreased 0.1%, Manufacturing increased 0.1%, Utilities output decreased 1.5%, Mining output decreased 0.4%, Total Industrial Production was 3.3% higher in October than a year ago. Total Capacity Utilization decreased 0.2% in OCtober to 79.9% which is 0.3% above its long run average.
Retail Sales – Released 11/16/2022 – US retail sales for October increased 1.3% to $694.5 billion and retail sales are 8.3% above October 2021. US retail sales for the August 2022 through October 2022 period were up 8.9% from the same period a year ago.
Producer Price Index – Released 11/15/2022 – The Producer Price Index for final demand increased 0.2% in October. PPI less food and energy declined 0.1%. The change in PPI for final demand has increased 8% year/y.
Recent Economic Date
Links take you to the data source
Consumer Price Index – Released 11/10/2022 – Consumer prices increased less than expected, rising 0.4% m/m in October following a 0.4% increase in September. Consumer prices are up 7.7% for the 12-month period ending in October. Core consumer prices increased 0.3% m/m in October.
Consumer Credit – Released 11/7/2022 – Consumer credit increased at a seasonally adjusted annual rate of 6.8% in the third quarter of 2022. Revolving credit increased at an annual rate of 12.9%, while nonrevolving credit increased at an annual rate of 4.9%. In September, consumer credit increased at an annual rate of 6.4%.
US Light Vehicle Sales – Released 11/4/2022 – US light vehicle sales were at a seasonally adjusted annual rate of 14.897 million units in October.
U.S. Trade Balance – Released 11/3/2022 – According to the US Census Bureau of Economic Analysis, the goods and services deficit increased in September by $7.6 billion to $73.3 billion. September exports were $258 billion, $2.8 billion less than August exports. September imports were $331.3 billion, $4.8 billion more than August imports. Year to date, the goods and services deficit increased $125.6 billion, or 20.2%, from the same period in 2021. Exports increased $378.1 billion or 20.2%. Imports increase $503.6 billion or 20.2%.
PMI Non-Manufacturing Index – Released 11/3/2022 – Economic activity in the non-manufacturing sector grew in October for the 29th consecutive month. ISM Non-Manufacturing registered 54.4%, which is 2.3 percentage points below the September reading of 56.7%.
PMI Manufacturing Index – Released 11/1/2022 – October PMI declined 0.7% registering 50.2%. The New Orders Index remained in contractionary territory at 49.2% up 2.1%. The Production Index registered 52.3%, up 1.7%.
U.S. Construction Spending – Released 11/1/2022 – Construction spending increased 0.2% in September measuring at a seasonally adjusted annual rate of $1,811.1 billion. The September figure is 10.9% above the September 2021 estimate. Private construction spending increased 0.4% from the revised August estimate at $1,450.3 billion. Public construction spending was 0.4% below the revised August estimate at $360.9 billion.
Chicago PMI – Released 10/31/2022 – Chicago PMI remained in contraction territory and declined slightly in October from 45.7 to 45.2. This marks the lowest reading since June 2020.
Personal Income – Released 10/28/2022 – Personal income increased $78.9 billion or 0.4% in September according to estimates released today by the Bureau of Economic Analysis. Disposable Personal Income (DPI) increased $71.3 billion or 0.4% and Personal Consumption Expenditures (PCE) increased $113 billion or 0.6%.
Advance Estimate of 3rd Quarter 2022 GDP – Released 10/27/2022 – Real Gross Domestic Product (GDP) increased at an annual rate of 2.6% in the third quarter of 2022, according to the advance estimate released by the Bureau of Economic Analysis. GDP decreased 0.6% in the second quarter of 2022. The GDP estimate released today is based on source data that are incomplete or subject to further revision. The increase in real GDP reflected increases in exports, consumer spending, nonresidential fixed investment, federal government spending, and state and local government spending, that were partly offset by decreases in residential fixed investment and private inventory investment. Imports, which are a subtraction in the calculation of GDP, decreased.
Durable Goods – Released 10/27/2022 – New orders for manufactured durable goods in September increased $1 billion or 0.4% to $274.7 billion. Transportation equipment led the increase up $1.9 billion or 2.1% to $95.4 billion.
New Residential Sales – Released 10/26/2022 – Sales of new single-family homes decreased 10.9% to 603k, seasonally adjusted, in September. The median sales prices of new homes sold in September was $470,600 with an average sales price of $517,700. At the end of September, the seasonally adjusted estimate of new homes for sale was 462k. This represents a supply of 9.2 months at the current sales rate.
Consumer Confidence – Released 10/25/2022 – The Consumer confidence index decreased in October following an increase in September. The Index now stands at 102.5, down from 107.8 in September.
Next week we get data on New Residential Sales and Durable Goods.
Data Sources:
Bureau of Economic Analysis (BEA)
Congressional Budget Office (CBO)
U.S. Bureau of Labor Statistics (BLS)
Federal Reserve Economic Data (FRED Charts)
CME Fed Watch
U.S. Treasury – Yields
U.S. Census Bureau
Institute for Supply Management (ISM)
Weekly DOL Employment Data
BLS Monthly Jobs Report
JOLTS
US Energy Admin (EIA)
BLS Consumer Price Index CPI
BLS Producer Price Index PPI
Atlanta Fed GDPNOW
NY Fed Nowcast GDP
US Census Bureau Housing Starts
Consumer Credit
USCB Retail Sales
Construction Spending
Federal Reserve Dot Plots
NY Empire Index
Philadelphia Federal Reserve
P/E Ratio Data -Yardeni Research
Technical Analysis Info:
StockCharts.com – Financial Charts
Exponential vs Simple moving average
Other Links:
1973 Arab Oil Embargo
Hunt Brothers Silver
Long-Term Capital bailout
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