The S&P 500 Jumped 6.9% In October, closing over 4600 for the first time ever. Growth was back in the driver’s seat for the week and the full month, outperforming value by 335 bps in October. The reasons for the positive sentiment are wide ranging, including strong earnings, solid demand and massively improving Covid numbers. The current 7-day average of new cases is 229k having fallen 80% since the July wave which saw a 1.149mm peak. There was also further traction on fiscal policy as the White House released the framework of a $1.75T social spending package that could potentially be passed this coming week.
With over half of the S&P500 companies reporting, the blended earnings growth rate for Q3 stands at 36.6%, the third highest in over ten years, trailing only the prior two quarters. In aggregate, companies have reported earnings 10.3% above expectations, down from nearly 16.5% in Q2 and nearly 22.5% in Q1, but still well ahead of the 8.4% five-year average positive surprise rate. Attached you will find the most recent earning insight from FactSet if you care to read more earnings data. Supply chain pressures continued again this week and were flagged by companies in a wide range of industries as a drag on both sales and margins. The global chip shortage continued to get a lot of the supply chain scrutiny. However, there were also some hints that this theme may be peaking, particularly in autos, one of the most adversely impacted industries. Ford noted that while semi availability remains a challenge, it markedly improved sequentially in Q3. GM also said that the current availability of its semi supply has improved.
Something to be aware of: the two year yield spiked in October, rising 20 bps to close at 0.48% – Rising yields and new all-time highs, this doesn’t seem recessionary.
The Baker Hughes rig count increased by 2 this week. There are 544 oil and gas rigs operating in the US – Up 248 over last year.
Metals Complex
Employment Picture
Wage growth is the highest it’s been since just before the GFC
Employment Cost Index – Released 10/29/2021 – Compensation costs for civilian workers increased 1.3% for the 3-month period ending in September 2021. The 12-month period ending in September 2021 saw compensation costs increase by 3.7%. The 12-month period ending September 2020 increased 2.4%. Wages and salaries increased 4.2 percent over the year and increased 2.5 percent for the 12-month period ending in September 2020. Benefit costs increased 2.5 percent over the year and increased 2.3 percent for the 12-month period ending in September 2020. This report is published quarterly.
Weekly Unemployment Claims– Released Thursday 10/28/2021 – The week ending October 23rd experienced a decrease of 10k in initial claims declining to 281k. This marks the lowest level of initial claims since March 14, 2020. The four-week moving average of initial jobless claims decreased 20.75k to 299.25k.
Job Openings & Labor Turnover Survey JOLTS – Released 10/12/2021 – The U.S. Bureau of Labor Statistics reported the number and rate of job openings decreased to 10.4 million on the last business day of August. Over the month, hires decreased to 6.3 million and separations were little changed at 6.0 million. Within separations, the quits rate increased to 2.9%. The layoffs and discharges rates were little changed at 0.9%.
September Jobs Report–BLS SummaryReleased 10/8/2021 – The US Economyadded 194k nonfarm jobs in September and the Unemployment rate declined 0.4% to 4.8. Average hourly earnings increased by 19 cents to $30.85. Hiring highlights include +74k Leisure and Hospitality, +60k Professional and Business Services, and +47 Transportation and Warehousing.
Average hourly earnings increased by 19 cents to $30.85.
U3 unemployment rate declined 0.4% to 4.8%. U6 unemployment rate declined to 8.5%.
The labor force participation rate was little changed at 61.6%.
Average work week increased 0.2 hours to 34.8 hours.
This Week’s Economic Data
Links take you to the data source
Chicago PMI–Released 10/29/2021 – Chicago PMI increased to 68.4 points in October, following two months of decline. Among the main five indicators, four were higher, led by Order backlogs and Employment. Only Production fell across the month.
Personal Income – Released 10/29/2021 – Personal income decreased $216.2 billion or 1.0 percent in September according to estimates released today by the Bureau of Economic Analysis. Disposable personal income (DPI) decreased $236.9 billion or 1.3 percent and personal consumption expenditures (PCE) increased $93.4 billion or 0.6 percent.
Advance Estimate of 3rd Quarter 2021 GDP – Released 10/28/2021 – Real gross domestic product (GDP) increased at an annual rate of 2.0 percent in the third quarter of 2021, according to the advance estimate released by the Bureau of Economic Analysis. GDP increased 6.7% in the second quarter of 2021. The advance estimate is based on source data that are incomplete or subject to further revision. The increase in real GDP in the third quarter reflected increases in private inventory investment, personal consumption expenditures (PCE), state and local government spending, and nonresidential fixed investment that were partly offset by decreases in residential fixed investment, federal government spending, and exports. Imports, which are a subtraction in the calculation of GDP, increased.
Durable Goods– Released 10/27/2021 – New orders for manufactured durable goods in September decreased $1.0 billion or 0.4% to $261.3 billion. Transportation equipment led the decrease falling $1.8 billion or 2.3% to $77.7 billion.
New Residential Sales– Released 10/26/2021 – Sales of new single-family homes increased 14.0% to 800k, seasonally adjusted, in September. The median sales price of new homes sold in September was $408,800 with an average sales price of $451,700. At the end of September, the seasonally adjusted estimate of new homes for sale was 379k. This represents a supply of 5.7 months at the current sales rate.
Consumer Confidence–Released 10/26/2021 – The Consumer confidence index increased in October. The Index now stands at 113.8, up from 109.8 in September.
Recent Economic Data
Links take you to the data source
Existing Home Sales–Released 10/21/2021 – Existing home sales increased in September. Sales rose 7.0% to a seasonally adjusted rate of 6.29 million in September. Sales are currently down 2.3% from one year ago. Housing inventory sits at 1.27 million units. Down 0.8% from August’s inventory. Down 13.0% over last year. Unsold inventory sits at a 2.4-month supply. The median existing home price for all housing types was $352,800.
Housing Starts–Released 10/19/2021 – New home starts in September were at a seasonally adjusted annual rate of 1.555 million; down 1.6% below August, but 7.4% above last September’s rate. Building Permits were at a seasonally adjusted annual rate of 1.589 million, down 7.7% compared to August, and virtually unchanged over last year.
Industrial Production and Capacity Utilization – Released 10/18/2021 – In September Industrial production declined 1.3%. Manufacturing decreased 0.7%. Motor Vehicles and parts, still limited by semiconductor shortages, declined 7.2%. Mining decreased 2.3%. Utilities output decreased 3.6%. Total industrial production was 4.6% higher in September than a year ago. Total capacity utilization decreased 1.0% to 75.2% in September which is 4.4% below its long run average.
Retail Sales– Released 10/15/2021 – U.S. retail sales for September increased 0.7% to $625.4 billion and retail sales are 13.9% above September 2020. U.S. retail sales for the July 2021 through September 2021 period were up 14.9% from the same period a year ago.
Producer Price Index–Released 10/14/2021 – The Producer Price Index for final demand increased 0.5% in September. PPI less food and energy increased 0.6% in September. The change in PPI for final demand has increased 8.6% year/y.
Consumer Price Index –Released 10/13/2021 – Consumer prices rose 0.4% m/m in September following a 0.3% gain in August. Core consumer prices increased 0.2% m/m in September following a 0.1% gain in August.
US Light Vehicle Sales – Released 10/8/2021 – U.S. light vehicle sales were at a seasonally adjusted annual rate (SAAR) of 12.176 million units in September.
Consumer Credit– Released 10/7/2021 – Consumer credit increased at a seasonally adjusted annual rate of 4.0 percent in August. Revolving credit increased at an annual rate of 3.6 percent, while nonrevolving credit increased at an annual rate of 4.1 percent.
PMI Non-Manufacturing Index–Released 10/5/2021 – Economic activity in the non-manufacturing sector grew in September for the 16th consecutive month. ISM Non-Manufacturing registered 61.9 percent, which is 0.2 percentage points above the adjusted August reading of 61.7 percent.
U.S. Trade Balance–Released 10/5/2021 – According to the U.S. Census Bureau of Economic Analysis the goods and services deficit increased in August by $2.9 billion to $73.3 billion. August exports were $213.7 billion, $1.0 billion more than July exports. August imports were $287.0 billion, $4.0 billion more than July imports. Year to date the goods and services deficit increased $140.8 billion or 33.7%, from the same period in 2020. Year to date exports and imports increased $244.3 billion or 17.5% and increased $385.1 billion or 21.2% respectively.
PMI Manufacturing Index – Released 10/1/2021 – September PMI increased 1.2% to 61.1% up from August’s reading of 59.9%. The New Orders Index was unchanged from August’s reading of 66.7%. The Production Index registered 59.4%, down 0.6%.
U.S. Construction Spending–Released 10/1/2021 – Construction spending was relatively unchanged in August measuring at a seasonally adjusted annual rate of $1,584.1 billion. The August figure is 8.9% above the August 2020 estimate. Private construction spending was 0.1% below the revised July estimate at $1,243.7 billion. Public construction spending was 0.5% above the revised July estimate at $341.9 billion.
Next week we get data on U.S. Construction Spending, PMI Manufacturing, U.S. Trade Balance, PMI Services, Consumer Credit, and the October Jobs Report.
Good Life Advisors – Talking Points – Week 43
Nothing Scary About October This Year
The S&P 500 Jumped 6.9% In October, closing over 4600 for the first time ever. Growth was back in the driver’s seat for the week and the full month, outperforming value by 335 bps in October. The reasons for the positive sentiment are wide ranging, including strong earnings, solid demand and massively improving Covid numbers. The current 7-day average of new cases is 229k having fallen 80% since the July wave which saw a 1.149mm peak. There was also further traction on fiscal policy as the White House released the framework of a $1.75T social spending package that could potentially be passed this coming week.
With over half of the S&P500 companies reporting, the blended earnings growth rate for Q3 stands at 36.6%, the third highest in over ten years, trailing only the prior two quarters. In aggregate, companies have reported earnings 10.3% above expectations, down from nearly 16.5% in Q2 and nearly 22.5% in Q1, but still well ahead of the 8.4% five-year average positive surprise rate. Attached you will find the most recent earning insight from FactSet if you care to read more earnings data. Supply chain pressures continued again this week and were flagged by companies in a wide range of industries as a drag on both sales and margins. The global chip shortage continued to get a lot of the supply chain scrutiny. However, there were also some hints that this theme may be peaking, particularly in autos, one of the most adversely impacted industries. Ford noted that while semi availability remains a challenge, it markedly improved sequentially in Q3. GM also said that the current availability of its semi supply has improved.
Something to be aware of: the two year yield spiked in October, rising 20 bps to close at 0.48% – Rising yields and new all-time highs, this doesn’t seem recessionary.
Table of Contents
Fixed Income
September FOMC Statement Credit, Liquidity and Balance Sheet Federal Reserve Dot Plots Sep 21′
US Corporate Debt Tops 7 Trillion. Treasury.gov yields FOMC Policy Normalization Statement Longer Run Goals August 2020
Global Bond Yields
Daily US Treasury Yields
Foreign Exchange Market
Energy Complex
The Baker Hughes rig count increased by 2 this week. There are 544 oil and gas rigs operating in the US – Up 248 over last year.
Metals Complex
Employment Picture
Wage growth is the highest it’s been since just before the GFC
Employment Cost Index – Released 10/29/2021 – Compensation costs for civilian workers increased 1.3% for the 3-month period ending in September 2021. The 12-month period ending in September 2021 saw compensation costs increase by 3.7%. The 12-month period ending September 2020 increased 2.4%. Wages and salaries increased 4.2 percent over the year and increased 2.5 percent for the 12-month period ending in September 2020. Benefit costs increased 2.5 percent over the year and increased 2.3 percent for the 12-month period ending in September 2020. This report is published quarterly.
Weekly Unemployment Claims – Released Thursday 10/28/2021 – The week ending October 23rd experienced a decrease of 10k in initial claims declining to 281k. This marks the lowest level of initial claims since March 14, 2020. The four-week moving average of initial jobless claims decreased 20.75k to 299.25k.
Job Openings & Labor Turnover Survey JOLTS – Released 10/12/2021 – The U.S. Bureau of Labor Statistics reported the number and rate of job openings decreased to 10.4 million on the last business day of August. Over the month, hires decreased to 6.3 million and separations were little changed at 6.0 million. Within separations, the quits rate increased to 2.9%. The layoffs and discharges rates were little changed at 0.9%.
September Jobs Report – BLS Summary Released 10/8/2021 – The US Economy added 194k nonfarm jobs in September and the Unemployment rate declined 0.4% to 4.8. Average hourly earnings increased by 19 cents to $30.85. Hiring highlights include +74k Leisure and Hospitality, +60k Professional and Business Services, and +47 Transportation and Warehousing.
This Week’s Economic Data
Links take you to the data source
Chicago PMI – Released 10/29/2021 – Chicago PMI increased to 68.4 points in October, following two months of decline. Among the main five indicators, four were higher, led by Order backlogs and Employment. Only Production fell across the month.
Personal Income – Released 10/29/2021 – Personal income decreased $216.2 billion or 1.0 percent in September according to estimates released today by the Bureau of Economic Analysis. Disposable personal income (DPI) decreased $236.9 billion or 1.3 percent and personal consumption expenditures (PCE) increased $93.4 billion or 0.6 percent.
Advance Estimate of 3rd Quarter 2021 GDP – Released 10/28/2021 – Real gross domestic product (GDP) increased at an annual rate of 2.0 percent in the third quarter of 2021, according to the advance estimate released by the Bureau of Economic Analysis. GDP increased 6.7% in the second quarter of 2021. The advance estimate is based on source data that are incomplete or subject to further revision. The increase in real GDP in the third quarter reflected increases in private inventory investment, personal consumption expenditures (PCE), state and local government spending, and nonresidential fixed investment that were partly offset by decreases in residential fixed investment, federal government spending, and exports. Imports, which are a subtraction in the calculation of GDP, increased.
Durable Goods – Released 10/27/2021 – New orders for manufactured durable goods in September decreased $1.0 billion or 0.4% to $261.3 billion. Transportation equipment led the decrease falling $1.8 billion or 2.3% to $77.7 billion.
New Residential Sales – Released 10/26/2021 – Sales of new single-family homes increased 14.0% to 800k, seasonally adjusted, in September. The median sales price of new homes sold in September was $408,800 with an average sales price of $451,700. At the end of September, the seasonally adjusted estimate of new homes for sale was 379k. This represents a supply of 5.7 months at the current sales rate.
Consumer Confidence – Released 10/26/2021 – The Consumer confidence index increased in October. The Index now stands at 113.8, up from 109.8 in September.
Recent Economic Data
Links take you to the data source
Existing Home Sales – Released 10/21/2021 – Existing home sales increased in September. Sales rose 7.0% to a seasonally adjusted rate of 6.29 million in September. Sales are currently down 2.3% from one year ago. Housing inventory sits at 1.27 million units. Down 0.8% from August’s inventory. Down 13.0% over last year. Unsold inventory sits at a 2.4-month supply. The median existing home price for all housing types was $352,800.
Housing Starts – Released 10/19/2021 – New home starts in September were at a seasonally adjusted annual rate of 1.555 million; down 1.6% below August, but 7.4% above last September’s rate. Building Permits were at a seasonally adjusted annual rate of 1.589 million, down 7.7% compared to August, and virtually unchanged over last year.
Industrial Production and Capacity Utilization – Released 10/18/2021 – In September Industrial production declined 1.3%. Manufacturing decreased 0.7%. Motor Vehicles and parts, still limited by semiconductor shortages, declined 7.2%. Mining decreased 2.3%. Utilities output decreased 3.6%. Total industrial production was 4.6% higher in September than a year ago. Total capacity utilization decreased 1.0% to 75.2% in September which is 4.4% below its long run average.
Retail Sales – Released 10/15/2021 – U.S. retail sales for September increased 0.7% to $625.4 billion and retail sales are 13.9% above September 2020. U.S. retail sales for the July 2021 through September 2021 period were up 14.9% from the same period a year ago.
Producer Price Index – Released 10/14/2021 – The Producer Price Index for final demand increased 0.5% in September. PPI less food and energy increased 0.6% in September. The change in PPI for final demand has increased 8.6% year/y.
Consumer Price Index – Released 10/13/2021 – Consumer prices rose 0.4% m/m in September following a 0.3% gain in August. Core consumer prices increased 0.2% m/m in September following a 0.1% gain in August.
US Light Vehicle Sales – Released 10/8/2021 – U.S. light vehicle sales were at a seasonally adjusted annual rate (SAAR) of 12.176 million units in September.
Consumer Credit – Released 10/7/2021 – Consumer credit increased at a seasonally adjusted annual rate of 4.0 percent in August. Revolving credit increased at an annual rate of 3.6 percent, while nonrevolving credit increased at an annual rate of 4.1 percent.
PMI Non-Manufacturing Index – Released 10/5/2021 – Economic activity in the non-manufacturing sector grew in September for the 16th consecutive month. ISM Non-Manufacturing registered 61.9 percent, which is 0.2 percentage points above the adjusted August reading of 61.7 percent.
U.S. Trade Balance – Released 10/5/2021 – According to the U.S. Census Bureau of Economic Analysis the goods and services deficit increased in August by $2.9 billion to $73.3 billion. August exports were $213.7 billion, $1.0 billion more than July exports. August imports were $287.0 billion, $4.0 billion more than July imports. Year to date the goods and services deficit increased $140.8 billion or 33.7%, from the same period in 2020. Year to date exports and imports increased $244.3 billion or 17.5% and increased $385.1 billion or 21.2% respectively.
PMI Manufacturing Index – Released 10/1/2021 – September PMI increased 1.2% to 61.1% up from August’s reading of 59.9%. The New Orders Index was unchanged from August’s reading of 66.7%. The Production Index registered 59.4%, down 0.6%.
U.S. Construction Spending – Released 10/1/2021 – Construction spending was relatively unchanged in August measuring at a seasonally adjusted annual rate of $1,584.1 billion. The August figure is 8.9% above the August 2020 estimate. Private construction spending was 0.1% below the revised July estimate at $1,243.7 billion. Public construction spending was 0.5% above the revised July estimate at $341.9 billion.
Next week we get data on U.S. Construction Spending, PMI Manufacturing, U.S. Trade Balance, PMI Services, Consumer Credit, and the October Jobs Report.
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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