US equities were mostly higher this week, with the S&P and Nasdaq adding to last week’s big rally (while the small-cap Russell notched its 12th decline of the past 15 weeks). Big tech was broadly higher, once again boosting the official S&P while the equal-weight variant posted a decline; RSP (0.6%).
Treasuries were weaker with the curve flattening; the 2Y moved back above 5%. The move came amid a focus on somewhat hawkish Powell comments and notably weak demand at this week’s 30Y auction. The dollar was higher overall, particularly on the yen and sterling crosses; DXY +0.8%. Gold (3.1%) was down after peeking above $2,000/oz in last week’s trading. Crude logged its third-straight weekly decline, with WTI settling down 4.1%
Stocks added on to the prior week’s big gains despite a lack of big stimuli and amid a decelerating Q3 earnings season. Thursday was the only session this week that saw the S&P move lower, with investors that day reacting negatively to some hawkish-leaning commentary from Fed Chair Powell and notably weak demand for a $24B auction of 30-year Treasury bonds.
But despite Powell’s comments about the Fed not hesitating to hike if necessary, there was no change to market expectations for the Fed to hold rates at the current level and begin to ease by mid-2024; and despite renewed worries about larger Treasury supply, 30Y yields remained well below the 5%+ that was seen as recently as late October.
Even the week’s most notable economic release–Friday’s weak preliminary November UMich consumer sentiment reading reflecting higher-than-expected inflation expectations–did nothing to stop the S&P from posting its biggest gain of the week.
Against this backdrop, there continued to be a debate about how durable the current bounce could prove, or whether it was little more than a bear-market rally. Bulls tended to point to the positive effects of a Peak Fed stance, recent “goldilocks” economic data, contrarian signaling from positioning/sentiment indicators, the return of corporate buybacks, and positive Nov-Dec seasonality.
Bears remained worried about the Fed giving up the inflation fight too soon, the lagged impacts of rate tightening already in the system, weaker corporate commentary about the macro backdrop, outsized cuts to Q4 earnings estimates, and lingering recession fears.
Next week’s economic calendar will be much busier, featuring highly anticipated reports for October CPI (Tuesday) and October retail sales (Wednesday). There will also be releases for PPI, housing starts, and November NY/Philadelphia manufacturing surveys.
Expect increased chatter about a government shutdown ahead of the 17-Nov expiration of funding authority; while there has been talk about another continuing resolution, House GOP dysfunction could make that a challenge. It will be another week thick with Fedspeak, with appearances from Williams, Goolsbee, Mester, Jefferson, Barr, Cook, and Waller.
The Baker Hughes rig count was down 2 this week. There are 616 oil and gas rigs operating in the US – Down 163 from last year.
Metals Complex
This Week’s Employment Picture
Weekly Unemployment Claims – Released Thursday 11/9/2023 – In the week ending November 4, the advance figure for seasonally adjusted initial claims was 217,000 down 3,000 from the previous week’s revised level. The 4-week moving average was 212,250 an increase of 1,500 from the previous week’s revised average.
October Jobs Report – BLS Summary – Released 11/3/2023 – The US Economy added 150k nonfarm jobs in October and the Unemployment rate was little changed at 3.9%. Average hourly earnings increased 7 cents to $34.00. Hiring highlights include +89k Education and Health Services, +51k Government, and +23k Construction.
Average hourly earnings increased 7 cents/0.2% to $34.00.
U3 unemployment rate was little changed at 3.9%. U6 unemployment rate increased 0.2% to 7.2%.
The labor force participation rate was little changed at 62.7%.
Average work week decreased 0.1 to 34.3 hours.
Job Openings & Labor Turnover Survey– JOLTS – Released 11/1/2023 – The number of job openings was little changed at 9.6 million on the last business day of September, the U.S. Bureau of Labor Statistics reported. Over the month the number of hires and total separations were little changed at 5.9 million and 5.5 million, respectively. Within separations, quits (3.7 million) and discharges (1.5 million) changed little.
Employment Cost Index– Released 10/31/2023 – Compensation costs for civilian workers increased 1.1% for the 3-month period ending in September 2023. The 12-month period ending in September 2023 saw compensation costs increase by 4.3. The 12-month period ending September 2022 increased 5.0%. Wages and salaries increased 4.6 percent over the 12-month September 2023 and increased 5.1 percent for the 12-month period ending in September 2022. Benefit costs increased 4.1 percent over the 12-month period ending September 2023 and increased 4.9 percent for the 12-month period ending in September 2022. This report is published quarterly.
This Week’s Economic Data
Consumer Credit– Released 11/7/2023 – Consumer credit increased at a seasonally adjusted annual rate of 0.4 percent in the third quarter. Revolving credit increased at an annual rate of 8.6 percent, while nonrevolving credit decreased at an annual rate of 2.4 percent. In September, consumer credit increased at an annual rate of 2.2 percent.
U.S. Trade Balance– Released 11/7/2023 –The U.S. Census Bureau and the U.S. Bureau of Economic Analysis announced that the goods and services deficit was $61.5 billion in September, up $2.9 billion from $58.7 billion in August. September exports were $261.1 billion, $5.7 billion more than August exports. September imports were $322.7 billion, $8.6 billion more than August imports. The September increase in the goods and services deficit reflected an increase in the goods deficit of $1.7 billion to $86.3 billion and a decrease in the services surplus of $1.2 billion to $24.8 billion.
Recent Economic Data
PMI Non-Manufacturing Index – Released 11/3/2023 – Economic activity in the services sector expanded in October for the tenth consecutive month as the Services PMI® registered 51.8 percent, 1.8 percentage points lower than September’s reading of 53.6 percent.
U.S. Construction Spending – Released 11/1/2023 – Construction spending during September 2023 was estimated at a seasonally adjusted annual rate of $1,996.5 billion, 0.4 percent above the revised August estimate of $1,988.3 billion. The September figure is 8.7 percent above the September 2022 estimate of $1,836.9 billion.
PMI Manufacturing Index – Released 11/1/2023 – The October Manufacturing PMI registered 46.7 percent, 2.3 percentage points lower than the 49.0 percent recorded in September. Regarding the overall economy, this contraction follows a month of expansion following nine months of contraction. The New Orders Index remained in contraction territory at 45.5 percent, 3.7 percentage points lower than the figure of 49.2 percent recorded in September. The Production Index reading of 50.4 percent is a 2.1-percentage point decrease compared to September’s figure of 52.5 percent.
Chicago PMI – Released 10/31/2023 – Chicago PMI remained in contraction territory in October decreasing to 44.0 points down from 44.1 points in September. The reading marked the 14th consecutive month of contraction in business activity in the Chicago region.
Consumer Confidence– Released 10/31/2023 – Consumer Confidence decreased for the third consecutive month in October to 102.6, down from 104.3 in September. Expectations fell slightly from 76.4 to 75.6. Expectations for the next six months stayed below the recession threshold of 80, reflecting a decline in confidence about future business conditions, job availability, and incomes. More than two-thirds of consumers still said recession is somewhat or very likely in October.
US Light Vehicle Sales– Released 10/27/2023 –U.S. light vehicle sales were at a seasonally adjusted annual rate (SAAR) of 15.732 million units in September.
Personal Income– Released 10/27/2023 – Personal income increased $77.8 billion (0.3 percent at a monthly rate) in September. Disposable personal income (DPI) increased $56.1 billion (0.3 percent). Personal consumption expenditures (PCE) increased $138.7 billion (0.7 percent).
Third Estimate of 2nd Quarter 2023 GDP– Released 10/26/2023 – Real gross domestic product (GDP) increased at an annual rate of 4.9 percent in the third quarter of 2023, according to the “advance” estimate released by the Bureau of Economic Analysis. In the second quarter, real GDP increased 2.1 percent. The GDP advance estimate is based on source data that are incomplete or subject to further revision. The increase in real GDP reflected increases in consumer spending, private inventory investment, exports, state and local government spending, federal government spending, and residential fixed investment that were partly offset by a decrease in nonresidential fixed investment. Imports, which are a subtraction in the calculation of GDP, increased.
Durable Goods– Released 10/26/2023 – New orders for manufactured durable goods in September, up following two months of declines, increased $13.2 billion or 4.7 percent to $297.2 billion, the U.S. Census Bureau announced today. This followed a 0.1 percent August decrease. Excluding defense, new orders increased 5.8 percent. Transportation Equipment led the increase, $12.3 billion or 12.7 percent to $109.2 billion.
New Residential Sales – Released 10/25/2023 – Sales of new single‐family houses in September 2023 were at a seasonally adjusted annual rate of 759,000, according to estimates released jointly by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 12.3 percent above the revised August rate of 676,000 and is 33.9 percent above the September 2022 estimate of 567,000. The median sales price of new houses sold in September 2023 was $418,800. The average sales price was $503,900. At the end of September, the seasonally adjusted estimate of new homes for sale was 435,000, a supply of 6.9 months at the current sales rate.
Existing Home Sales – Released 10/19/2023 – September 2023 brought 3.96 million in sales, a decrease of 2.0% from August. The median sales price was $394,300. The current unsold housing inventory was 3.4 months of inventory.
Housing Starts – Released 10/18/2023 –September housing starts came in at 1,358,000, 7.0% above the August estimate but is 7.2% below the September 2022 rate. Building permits were 4.4% below the August rate at $1,541,000 and 7.2% below the September 2022 rate.
Industrial Production and Capacity Utilization – Released 10/17/2023 – Industrial production increased 0.3% in September and increased 2.5% for the third quarter. Utilities output decreased 0.3%. Manufacturing increased 0.4%. Mining increased 0.4%. Capacity utilization increased to 79.7% in September, in line with its long-run average.
Retail Sales – Released 10/17/2023 –Headline retail sales increased 0.7% in September and are up 3.8% above September 2022.
Consumer Price Index– Released 10/12/2023 – The Consumer Price Index for All Urban Consumers rose 0.4 percent in September on a seasonally adjusted basis, after increasing 0.6 percent in August. Over the last 12 months, the all items index increased 3.7 percent before seasonal adjustment.
Producer Price Index – Released 10/11/2023 – The Producer Price Index for final demand increased 0.5 percent in September, seasonally adjusted. Final demand increased 0.7 percent in August. On an unadjusted basis, the index for final demand moved up 2.2 percent for the 12 months ended in September.
Next week we get data on PPI, CPI, Retail Sales, Industrial Production and Capacity Utilization, and Housing Starts.
Disclaimer
This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any stock, bond, currency or CFD contract.
Some information contained herein has been obtained from third party sources believed to be reliable, but has not been independently verified by us; its accuracy or completeness is not guaranteed. Our commentary is based on information considered to be reliable, but no representation is made that it is accurate or complete, and should not be relied upon as such.
The views expressed represent the opinions and beliefs at the time of this commentary and are not meant as a market forecast. These views are subject to change at any time based on market or other conditions and Good Life Advisors disclaims any responsibility to update such views. This information may not be relied on as advice or as an indication of trading intent on behalf of any portfolio. Portfolio investments may change at any time.
Economic and performance information referenced is historical and past performance does not guarantee future results. References to future returns are not promises or estimates of actual returns we may achieve, and should not be relied upon.
No investment strategy or risk management process can guarantee returns or eliminate risk in any market environment. Investing in securities involves risk of loss. Stock and Bond prices can decline significantly in response to adverse market conditions, company-specific events, and other domestic and international political and economic developments. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future.
While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Weekly Market Update | Week 45, 2023
US equities were mostly higher this week, with the S&P and Nasdaq adding to last week’s big rally (while the small-cap Russell notched its 12th decline of the past 15 weeks). Big tech was broadly higher, once again boosting the official S&P while the equal-weight variant posted a decline; RSP (0.6%).
Treasuries were weaker with the curve flattening; the 2Y moved back above 5%. The move came amid a focus on somewhat hawkish Powell comments and notably weak demand at this week’s 30Y auction. The dollar was higher overall, particularly on the yen and sterling crosses; DXY +0.8%. Gold (3.1%) was down after peeking above $2,000/oz in last week’s trading. Crude logged its third-straight weekly decline, with WTI settling down 4.1%
Stocks added on to the prior week’s big gains despite a lack of big stimuli and amid a decelerating Q3 earnings season. Thursday was the only session this week that saw the S&P move lower, with investors that day reacting negatively to some hawkish-leaning commentary from Fed Chair Powell and notably weak demand for a $24B auction of 30-year Treasury bonds.
But despite Powell’s comments about the Fed not hesitating to hike if necessary, there was no change to market expectations for the Fed to hold rates at the current level and begin to ease by mid-2024; and despite renewed worries about larger Treasury supply, 30Y yields remained well below the 5%+ that was seen as recently as late October.
Even the week’s most notable economic release–Friday’s weak preliminary November UMich consumer sentiment reading reflecting higher-than-expected inflation expectations–did nothing to stop the S&P from posting its biggest gain of the week.
Against this backdrop, there continued to be a debate about how durable the current bounce could prove, or whether it was little more than a bear-market rally. Bulls tended to point to the positive effects of a Peak Fed stance, recent “goldilocks” economic data, contrarian signaling from positioning/sentiment indicators, the return of corporate buybacks, and positive Nov-Dec seasonality.
Bears remained worried about the Fed giving up the inflation fight too soon, the lagged impacts of rate tightening already in the system, weaker corporate commentary about the macro backdrop, outsized cuts to Q4 earnings estimates, and lingering recession fears.
Next week’s economic calendar will be much busier, featuring highly anticipated reports for October CPI (Tuesday) and October retail sales (Wednesday). There will also be releases for PPI, housing starts, and November NY/Philadelphia manufacturing surveys.
Expect increased chatter about a government shutdown ahead of the 17-Nov expiration of funding authority; while there has been talk about another continuing resolution, House GOP dysfunction could make that a challenge. It will be another week thick with Fedspeak, with appearances from Williams, Goolsbee, Mester, Jefferson, Barr, Cook, and Waller.
Fixed Income
Yield Curve
July 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 was down 2 this week. There are 616 oil and gas rigs operating in the US – Down 163 from last year.
Metals Complex
This Week’s Employment Picture
Weekly Unemployment Claims – Released Thursday 11/9/2023 – In the week ending November 4, the advance figure for seasonally adjusted initial claims was 217,000 down 3,000 from the previous week’s revised level. The 4-week moving average was 212,250 an increase of 1,500 from the previous week’s revised average.
October Jobs Report – BLS Summary – Released 11/3/2023 – The US Economy added 150k nonfarm jobs in October and the Unemployment rate was little changed at 3.9%. Average hourly earnings increased 7 cents to $34.00. Hiring highlights include +89k Education and Health Services, +51k Government, and +23k Construction.
Job Openings & Labor Turnover Survey – JOLTS – Released 11/1/2023 – The number of job openings was little changed at 9.6 million on the last business day of September, the U.S. Bureau of Labor Statistics reported. Over the month the number of hires and total separations were little changed at 5.9 million and 5.5 million, respectively. Within separations, quits (3.7 million) and discharges (1.5 million) changed little.
Employment Cost Index – Released 10/31/2023 – Compensation costs for civilian workers increased 1.1% for the 3-month period ending in September 2023. The 12-month period ending in September 2023 saw compensation costs increase by 4.3. The 12-month period ending September 2022 increased 5.0%. Wages and salaries increased 4.6 percent over the 12-month September 2023 and increased 5.1 percent for the 12-month period ending in September 2022. Benefit costs increased 4.1 percent over the 12-month period ending September 2023 and increased 4.9 percent for the 12-month period ending in September 2022. This report is published quarterly.
This Week’s Economic Data
Consumer Credit – Released 11/7/2023 – Consumer credit increased at a seasonally adjusted annual rate of 0.4 percent in the third quarter. Revolving credit increased at an annual rate of 8.6 percent, while nonrevolving credit decreased at an annual rate of 2.4 percent. In September, consumer credit increased at an annual rate of 2.2 percent.
U.S. Trade Balance – Released 11/7/2023 – The U.S. Census Bureau and the U.S. Bureau of Economic Analysis announced that the goods and services deficit was $61.5 billion in September, up $2.9 billion from $58.7 billion in August. September exports were $261.1 billion, $5.7 billion more than August exports. September imports were $322.7 billion, $8.6 billion more than August imports. The September increase in the goods and services deficit reflected an increase in the goods deficit of $1.7 billion to $86.3 billion and a decrease in the services surplus of $1.2 billion to $24.8 billion.
Recent Economic Data
PMI Non-Manufacturing Index – Released 11/3/2023 – Economic activity in the services sector expanded in October for the tenth consecutive month as the Services PMI® registered 51.8 percent, 1.8 percentage points lower than September’s reading of 53.6 percent.
U.S. Construction Spending – Released 11/1/2023 – Construction spending during September 2023 was estimated at a seasonally adjusted annual rate of $1,996.5 billion, 0.4 percent above the revised August estimate of $1,988.3 billion. The September figure is 8.7 percent above the September 2022 estimate of $1,836.9 billion.
PMI Manufacturing Index – Released 11/1/2023 – The October Manufacturing PMI registered 46.7 percent, 2.3 percentage points lower than the 49.0 percent recorded in September. Regarding the overall economy, this contraction follows a month of expansion following nine months of contraction. The New Orders Index remained in contraction territory at 45.5 percent, 3.7 percentage points lower than the figure of 49.2 percent recorded in September. The Production Index reading of 50.4 percent is a 2.1-percentage point decrease compared to September’s figure of 52.5 percent.
Chicago PMI – Released 10/31/2023 – Chicago PMI remained in contraction territory in October decreasing to 44.0 points down from 44.1 points in September. The reading marked the 14th consecutive month of contraction in business activity in the Chicago region.
Consumer Confidence – Released 10/31/2023 – Consumer Confidence decreased for the third consecutive month in October to 102.6, down from 104.3 in September. Expectations fell slightly from 76.4 to 75.6. Expectations for the next six months stayed below the recession threshold of 80, reflecting a decline in confidence about future business conditions, job availability, and incomes. More than two-thirds of consumers still said recession is somewhat or very likely in October.
US Light Vehicle Sales – Released 10/27/2023 – U.S. light vehicle sales were at a seasonally adjusted annual rate (SAAR) of 15.732 million units in September.
Personal Income – Released 10/27/2023 – Personal income increased $77.8 billion (0.3 percent at a monthly rate) in September. Disposable personal income (DPI) increased $56.1 billion (0.3 percent). Personal consumption expenditures (PCE) increased $138.7 billion (0.7 percent).
Third Estimate of 2nd Quarter 2023 GDP – Released 10/26/2023 – Real gross domestic product (GDP) increased at an annual rate of 4.9 percent in the third quarter of 2023, according to the “advance” estimate released by the Bureau of Economic Analysis. In the second quarter, real GDP increased 2.1 percent. The GDP advance estimate is based on source data that are incomplete or subject to further revision. The increase in real GDP reflected increases in consumer spending, private inventory investment, exports, state and local government spending, federal government spending, and residential fixed investment that were partly offset by a decrease in nonresidential fixed investment. Imports, which are a subtraction in the calculation of GDP, increased.
Durable Goods – Released 10/26/2023 – New orders for manufactured durable goods in September, up following two months of declines, increased $13.2 billion or 4.7 percent to $297.2 billion, the U.S. Census Bureau announced today. This followed a 0.1 percent August decrease. Excluding defense, new orders increased 5.8 percent. Transportation Equipment led the increase, $12.3 billion or 12.7 percent to $109.2 billion.
New Residential Sales – Released 10/25/2023 – Sales of new single‐family houses in September 2023 were at a seasonally adjusted annual rate of 759,000, according to estimates released jointly by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 12.3 percent above the revised August rate of 676,000 and is 33.9 percent above the September 2022 estimate of 567,000. The median sales price of new houses sold in September 2023 was $418,800. The average sales price was $503,900. At the end of September, the seasonally adjusted estimate of new homes for sale was 435,000, a supply of 6.9 months at the current sales rate.
Existing Home Sales – Released 10/19/2023 – September 2023 brought 3.96 million in sales, a decrease of 2.0% from August. The median sales price was $394,300. The current unsold housing inventory was 3.4 months of inventory.
Housing Starts – Released 10/18/2023 – September housing starts came in at 1,358,000, 7.0% above the August estimate but is 7.2% below the September 2022 rate. Building permits were 4.4% below the August rate at $1,541,000 and 7.2% below the September 2022 rate.
Industrial Production and Capacity Utilization – Released 10/17/2023 – Industrial production increased 0.3% in September and increased 2.5% for the third quarter. Utilities output decreased 0.3%. Manufacturing increased 0.4%. Mining increased 0.4%. Capacity utilization increased to 79.7% in September, in line with its long-run average.
Retail Sales – Released 10/17/2023 – Headline retail sales increased 0.7% in September and are up 3.8% above September 2022.
Consumer Price Index – Released 10/12/2023 – The Consumer Price Index for All Urban Consumers rose 0.4 percent in September on a seasonally adjusted basis, after increasing 0.6 percent in August. Over the last 12 months, the all items index increased 3.7 percent before seasonal adjustment.
Producer Price Index – Released 10/11/2023 – The Producer Price Index for final demand increased 0.5 percent in September, seasonally adjusted. Final demand increased 0.7 percent in August. On an unadjusted basis, the index for final demand moved up 2.2 percent for the 12 months ended in September.
Next week we get data on PPI, CPI, Retail Sales, Industrial Production and Capacity Utilization, and Housing Starts.
Disclaimer
This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any stock, bond, currency or CFD contract.
Some information contained herein has been obtained from third party sources believed to be reliable, but has not been independently verified by us; its accuracy or completeness is not guaranteed. Our commentary is based on information considered to be reliable, but no representation is made that it is accurate or complete, and should not be relied upon as such.
The views expressed represent the opinions and beliefs at the time of this commentary and are not meant as a market forecast. These views are subject to change at any time based on market or other conditions and Good Life Advisors disclaims any responsibility to update such views. This information may not be relied on as advice or as an indication of trading intent on behalf of any portfolio. Portfolio investments may change at any time.
Economic and performance information referenced is historical and past performance does not guarantee future results. References to future returns are not promises or estimates of actual returns we may achieve, and should not be relied upon.
No investment strategy or risk management process can guarantee returns or eliminate risk in any market environment. Investing in securities involves risk of loss. Stock and Bond prices can decline significantly in response to adverse market conditions, company-specific events, and other domestic and international political and economic developments. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future.
While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Data Sources:
Conference Board Economic Indicators 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 All capital in one visualization 2020
US Energy Admn (EIA) BLS Consumer Price Index CPI BLS Producer Price Index PPIAtlanta Fed GDPNOW NY Fed Nowcast GDP US Census Bureau Housing Starts U.S. Energy Admn
Consumer Credit USCB Retail Sales Construction Spending Federal Reserve Dot Plots 2017 NY Empire Index Philadelphia Federal Reserve P/E Ratio Data -Yardeni Research
Technical Analysis Info: Koyfin.com StockCharts.com – Financial Charts Exponential vs Simple Moving Average
Other links: 1973 Arab Oil Embargo Hunt Brothers Silver Asian Contagion Long-Term Capital bailout
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