October retained its reputation as a volatile month. Stocks ended the volatile week with little change. The early week rally faded after the FED released its September minutes on Wednesday indicating that gradual interest rate increases are likely to continue. Economic data were mixed for the week. The 10 year Treasury yield moved back up to 3.2% and the dollar appreciated against a basket of currencies. Gold prices rose and oil prices fell.
In the numbers this week:
- The National Association of Realtors reported
- Existing home sales fell 3.4% in September and were down 4.1% from last September. A shortage of existing homes, increased prices and higher mortgage rates were attributed to the decline. Also, the limits in the new tax law for deducting mortgage interest and property taxes were to blame, in high cost areas.
- The median price for an existing home rose 4.2% from a year earlier.
- China reported that its growth rate fell to 6.5% annual pace in the third quarter. Growth in industrial output and consumption softened while exports maintained their growth despite U.S. tariffs, most of which started in late September.
- The Commerce Department reported:
- Retail sales rose only 0.1% in September. The smaller increase may have been due to hurricane Florence.
- Housing starts fell 5.3% in September but were up 6.4% for the first nine months of 2018 compared to 2017. Single family starts were down 0.9% and multifamily starts were down 12.9%.
- Building permits, a sign of future housing starts fell only 0.6% in September.
- The Treasury Department reported that the federal deficit was $779BN in the fiscal year ending September 30th, 17% higher than the previous year. Government receipts were only up 0.4% as growth offset the tax cuts starting in January. Higher interest on the federal debt and increased military spending were largely responsible for the increase.
- The College Board reported that college costs, adjusted for inflation, were mostly flat to down in the 2018-2019 school year, due to more and larger scholarships being given. On average, after scholarships, the average inflation adjusted cost of a four-year public college or university fell to $14,880 versus $14,910 in the previous year. Still college costs have risen $3400 a year, adjusted for inflation, over the past decade.
- The U.N. conference on Trade and Development reported that global business investment flows fell 41% in the first half of 2018 to the lowest level since 2005. Keep in mind that foreign profits produced and retained overseas by U.S. companies was counted as foreign investment. So, the repatriation of foreign profits under the new tax law is largely responsible for the decline. In the first half of 2018 U.S. companies have repatriated back to the U.S. over $464BN in retained foreign earnings.
- The Federal Reserve reported that industrial production rose 0.3% in September after increasing 0.2% in August. For the third quarter industrial production rose at an annual rate of 3.3% down from 5.3% in the second quarter. Manufacturing increased 0.2% in September while mining output increased 0.5% and utilities were unchanged.
- The Labor department reported First time claims for unemployment fell 5,000 at a seasonally adjusted 210,000. The four-week moving average of claims rose 2000 to a seasonally adjusted 211,750.
- The Energy Information Administration weekly report is here: wpsrsummary. Also, the EIA reported
- U.S. Crude oil production fell from 11.2MM barrels per day to 10.9MM barrels per day.
- Storage of natural gas rose 81BN cubic feet. Natural gas storage is below the minimum for this date during the past five years.
- According to Baker Hughes, In the past week, the number of active oil rigs rose 4 to 873 and natural gas rigs rose 1 to 194.
- Factset reported, with 6% of S&P 500 companies reporting 3rd quarter earnings, the blended earnings increase was 19.1% from the 3rd quarter of last year. Four companies reported negative guidance and three reported positive guidance for future quarters.
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Loren C. Rex, CFP®, AIF®, MA Erik A Smith
President Managing Partner
Generations Financial Planning & Wealth Management 269-441-4143
77 E. Michigan Ave, Suite 140
Battle Creek, MI 49017
Carrie Fuce, Assistant 269-441-4091
Toll Free: 800-513-8180
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These are the opinions of Loren Rex and Erik Smith and are not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice. The Indices mentioned are unmanaged and cannot be invested into directly.