October was the worst month since 2011 as trade fears weighed on the markets. At its worst, the S&P 500 index was down nearly 10% from its September 20th high to its October 29th low but the month ended on a strong note that extended into November as optimism rose that negotiations with China could resume. The renewed Iran sanctions are now taking effect. October was a strong month for job creation and inflation remains moderate. The 10-year Treasury yield rose to 3.21% on the strong jobs number. The dollar ended the week slightly higher and crude oil fell 2.5%.
In the numbers this week:
- Automotive News reported that October car sales came it at a seasonally adjusted annualized rate of 17.59MN cars with October being the best month of 2018.
- The IRS announced higher limits for retirement account contributions as follows:
- $6,000 (before over age 50 catchup) for IRA contributions up from $5,500. The catchup amount remains at $1000.
- $19,000 salary deferral (before over age 50 catchup) for 401k contributions up from $18,500. The catchup amount remains at $6,000.
- Self-employed individuals will be able to contribute up to $56,000 into a SEP IRA or Individual 401k. Individual 401ks also can have up to $6,000 catchup contribution.
- The Institute for Supply Management reported that its manufacturing purchasing managers index fell to 57.7 in October from 59.8 in September. Anything over 50 still represents growth, just at a slower acceleration.
- The Caixin and IHS Markit, China purchasing managers index was 50.1 in October up from 50.0 in September. 50.0 indicates no change.
- The S&P CoreLogic Case-Shiller National Home Price Index was up 5.8% in August from the prior year which is down from the 6.0% increase in July.
- The Commerce Department reported:
- Personal Consumption Expenditures rose 0.4% in September. The increase was due mainly to automobiles and healthcare expenditures.
- The PCE price index rose 0.1% in September. This is the FED’s preferred measure of inflation and has been slowing in recent months but remains at 2.0% over the past 12 months, the FED’s target.
- Personal Income rose 0.2% in September.
- The U.S. Trade deficit rose to $54BN in September, but both imports and exports grew. The deficit with China hit a record of $40.2BN. Keep in mind that most of the tariffs on Chinese imports took place late in September.
- The Labor department reported
- First time claims for unemployment fell 2,000 at a seasonally adjusted 214,000. The four-week moving average of claims was rose to 213,750.
- Productivity rose at a 2.2% annual rate in the third quarter.
- Unit labor costs rose at a 1.2% annual rate in the third quarter.
- Over the past 12 months wages and salaries have risen 3.1%, the fastest since the second quarter of 2008.
- In the month of October 250,000 jobs were created and the unemployment rate held steady at 3.7%.
- Wages rose 0.2% in October but were up 3.0% from a year earlier.
- The Energy Information Administration weekly report is here wpsrsummary. Also, the EIA reported
- U.S. Crude oil production from 10.9MM barrels per day to 11.2MM barrels per day.
- Storage of natural gas rose 48BN 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 fell 1 to 874 and natural gas rigs were unchanged at 193.
- Factset reported, with 74% of S&P 500 companies reporting 3rd quarter earnings, the blended earnings increase was 24.9% from the 3rd quarter of last year. However, 46 companies reported negative guidance and 24 reported positive guidance for future quarters in many cases citing tariffs.
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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.