FED Rate Cut, Stronger than Expected Jobs and Mixed Trade Signals

04 Nov

Trade provided mixed signals as signs of progress towards the phase one deal came early in the week.  However, on Thursday, Chinese officials expressed doubt that they’ll be able to reach a long-term deal with Trump.  The FED cut short term rates for the third time this year with the Fed funds rate now targeted to 1.5% to 1.75%.  The FED also changed the language in it’s press release in a way that was deemed to raise the bar for further rate cuts.  Economic news was generally positive with a stronger than expected Q3 gross domestic product and stronger than expected jobs growth, pushing market indexes higher for the week.

The 10-Year Treasury fell to 1.716%.  The dollar weakened against a basket of currencies.  Crude oil fell to $56.02 a barrel and gold rose to $1515 an ounce.

In economic numbers this week:

  • The S&P CoreLogic Case-Shiller home price index was up 3.2% in August from a year earlier, up from 3.1% year over year in July.  Still home prices year to date are growing more slowly than they were last August.
  • Freddie Mac reported that the average 30-year mortgage rate fell to 3.75% last week after climbing to nearly 5% last November.
  • IHS Markit reported it’s U.S. Manufacturing PMI seasonally adjusted rose from 51.1 to 51.3.
  • The private Caixin/Markit Manufacturing Purchasing Manager’s Index rose from 51.4 to 51.7.
  • The Commerce Department reported
    • U.S. gross domestic product grew 1.9% in the third quarter, better than estimates for 1.6% growth but slower than the 2.0% posted in the second quarter.  Government and consumer spending were attributed to the growth.
    • Exports rose 0.7% in Q3.
    • Disposable income rose 0.3%, adjusted for inflation.
    • Personal-consumption expenditures rose 0.2% in September.
    • The price-index for personal-consumption expenditures fell a seasonally adjusted 0.1% in September.  From a year earlier the index was up 1.33%.  Core prices, excluding volatile food and energy, have risen 1.7% from a year earlier.  This is the FED’s preferred measure of inflation and is below the FED’s 2% target.
    • The personal savings rate increased from 8.1% in August to 8.3% in September.
  • The Labor Department reported
    • First time claims for unemployment rose 5,000 to a seasonally adjusted 218,000.  The four week moving average of claims declined to 214,750.
    • Payrolls rose 128,000 in October despite the GM strike, which was estimated to reduce payrolls by 41,600.  The unemployment rate rose from 3.5% to 3.6% as hundreds of thousands of people joined the workforce.  August and September were also revised higher by another 95,000 jobs.
  • The EIA weekly oil report is here: wpsrsummary.  Also, the EIA reported in the past week:
    • Field production of crude oil was unchanged at 12.6MM barrels per day.
    • Natural gas storage increased by 89BN cubic feet and is and is slightly above the five year average at this time of year.
  • Factset reported with 71% of S&P 500 companies reporting Q3earnings, the blended earnings decline was 2.7%.  76% of companies have beaten their estimates which is above the five year average.
  • Baker Hughes reported the number of active oil rigs fell 5 to 691 and the number of active gas rigs fell 3 to 130.

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Best Regards,

Loren C. Rex, CFP®, AIF®, MA                                                       Erik A Smith

President                                                                                               Managing Partner

Generations Financial Planning & Wealth Management           269-441-4143

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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.