Stocks sold off this week with many individual stocks reacting to earnings announcements.  Gross domestic product, durable goods orders and new home sales data released this week all pointed to an accelerating economy.  This coupled with a strong labor market makes the FED’s position in fighting inflation challenging.  The FED may decide to hold short term rates at the November meeting due to the recent increase in bond yields but may have to act further to bring down inflation to its 2% goal.  Geopolitical uncertainty also affected stock prices as US aircraft attacked Iran-supported bases in Syria in response to ongoing but mostly unsuccessful attacks against U.S. troops in Iraq and Syria.  Meanwhile, Israel prepares for an invasion into the Gaza strip.

The European Central Bank met this week and decided to leave its short-term interest rate at 4.0%, following 10 straight rate hikes.  ECB president Christine Lagarde cited increased risks of economic weakness in the EU. 

The Bank of Canada met and chose to keep its benchmark interest rate at 5.0% citing slowing consumption.

Turkey’s central bank hiked its short-term rate by 5% to 35%.  This was the fifth hike by Turkey’s central bank.  Turkey is seeing inflation near 70%.

Treasury bond yields fell with the 30-year bond yield at 5.019% and the 10-Year note at 4.844%.  Freddie Mac reported that the average 30-year mortgage rate rose to 7.79%.  Crude oil fell to $85.11 a barrel and natural gas rose to $3.158 per MMBTUs.  The U.S. dollar index fell to 106.16 and gold rose to $2016.30 an ounce.

• The Bureau of Economic Analysis reported that the U.S. real gross domestic product rose at a 4.9% annual rate in the third quarter following a 2.1% annualized gain in the second quarter. 
  • This rate is adjusted for inflation.
  • Consumer spending, private inventory investment, exports, state and local government spending, federal government spending, and residential fixed investment all increased.
  • Nonresidential fixed investment decreased, and imports increased to offset the other increases.

• • The personal savings rate fell to 3.8% in Q3 versus 5.2% in Q2.
• The Commerce Department reported:
  • New home sales rose a seasonally adjusted 12.3% in September and are up 33.9% from last September.
    • Sales were strongest in the Northeast and West.
    • The Midwest was the weakest with an increase of 4.7% for the month of September and the same amount year over year.
    • The median sale price of a new home was $418,800.
  • Personal consumption expenditures rose 0.7% in September.
  • The PCE price index rose 0.4% in September and is up 3.4% from a year ago.
    • Excluding volatile food and energy the PCE index rose 0.3% in September and 3.7% from a year ago.  This is the FED’s preferred measure of inflation.
  • Personal incomes rose 0.3% and adjusted for inflation fell 0.1%.
  • Durable goods orders surged in September to a 4.7% gain following two monthly declines.

• The Labor Department reported:
  • Seasonally adjusted first-time claims for unemployment were 210,000, an increase from the previous week’s revised level of 200,000.
    • The 4-week moving average of claims, designed to smooth out volatility, was 207,500, an increase of 1250 from the previous week’s revised level. 
    • For the full unemployment report go here:  https://www.dol.gov/ui/data.pdf .
• The EIA weekly oil report is here: http://ir.eia.gov/wpsr/wpsrsummary.pdf .  Also, the EIA reported in the prior week:
  • Field production of crude oil was unchanged at 13.2MM BPD.
  • Natural gas storage rose 74BN cubic feet and is above the 5-year average at this time of year.
• Baker Hughes reported the number of active oil rigs rose 2 to 504.  The number of active natural gas rigs fell 1 to 117.
• Factset reported with 49% of S&P 500 companies reporting 3^rd quarter earnings, the blended earnings increase from last year is 2.7%.

Please call us if you have any questions.

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

Founder / Emeritus                                                                            President & C.E.O.                                  

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.

Sources:

https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=WCRFPUS2&f=W

https://ir.eia.gov/ngs/ngs.html

https://www.freddiemac.com/pmms

https://www.wsj.com/market-data?mod=nav_top_subsection

https://bakerhughesrigcount.gcs-web.com/na-rig-count

https://www.census.gov/economic-indicators

https://www.bea.gov/data/gdp/gross-domestic-product