Stocks continued to rally as the 3rd quarter gross domestic product rose after two quarters of declines. It was an active week for earnings as some large company stocks fell or rose sharply after earnings releases. The biggest gains this week were in the Dow 30 Industrials and the Small Cap Russell 2000 indices. Gains were much smaller in the tech heavy Nasdaq and the developed international indices while emerging markets fell.
While Europe will struggle this winter with high natural gas prices, in the shale patch of Texas, natural gas prices went negative on Tuesday. Production of shale oil has increased since the pandemic but there is a shortage of pipeline capacity to take the natural gas produced as a byproduct. Unfortunately, this leads to natural gas being flared which adds significant planet warming carbon dioxide. The shortage of gas in Europe after Russian pipeline shutdowns has prompted the U.S. and other countries to increase exports of liquified natural gas by ship. Many ships are waiting off the coasts of European countries for an opening to unload. Since parts of eastern U.S. also depend on liquified natural gas, as they don’t have pipelines, they are also seeing prices spike.
Canada’s central bank met and chose to raise short term interest rates by a smaller than expected 0.5% to 3.75%. This caused speculation that the U.S. Federal Reserve may choose a smaller rate hike in November resulting in a fall in U.S. bond yields and an upward move in stocks.
Japan’s central bank met and chose to leave interest rates unchanged and to continue targeting at rate of 0% on the 10-year bond. Japan has maintained its dovish stance despite experiencing moderately increased inflation and expects prices to rise to 2.9% in the current fiscal year. The central bank has intervened to boost the Yen which has fallen in value as other countries raise rates.
The European Central Bank met and rose short term interest rates by 0.75% to 1.5%. It also limited payment of low interest loans to banks as part of its Covid relief strategy.
Treasury bond yields fell sharply with the 30-year bond at 4.146% and the 10-Year note at 4.016%. 30 year mortgage rates fell to 7.10%. Crude oil rose to $88.37 a barrel and natural gas rose to $6.057 per MMBTUs. The U.S. dollar index fell to 110.67 and gold fell to $1648.30 an ounce.
- China released it’s 3rd quarter gross domestic product and showed growth of 3.9% from a year ago, this was up from the 0.4% year over year increase in the 2nd quarter when large cities like Shanghai were locked down.
- The S&P CoreLogic Case-Shiller National Home Price Index fell 1.1% in August but was up 13% from a year earlier. This was down from 15.6% year over year in July.
- The Commerce Department reported.
- New home sales declined 10.9% in the month of September on higher mortgage rates.
- Gross domestic product grew at a 2.6% annual pace in the 3rd quarter, following negative numbers in the first two quarters of 2022.
- Durable goods orders rose 0.4% in September, the sixth increase in the last seven months.
- Orders for commercial aircraft rose 21.9%.
- Orders for cars and trucks rose 2.2%
- Core orders, excluding volatile transportation and military spending, fell 0.7%.
- Consumer spending rose 0.6% in the month of September. This is not adjusted for inflation.
- The Personal Consumption Price index, the FED’s preferred measure of inflation, was up 6.2% from a year ago, the same rate as in August.
- Excluding volatile food and energy, core prices were up 5.1% in September, up from 4.9% in August and the highest increase since March.
- The Labor Department reported seasonally adjusted first time claims for unemployment were 217,000, up from 214,000 in the prior week.
- The 4-week moving average of claims, designed to smooth out volatility, was 219,000 up from a revised 212,250.
- For the full unemployment report go here: https://www.dol.gov/ui/data.pdf .
- Worker pay and benefits in the third quarter have risen 5% from a year earlier, down slightly from the 2nd quarter.
- 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 12.0MM BPD.
- Natural gas storage rose 52BN cubic feet and is below the 5-year average at this time of year.
- Baker Hughes reported the number of active oil rigs fell 2 to 610. The number of active natural gas rigs fell 1 to 156.
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Loren C. Rex, CFP®, MA Erik A Smith, AIF®
Founder / Emeritus President & C.E.O. 269-441-4143 517-795-2025
Registered Representative of and securities offered through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Cambridge and Generations Financial Planning & Wealth Management are separate companies and are not affiliated.
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.