Major stock indices moved higher again this week as traders become more confident that the FED will no longer need to hike rates.  While the headline consumer price index was unchanged in October, this was mainly due to a 2.5% drop in energy prices.  The consumer price index and the producer price index from a year ago continue to move lower largely due to falling energy prices.  However, excluding volatile food and energy, core consumer prices have still risen twice the FED’s goal of 4.0%.  So it may be a bit premature to declare mission accomplished and even more premature to anticipate rate cuts.

Moody’s placed U.S. federal government debt ratings on a negative watchlist.  Although they still rate the government debt as AAA, it could be lowered.  Fitch, downgraded U.S. debt from AAA to AA+ three months ago and Standard and Poor’s lowered the rating from AAA to AA+ back in 2011.

Treasury bond yields fell with the 30-year bond yield at 4.597% and the 10-Year note at 4.434%.  Freddie Mac reported that the average 30-year mortgage rate fell to 7.44%.  Crude oil fell to $75.76 a barrel and natural gas fell to $3.139 per MMBTUs.  The U.S. dollar index fell to 103.86 and gold rose to $1982.70 an ounce.

• Japan reported that it’s gross domestic product fell at a 2.1% annual rate in the third quarter.  Japan’s GDP had increased at a 4.8% annual rate in the 2^nd quarter.
• China reported:
  • Retail sales in October were up 7.6% from a year ago.
  • Industrial production was up 4.6%.
  • Investment in property development has fallen 9.1% for the first ten months of 2023 versus the same period in 2022.
  • Residential property sales have fallen 3.7% in the same period versus a year ago.
• The Treasury Department reported that the U.S. budget deficit was $66.6BN in October, down from $87.9BN last October.

                                Source: U.S. Department of Treasury

• The Commerce Department reported
  • Advance Retail Sales fell 0.1% in October, although this was largely due to a fall in auto sales due to the UAW strike.
• • Seasonally adjusted housing starts in October rose 1.9% above the revised September number but are 4.2% below last October.
    • Single family starts rose 0.2%.
    • Multi-family starts (5 units or more) rose 4.9%.
    • Permits, an indication of future housing starts 1.1%.

• The Federal Reserve reported that industrial production fell 0.6% in October and is down 0.7% from a year ago.
  • Much of the October decline was caused by a 10% drop in motor vehicle production due to UAW strikes.
  • Manufacturing fell 0.7% and was down 1.8% from a year ago.
  • Mining, including oil and gas production, was up 0.4% in October and 2.2% from a year ago.
  • Utilities were down 1.6% for the month and were up 2.9% from a year ago.
• The Labor Department reported:
  • The consumer price index for October was unchanged following a 0.4% increase in September.
    • From a year ago the CPI has increased 3.2%.
    • Energy prices fell 2.5% in October.
    • Food prices rose 0.3%.
    • Shelter prices rose 6.7%.
    • All items excluding volatile food and energy rose 0.2% and are up 4.0% from a year ago.
  • The producer price index fell a seasonally adjusted 0.5% in October following a 0.4% rise in September.  This was the largest drop since April 2020.
    • The index was up 1.3% from a year ago.
    • Excluding volatile food, energy and trade services, the producer price index rose 0.1% in October and is up 2.9% from a year ago. 
  • Seasonally adjusted first-time claims for unemployment were 231,000, an increase from the previous week’s revised level of 218,000.
    • The 4-week moving average of claims, designed to smooth out volatility, was 220,250, an increase of 7750 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 60BN cubic feet and is above the 5-year average at this time of year.
• Baker Hughes reported the number of active oil rigs rose 6 to 500.  The number of active natural gas rigs fell 4 to 114.
• Factset reported with 94% of S&P 500 companies reporting 3^rd quarter earnings, the blended earnings increase from last year is 4.3%.

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.federalreserve.gov/releases/g19/current/default.htm

https://www.bloomberg.com/news/articles/2023-11-14/japan-s-economy-slips-into-reverse-amid-weak-yen-inflation?sref=rkXJdUyz

https://www.bls.gov/cpi/

https://www.bls.gov/ppi/

https://www.bloomberg.com/news/articles/2023-11-15/china-property-slump-deepens-as-beijing-mulls-more-stimulus?sref=rkXJdUyz

https://www.bloomberg.com/news/articles/2023-11-15/china-s-economic-activity-mixed-as-beijing-steps-up-support?sref=rkXJdUyz