Anticipation about the direction of interest rates drove stocks last week.  The monthly core PCE price index, released Thursday, posted a monthly increase of 0.3%, the highest since April.  While inflation has come down substantially, progress seems to have stalled above the FED’s target.  This raised doubts about a FED cut in November.  Technology stocks were hard hit after the auditor at one company resigned because it was “unwilling to be associated with the financial statements prepared by management.”  Other technology companies, while posting strong earnings cited the costs of implement AI as likely to slow growth going forward. 

On Friday, the weak jobs number increased speculation that the FED may cut again this week, and stocks recovered some of the losses.  Most major indices ended the week with modest losses with the small cap Russell 2000 breaking even for the week.

Treasury bond yields rose with the 30-year bond yield at 4.574% and the 10-Year note at 4.383%.  Freddie Mac reported that the average 30-year mortgage rate rose to 6.72%.  Crude oil fell to $69.48 a barrel and natural gas fell to $2.662 per MMBTUs.  The U.S. dollar index was unchanged at 104.32 and gold fell to $2743.90 an ounce.

In economic reports this week:

• S&P Global released the following manufacturing purchasing manager’s indices for October.  Keep in mind that anything over 50 represents expansion and anything under 50 represents contraction.
  • U.S. rose from 47.3 to 48.5.
  • Mexico rose from 47.3 to 48.4.
  • Canada rose from 50.4 to 51.1.
  • China rose from 49.3 to 50.3
  • Japan fell from 49.7 to 49.2.
• The Commerce Department reported:
  • The first estimate of 3^rd quarter gross domestic product grew at an annual rate of 2.8%, below the 3.0% rate in the 2^nd quarter.

• • Personal consumption expenditures rose 0.5% in September or 0.3% adjusted for inflation.
    • The PCE price index rose 0.2% in September and was up 2.1% from a year ago.
    • Excluding volatile food and energy, the PCE price index rose 0.3%, up from 0.2% in August.  This is the FED’s preferred measure of inflation.
      • From a year ago, the index was up 2.7%, the same as August and July.
    • Personal incomes rose 0.3%, in-line with core PCE prices.
  • Construction spending rose a seasonally adjusted 0.1% in September after rising 0.1% in August.

• The Labor department reported:
  • Job openings, hires and separations changed little in September.  However, the number of job openings has been trending down for nearly the past year.

• • Seasonally adjusted first-time claims for unemployment were 216,000, a decrease of 12,000 from the previous week’s revised level.  
    • The 4-week moving average of claims, designed to smooth out volatility, was 236,500 an increase of 2250 from the previous week’s revised level. 
    • For the full unemployment report go here:  https://www.dol.gov/ui/data.pdf .
  • Non-farm payrolls rose slightly by 12,000 jobs in October, while the unemployment rate was unchanged at 4.2%.
    • The weak number of jobs created was attributed to the Boeing strike and disruptions from hurricanes.
    • Hourly wages rose 0.4% in October.
• 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 a record 13.5MM BPD.
  • Natural gas storage rose 78BN cubic feet and is above the average level during the past five years at this time of year.
• Baker Hughes reported the number of oil rigs fell 1 to 479 and the number of natural gas rigs rose 1 to 102.
• Factset reported with 70% of S&P 500 companies reporting Q3 earnings the blended earnings increase is 5.1% from a year ago.

Please call us if you have any questions.

Loren Rex – Emeritus

Erik A Smith, AIF® – 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. The Dow Jones Industrial Average, Dow Jones, or simply the Dow, is a stock market index of 30 prominent companies listed on stock exchanges in the United States. The DJIA is one of the oldest and most commonly followed equity indexes. The Nasdaq Composite is a stock market index that includes almost all stocks listed on the Nasdaq stock exchange (more than 2500 stocks).

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.bls.gov/news.release/empsit.nr0.htm

https://www.pmi.spglobal.com/Public/Release/PressReleases