Stocks sold off last week after the previous weeks’ strong rally.  The selloff was accelerated by Fed Chairman Powell’s comments on Thursday that with the economy growing, a strong labor market and inflation still above the FED’s target, that the FED can deliberate carefully on additional rate cuts.  This along with price index data no longer declining, raised concerns about more FED rate cuts.  The biggest decline was in emerging markets with only a slight decline In the Dow 30 industrials.

Treasury bond yields were mixed with the 30-year bond yield at 4.619% and the 10-Year note at 4.444%.  Freddie Mac reported that the average 30-year mortgage rate fell to 6.78%.  Crude oil fell to $66.95 a barrel and natural gas rose to $2.836 per MMBTUs.  The U.S. dollar index rose to 106.67 and gold fell to $2567.50 an ounce.

In economic reports this week:

• The Treasury Department reported that in the month of October, revenue was $327BN while expenditures were $584BN for a monthly deficit of $257BN.
• The Federal Reserve reported that industrial production fell 0.3% in October and is down 0.3% from last October.
  • Manufacturing fell 0.5% and is down 0.3% year over year.  This was hurt by the Boeing strike and hurricanes.
  • Mining, including oil and gas production rose 0.3% and is down 1.5% from a year ago.  Keep in mind that this is dollar based not unit based.
  • Utilities rose 0.7% and is up 1.5% from a year ago.
• The Commerce Department reported:
  • The seasonally adjusted advanced estimate of retail sales rose 0.4% in October following a revised 0.8% rise in September.
• The Labor department reported:
  • The consumer price index rose 0.2% in October and 2.6% from last October. 
  • Core prices, excluding volatile food and energy, rose 0.3% and were up 3.3% from a year ago.  This is the FED’s preferred measure of inflation.
    • • Food prices rose 0.2% and 2.1% from a year ago.
      • Energy prices were unchanged in October and were down 4.9% from a year ago.
        • Gasoline and fuel oil have dropped over 12% form a year ago.
  • The producer price index rose 0.2% in October and was up 2.4% from a year ago.
    • Core prices, excluding volatile food and energy rose 0.3% and are up 3.5% from a year ago.
  • Seasonally adjusted first-time claims for unemployment were 217,000, a decrease of 4,000 from the previous week.  
    • The 4-week moving average of claims, designed to smooth out volatility, was 221,000 a decrease of 6,250 from the previous week. 
    • 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 fell from a record 13.5MM BPD to 13.4MM BPD.
  • Natural gas storage rose 42BN cubic feet and is above highest level during the past five years at this time of year.
• Baker Hughes reported the number of oil rigs fell 1 to 478 and the number of natural gas rigs fell 1 to 101.
• Factset reported with 93% of S&P 500 companies reporting Q3 earnings the blended earnings increase is 4.2% 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/cpi.nr0.htm

https://fiscal.treasury.gov/files/reports-statements/mts/mts1024.pdf

https://www.bls.gov/news.release/ppi.nr0.htm

https://www.federalreserve.gov/releases/g17/current/