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Weekly Market Commentary

November 4th – November 8th 

The ISM Non-Manufacturing Index was reported higher than expected at 54.7 for October, allaying concerns that goods manufacturing weakness may carry over into the services sectors.  

Factory Orders fell 0.6% in September.  Inventories rose marginally by +0.3% while shipments pulled back by -0.2%

The 10-Year U.S. Treasury yield advanced to 1.93%.  The sale of U.S. Treasuries and shift into riskier assets drove the bellwether Treasury down in price and to the highest yield since July.  The rise of longer maturity Treasury yields added positive slope to the yield curve and reversed the curve inversion for the first time since November 2018.  The 10-Year spread over the 2-Year Treasury is back to a healthy 27 basis points and 38 basis points over the 3-Month Bill.  The Fed and market participants are now far closer to being on the same page than any other time this year.        

The risk-on shift into equities drove U.S. stock indices further into record territory.  Stronger than anticipated corporate earnings, a positive view of trade negotiations and a general sense that the U.S. economic cycle still has legs led investors into more cyclical positions and away from more defensive stocks like utilities and real estate.  The S&P 500 advanced by 0.9% on the week to close at 3,093.  The NASDAQ was higher by 1.1% to 8,475.     

The bond market will be closed on Monday in a holiday-shortened trading week, while the stock market will trade during regular hours on all five days.  Key economic releases next week include CPI and PPI inflation, Retail Sales and Industrial Production.  


Weekly Market Commentary

October 28th – November 1st

The first estimate of Q3 GDP exceeded expectations at 1.9%.  Consumer spending continues to be the key driver of economic growth.  Personal Consumption rose by 2.9% in the period.  Business Investment contracted further by -3.0%.

The Federal Open Market Committee (FOMC) reduced short-term interest rates by 0.25% as expected, the third cut thus far in the calendar year.  The Fed Funds Target Rate now stands at 1.5-1.75%.  Post announcement comments aimed for a neutral stance but reading between the lines of the written statement and Chairman remarks reveals a Fed looking to pause on further rate cuts.  The probability of a fourth cut in 2019 quickly dropped from over 50% to 25% after the release.  

Non-farm payrolls were reported higher than anticipated for October at 128k new jobs, despite a pullback from GM workers on strike during the month (-40k) and a reduction from temporary census workers (-20k).  An additional 95k jobs from an upward revision of the last two months of data also points to continued strength in the labor markets.  The Unemployment rate moved a tick higher to 3.6%, as did Labor Force Participation to 63.3%.  Wage Growth stands at a good but not great annual pace of 3%.  

International Trade in Goods fell sharply.  Exports dropped -1.6% in September, contracting -3.0% on a year-on-year basis.  Foods, feeds and beverages were the steepest fall off, -12.6% in the month.  Imports were lower by -2.3% on the month and -4.6% over the past year.  These are the types of trade-related data points the Fed is looking at when referring to global “economic headwinds”.  

The 10-Year U.S. Treasury yield pulled back along with shorter rates to close 8 basis points lower to 1.71.  Despite a modest flattening of the yield curve between the 2-Year and 10-Year maturities, markets seem to agree with the Fed outlook, maintaining positive slope in the curve.  

Amid a slew of corporate earnings reports and favorable economic data, the S&P 500 advanced by 1.5% on the week to close at 3,066.  The NASDAQ was higher by 1.7% t0 8,386.  

Key economic releases next week include Factory Orders, JOLTS jobs report and ISM Services Index.  


Weekly Market Commentary

October 21st – October 25th

Existing Home Sales were reported at a 5.38mm annualized pace for September.  The measure missed the mark relative to consensus expectations and was lower than the August reading revised up a tick to 5.50mm.  Despite the pullback, the trailing 3-month level of 5.433mm remains strong and a 3.9% increase from a year ago is the highest since March 2017.  New Home Sales were stronger at 701k, just ahead of estimates and following an above trend reading in August.  Home price appreciation continues to outpace wage growth with a national reading of home price appreciation up 4.6% on a year-on-year basis.  

Durable Goods Orders in September were weaker than anticipated at -1.1%.  Capital Goods orders declined for a second month as businesses hold investment decisions until more clarity is available on global tariff impacts.  Business Fixed Investment will likely be one of the weaker components of GDP for a second consecutive quarter.  

The 10-Year U.S. Treasury yield climbed further by 6 basis points this week to close at 1.80%.  The yield curve normalized further with the spread of the 10-Year bellwether Treasury now 17 basis points over the 2-Year and 13 over the 3-Month Bill.

The S&P 500 advanced 1.3% for the week to 3,023 with more positive than negative news in an abundance or corporate earnings reports.  The NASDAQ advanced by 1.9% to 8,243.

All eyes will be on the FOMC meeting next week.  We are expecting the market will get a pre-Halloween treat of an additional 25 basis point cut in the Fed Funds Rate.  Key economic releases next week include Employment, and Manufacturing Indices.   


Weekly Market Commentary

October 14th – October 18th

Retail Sales fell unexpectedly in September by -0.3% versus expectations of a positive 0.3%.  The critical Control Group (which factors into GDP measurement) however, was flat at 0% in September and unrevised at 0.3% for the prior month.  

The Fed Beige Book report for October had more sanguine language assessing U.S. economic growth than prior months, noting expansion at a “slight to modest pace”, with varying levels of business activity across the country.  Tight labor markets and softening manufacturing were recurring themes.  

Housing Starts advanced by an annual pace of 1.25mm in September.  The reading fell sort of consensus estimates but had some strength in the detail.  The strong August reading was revised modestly higher.  There was also a modest gain in single-family starts in September, a fifth consecutive increase.  Despite weakness in multi-family starts, the single-family data is more impactful per unit and will have a positive contribution to GDP.  September Building Permits exceeded expectations at 1.39mm, with a similar prior month upward revision and leadership by single-family.

Industrial Production pulled back more than expected in September after a strong August reading.  The -0.4% reading was pulled down by manufacturing (-0.5%).  Key to the weakness came from a -4.2% drop for motor vehicles, negatively impacted by the GM strike.  

The 10-Year U.S. Treasury yield closed the week a basis point higher from where it started at 1.74% after trading in a range of 1.67-1.79%.  The yield curve steepened modestly with the spread of the bellwether 10-Year over the 2-Year Treasury now at 16 basis points and 7 basis points over the 3-Month Bill.  The probability of a Fed rate cut at month end (priced in by the futures markets) jumped to 84% following the weaker than anticipated Retail Sales report.  

Q3 Earnings season kicked off in earnest this week with more initial good news than bad.  The S&P 500 advanced by 0.5% approaching a new record high at 2,986.  At 8,089, the NASDAQ was higher by 0.4% for the week.

Key economic releases next week include Existing and New Home Sales, Durable Goods Orders and Consumer Sentiment.  


Weekly Market Commentary 

October 7th – October 11th

Core Consumer Prices (CPI) remained very squarely in check in September, coming in a tick lower than expected on the month and holding at 2.4% on a year-on-year basis.  Producer Prices (PPI) pulled back by -0.3% in the month driven by trade, transport and warehousing services components.  The year-on-year Core PPI pulled back to 2.0% from 2.3%.

The August JOLTS reports showed job openings have moderated modestly at 7.05mm, a third monthly decline and below the 7.25mm survey estimate.  

Mortgage applications were once again reported at multi-year highs.  Refinancing activity rose as 30-year fixed mortgage rates approached 3-year lows.  Despite the lower rates available to borrowers, the spread for mortgage rates over the benchmark 10-Year U.S. Treasury has widened in a period of rapid decline for Treasury yields.  

The FOMC minutes showed that the Committee remains concerned about global growth and trade uncertainty, striking a marginally more dovish tone than the previous meeting.  

The 10-Year U.S. Treasury yield rose by 20 basis points to 1.73%.  A modest decline in the 3-Month yield allowed the yield curve to gain back some normalcy by the end of the week.  The 10-Year Treasury now has a positive 13 basis point spread to the to 2-Year Treasury and 5 basis points to the 3-Month Bill, reversing the inversion for the time being.  

Equity markets ebbed and flowed with the sentiment of trade headlines during the week.  The S&P 500 closed higher by 0.6% to 2,970.  The NASDAQ Index advanced by 0.9% to 8,057.

A number of Fed Governors take to the speaking circuit next week giving analysts more puzzle pieces on interest rate sentiment.  Key economic releases next week include Retail Sales, Housing Starts and Industrial Production.  


Weekly Market Commentary 

September 30th – October 4th

Non-farm payrolls were reported with 136k new jobs in September, while August was revised higher by 38k.  The Unemployment Rate dropped to a lower than expected 3.5%, the lowest level since 1969.  Despite the very positive labor market picture, Average Hourly Earnings increased only 2.9% from a year earlier, a consensus miss and slowest pace since July 2018.  

The ISM Manufacturing Index fell to a 10-year low of 47.8, missing across the board on component estimates with particular weakness in production, backlog and exports.  It is likely that the GM strike shutting down plants and vehicle deliveries factored into the shortfall.  The ISM Non-Manufacturing (Services) report was equally weak.  The fall to 52.6 is a three-year low.  The report raised concerns that the slowdown is not limited to factories in the U.S. 

Factory Orders in the U.S. for August edged lower as well, down by -0.1%.  The report was well off the prior reading of 1.4%, but ahead of the -0.6% estimate.  In conjunction with the lower than expected Core Capital Goods report, data is pointing toward slowed business investment as the trade war drags on weighing on manufacturing production.  

The 10-Year U.S. Treasury yield pulled back during the week in a flight to quality.  The bellwether Treasury closed the final session off by 16 basis points to 1.51%.  It now stands at 12 basis points higher than the 2-Year Treasury Note which pulled back sharply as well, while still inverted at a -18 basis point spread to the 3-Month Bill.

Negative headlines on U.S. manufacturing along with weak data overseas and more drama out of Washington weighed on investor confidence through the week before favorable employment data sparked a turn of sentiment in the final trading session.  The S&P 500 closed off by -0.3% to 2,952.  The NASDAQ eked out a 0.5% gain to 7,982.      

Key economic releases next week include Consumer and Producer Inflation, the JOLTS jobs report and Import/Export Prices.  



Weekly Market Commentary 

September 23rd – September 27th

Durable Goods Orders in August were stronger than expected at the headline level (0.2% and 0.5% excluding transportation), but weakness in Core Capital Goods at -0.2% and prior month revision from 0.4% to 0.0% weighed down the report.  The Capital Goods details raised concerns of further slowing in business fixed investment in the third quarter and slowing global growth carrying over to U.S. factories.  Computers and electronic products along with communications equipment were the weakest segments.

Consumer Confidence measured by the Conference Board pulled back in the latest reading but remains elevated relative to historical levels.  The gap between survey participants’ view of current conditions relative to future expectations widened, typically indicative of a late phase of an economic cycle.  Based on the frequent negative headlines relating to slowing global growth, the ratio is not particularly surprising.  

New Home Sales topped the consensus range at a 713k annualized pace in August driven by strong new single-family home sales.  Combined with a sharp upward revision to the July figure, the 3-month average moved to 703k, the best reading since 2007.  Mortgage purchase applications for this time of year remain at multi-year highs in the favorable rate environment for borrowers.

The final estimate of Q2 GDP was steady at a 2.0% annualized pace.  Consumer Spending remains the key driver at 4.6%.

The 10-Year U.S. Treasury yield declined by 4 basis points on the week, closing at 1.68%.  The yield curve inversion of the 3-Month to 10-Year Treasuries persists at -11 basis points, with the 2-Year to 10-Year spread modestly positive at 4 basis points.

The S&P 500 pulled back for a second week, down by -1.0% at the final bell to 2,961.  The NASDAQ Index declined -2.2% to 7,939.  News out of Washington of a Presidential impeachment inquiry took center stage in the headlines and gave investors pause.  

Key economic releases next week include ISM and PMI Manufacturing and Services Indices and Employment data.  


Weekly Market Commentary 

September 16th – September 20th

The Federal Open Market Committee (FOMC) cut the Fed Funds Rate by 25 basis points as expected to a target range now back at 1.75-2.00%.  Committee members were divided on the move with 2 voting to stand pat and 1 to cut by 50 basis points.  The “dot plot” of further rate moves going forward paints a cloudy picture at best with a broad divergence of opinion between those who feel no further cuts are necessary this year and those in different camps on 25-50 basis points of incremental cuts in 2019.  Fed Chairman Powell delivered measured remarks following the announcement remaining non-committal on future policy.

Industrial Production in August surprised to the upside at 0.6% relative to a consensus survey of 0.2%.  The report is the strongest of the year and takes the edge off concerns raised by weaker ISM manufacturing data out over the past two months.  

Housing Starts (1,364k) and Building Permits (1,419k) in August were both higher than expected.  Existing Home Sales did an about face as well with the highest reading in 17 months at a +2.6% annualized pace of 5.42 million home sales.  

The Fed injected billions of dollars in liquidity into short-term money markets in response to a spike in overnight rates, the first such move in 10 years.  The market operation is slated to take place until October 10 to keep overnight repo rates below the Fed Funds upper target band.  The 10-Year U.S. Treasury yield traded within a broad range of 1.90-1.72% closing at 1.72%.  The yield curve flattened with the 2-Year and 10-Year Treasury spread now at 5 basis points.  

News of a drone attack on Saudi Arabia oil facility heightened volatility in oil prices and stocks early in the week.  Further slowing in economic data out of China raised concerns about global growth as well.  The S&P 500 closed the week modestly lower by -0.5% to 2,991.  The NASDAQ was off by -0.7% to 8,117.

Key economic releases next week include a final estimate of Q2 GDP, Durable Goods, and Personal Income and Outlays.  


Weekly Market Commentary

September 9th – September 13th

Sales excluding autos and gasoline were weaker than anticipated; however, the critical Control Group (excluding food services, building materials, autos and gas) which factors into GDP growth was right in line with estimates at 0.3%.  The headline reading was also revised up a tick to 0.8% from July.  Retail Sales in August exceeded forecasts at 0.4% versus a consensus estimate of 0.2% with a lift from strong auto sales.

Core Producer Prices (PPI) were modestly higher than anticipated in the month as well  This brings the year-on-year reading a tenth higher to 2.4%.  The Core Consumer Price Index (CPI), which excludes weaker food and energy prices, rose by 0.3% in August for a third consecutive month, ahead of expectations.

The precipitous fall in rates earlier in the month is serving as a positive catalyst to the sluggish housing sector.  The average conventional 30-year mortgage rate fell to 3.82% this week leading to a strong 9% year-on-year increase in purchase applications.

The European Central Bank (ECB) cut deposit rates as expected and restarted the bond buying program of 20 billion EUR per month.  With a promise of holding rates at or lower than the new level until signs of robust inflation appear, pundits broke out the “QE Infinity” label once again signifying accommodative quantitative easing expected out of Europe for the foreseeable future. 

The 2-Year and 10-Year Treasury spread remains in positive territory at a healthier 10 basis points.  The yield up – price down movement in longer maturity Treasuries over the past eight trading days is beginning to normalize the shape of the yield curve.  The 10-Year U.S. Treasury yield rose during the week by 35 basis points to 1.90%.

Easier talk on tariffs and agricultural purchases out of China and the U.S. struck a positive tone for equity investors.  The S&P 500 advanced once again through the 3,000 level, ending the week ahead by 1.0% at 3,007 and nearing a new high.  The DOW advanced through the 27,000 level as well, up by 1.6% to 27,219 and the NASDAQ by 0.9% to 8,176 with some of the technology stocks coming under pressure late in the week due to added regulatory scrutiny.

In addition to a much anticipated FOMC meeting with an expected rate cut, important economic releases next week include Housing Starts, Existing Home Sales and Industrial Production. 


Weekly Market Commentary

September 2nd – September 6th

The closely watched August jobs report came in below expectations at 130k versus the 163k consensus estimate and the prior two month’s reports were revised down by a collective 17k.  The pullback comes even though the government added approximately 30k new temporary census worker jobs.  The unemployment rate remains at 3.7%.  The consumer got a modest boost to their wallets with wage growth a tick over expectations at 3.2% and the prior month revised up from 3.2 to 3.3%.  The data is supportive of the expectation of a rate cut in the upcoming meeting but is rather unlikely to have influenced Chairman Powell’s remarks at the economic outlook summit in Zurich Switzerland later in the day. 

U.S. manufacturing slowed further with another key measure, the ISM Manufacturing report, falling into contraction (a sub-50 reading) for the first time since 2016.  The key components of New Orders, Production and Employment all fell to 40-handle levels and New Export Orders at 43.3 is the lowest since 2009 and points to trade concerns hampering manufacturing.  The services industries measured by the ISM Non-manufacturing Index easily beat expectations however at 56.4, ahead of the 53.7 July reading.  The Business Activity Index advanced by eight points to 61.5, although similar to goods manufacturing, services exports were weak. 

The 10-Year U.S. Treasury yield ticked up in the holiday shortened trading week trading in a wide range of 1.44% to 1.60% before settling back at 1.55% to close the final session.  The spread between the 2-Year and 10-Year Treasuries shifted back into positive territory by 2 basis points.  The S&P 500 and NASDAQ indices advanced on the week by 1.8% to 2,978 and 8,103 respectively.

Important economic releases next week include the JOLTS jobs report, Retail Sales as well as CPI and PPI inflation. 


Weekly Market Commentary

August 26th – August 30th

Q2 GDP growth was revised down modestly to 2.0% from 2.1%, but there was more good news than bad as the critical component of personal consumption rose from 4.3% to 4.7%.  This is the highest reported consumer spending level since 2014.  Backed by a strong labor market, consumers did their part to maintain the longest economic expansion in history.  Business investment, net exports and inventories weighed on the revision.  A pull back in inventories bodes well however for third quarter manufacturing.

Amid all the negative headlines on trade wars and economic growth, consumer confidence was well ahead of expectations in August after an equally stellar July.  Sentiment on current situation reached a 19-year high, with forward expectations paring back modestly.  Personal Consumption Expenditures (PCE) rose by 0.2% in July.  On a year-on-year basis this key measure of inflation advanced 1.4% and the Core reading by 1.6%, both in line with the prior month and consensus expectations.

Durable Goods Orders in July exceeded consensus estimates led by a 49% jump in civilian aircraft orders.  Total orders increased 2.1% while the Ex-Transportation reading contracted by -0.4%.  Core Capital Goods Orders (non-defense and aircraft) were positive at 0.4%. 

The 10-Year U.S. Treasury yield slid further during the week closing at 1.50%.  The negative spread between the 2-Year and 10-Year Treasuries widened out to a level not seen since 2007 before ending the final trading session inverted by just over one basis point.

Renewed hope for progress on the trade front between the U.S. and China (after both sides reigned in retaliatory tariff threat rhetoric) reinvigorated the stock market.  The S&P 500 snapped a four-week losing streak to close higher by 2.7% to 2,926.  The NASDAQ advanced by 2.5% to 7,962.

Important economic releases in the holiday-shortened trading week next week include Manufacturing Indices, Factory Orders and Employment


Weekly Market Commentary

August 19th – August 23rd

Existing Home Sales exceeded expectations, coming in at 5.42mm, a 2.5% increase from last month’s reading, which was revised upward to 5.29mm.  The New Home Sales report was mostly positive despite coming in slightly below estimates at 635k vs. 645k.  The prior month saw a sharp upward revision from 646k to 728k.  July also saw a rise in in supply, up 1.2% to 337,000.  The housing market has been stop and go over the past six months but an increase in supply coupled with low mortgage rates could be a positive catalysts moving forward.

FOMC minutes were released on Wednesday.  There was a slight change in language from last month's FOMC press conference.  The 25 basis-point cut which was labeled a "mid-cycle policy adjustment" in the press conference, was described in the minutes as a "recalibration" of policy.  Either way, there was no mention of further rate cuts which weighed on equity markets.  Chairman Powell seemingly doubled down on this sentiment during his speech in Jackson Hole on Friday signaling that the Fed “will act as appropriate” to keep the economic expansion going but wasn’t clear on when further cuts would be coming.

U.S. rates had another rough week.  The 10-Year U.S. Treasury yield fell 9 bp on Friday to 1.523%.  The 2-Year yield closed at 1.528%, modestly above the 10-Year yield, inverting the curve again this week and further stoking recession concerns.

Retaliatory tariffs announced by China followed by a series of Trump tweets sent the Dow tumbling -2.37% to 25,630.  The S&P 500 finished the week at 2,847, down -2.6% while the NASDAQ Index ended the week at 7,751, off by -3.0%.

Important economic releases next week include Durable Goods Orders, a revised estimate of Q2 GDP and Personal Income.


Weekly Market Commentary

August 12th – August 16th

The Consumer Price Index (CPI) rose 0.3% in July, in line with expectations.  The Core CPI (excluding the volatile food and energy segments) reading was also 0.3%, modestly ahead of expectations.  Computer prices (+2.8%) and airline fares (+2.3%) were key components of the increase.  Marginally higher Core CPI at 2.2% on a year-on-year basis may be due to temporary tariff-related price increases.

Retail Sales bucked the dour mood on economic growth with July readings ahead of expectations.  The monthly change of 0.7% was more than twice the consensus estimate.  Excluding the weaker auto segment the reading was 1.0%, as was the important Control Group reading tied directly to GDP. 

Nonfarm Productivity of 2.3% for the second quarter was also a positive surprise.  The -0.4% manufacturing component of the latest Industrial Production report however, highlighted continued slowing in factories.  Construction supplies were a key driver of weakness and motor vehicle production edged lower. 

Housing Starts in July declined by 4% at a 1.19 mm annualized pace missed the mark by a significant amount and continue to point to weakness.  Although single family homes increased on a year-on-year basis, the report showed a sharp falloff in multi-family structures.  The more forward-looking Building Permits reading was ahead of expectations at 1.33 mm, partially making up for the sharp decline in the prior month. 

U.S. rates continued to plummet during the week.  The 30-Year Treasury reached a new record low yield at 1.98%.  The 10-Year U.S. Treasury yield fell to an eye popping low of 1.48% before ending the week at 1.55%.  The yield curve between the 2-Year and 10-Year Treasuries inverted for the first time since before the 2008 financial crisis, closing the week modestly positive at 6 basis points.  An inversion in this segment of the yield curve has historically predated a recession by 12-18 months so the financial press likely broke records on use of the “R” word in single week. 

The S&P 500 Index volatility spiked with each push and pull on global trade comments out of Washington and Beijing, including a dramatic mid-week 3% single day drop…the worst of the year.  A rise in the final trading session led the index to a change of 1.0% for the week to 2,888.  The NASDAQ Index ended the week at 7,895, off by -0.8%.

Notable economic releases next week include Existing and New Home Sales along with a release of the FOMC minutes from the latest meeting. 



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