Strong rebound after last week’s selloff.
The possibility of a divided congress seemed to outweigh both the spiking number of COVID cases and the possibly contested election. Easing political concerns will allow focus to be put back onto corporate earnings and of course how the COVID economy reshapes the landscape. Friday’s jobs report was a peek into the reopening of the America with 638k jobs created in October and the unemployment rate declining to 6.9%. Hiring highlights include leisure and hospitality adding 271k –BLS Summary.
On the earnings front, the majority of S&P500 companies have reported and the consensus estimate is that profits will be down about 7.5%, according to FactSet. Compare this to the mid-September consensus of a 21% decline in profit and you could see why there is still a very sharp buying interest in equities.
Lost in the election overload was the Fed meeting this week. No real surprises in it, keeping rates at near zero, this short paragraph from the statement should cover the entire meeting. “The path of the economy will depend significantly on the course of the virus. The ongoing public health crisis will continue to weigh on economic activity, employment, and inflation in the near term, and poses considerable risks to the economic outlook over the medium term.”
On the COVID front, U.S. cases have spiked since September with Saturday (last full day data available) reaching a one day record at over 127k cases reported. John Hopkins Covid Map It doesn’t appear that there is an end to this in the short term.
The S&P 500 rocketed higher by more than 7% after last week’s 5.6% decline. The Nasdaq rallied 9%, with the Dow and the Russell 2000 both jumping 6.9%. Every S&P sector finished higher with energy lagging behind.
9/16 FOMC Statement Credit, Liquidity and Balance Sheet Federal Reserve Dot Plots US Debt Measurement US Corporate Debt Almost 7 Trillion Treasury.gov yields FOMC Policy Normalization Statement Longer Run Goals August 2020
Global Bond Yields
Foreign Exchange Market
The Baker Hughes rig count gained 4 this week. There are 300 oil and gas rigs operating in the US – down 517 over last year.
- Brent Crude Oil gained 3.98% this week closing at $39.45/bbl
- WTI Crude Oil gained 3.77% this week to close at $37.14/bbl
- Heating Oil gained 5.22% this week closing at $1.14/gallon
- Natural Gas lost 13.89% this week closing at $2.89 per million BTUs
- Unleaded Gas gained 5.06% this week closing at $1.08/gallon
- Gold gained 3.82% this week closing at $1951.70oz
- Silver gained 8.53% on the week closing at $25.66/oz
- Palladium gained 12.75% this week closing at $2500.00/oz
- Platinum gained 6.01% this week closing at $899.40/oz
- Copper gained 3.49% this week closing at $3.15/lb
October Jobs Report – BLS Summary – Released 11/6/2020 – The US Economy gained 638k nonfarm jobs in October and the Unemployment rate declined to 6.9%. Average hourly earnings increased 4 cents to $29.50. Hiring highlights include Leisure and Hospitality +271k, Retail Trade +104k, Professional and Business Services +208k.
- Average hourly earnings increased 4 cents to $29.50.
- U3 unemployment rate declined to 6.9%. U6 unemployment rate declined to 12.1%.
- The labor force participation rate increased 0.3% to 61.7%.
- Average work week was unchanged at 34.8 hours.
Weekly Unemployment Claims – Released Thursday 11/5/2020 – Initial jobless claims for the week ending October 31st decreased 7k to 751k. The 4-week moving average was 787k, a decrease of 4k.
Employment Cost Index – Released 10/30/2020 – Compensation costs for civilian workers increased 0.5% for the 3-month period ending in June 2020. The 12 month period ending on September 2020 saw compensation costs increase by 2.4%. The 12 month period ending September 2019 increased 2.8%. Wages and salaries increased 2.5 percent over the year and increased 2.9 percent for the 12-month period ending in September 2019. Benefit costs increased 2.3 percent for the 12-month period ending in September 2020. In September 2019, the increase was also 2.3 percent. This report is published quarterly.
Job Openings & Labor Turnover Survey JOLTS – Released 10/6/2020 – The U.S. Bureau of Labor Statistics reported the number and rate of job openings was little changed at 6.5 million on the last business day of August. Over the month, hires increased to 5.9 million and separations decreased to 4.6 million. Within separations, the quits rate decreased to 2.0%. The layoffs and discharges rates decreased to 1.0%.
This Week’s Economic Data
Links take you to the data source
Consumer Credit – Released 11/6/2020 – In September, consumer credit increased at a seasonally adjusted rate of 2.25%. Revolving credit decreased at an annual rate of 2.5 percent, while nonrevolving credit increased at an annual rate of 4.0 percent. Total Outstanding consumer credit is currently at $4.161 trillion.
U.S. Trade Balance – Released 11/4/2020 – According to the U.S. Census Bureau of Economic Analysis the goods and services deficit declined in September by $3.2 billion to $63.9 billion. September exports were $176.4 billion, $4.4 billion more than August exports. September imports were $240.2 billion, $1.2 billion more than August imports. The goods and services deficit increased $38.5 billion or 8.6% year-to-date, from the same period in 2019. Year – over – year exports and imports decreased $329.0 billion or 17.4% and decreased $290.4 billion or 12.4% respectively.
PMI Non-Manufacturing Index (ISM Services) – Released 11/4/2020 – Economic activity in the non-manufacturing sector grew in October for the fifth consecutive month. ISM Non-Manufacturing registered 56.6 percent, which is 1.2 percentage points below the adjusted September reading of 57.8 percent.
PMI Manufacturing ISM Index – Released 11/2/2020 – October PMI increased 3.9% to 59.3% from September’s reading of 55.4%. The New Orders Index was up 7.7% from September’s reading of 60.2% to 67.9%. The Production Index registered 63.0%, up 2.0%.
U.S. Construction Spending – Released 11/2/2020 – Construction spending increased 0.3% in September measuring at a seasonally adjusted annual rate of $1,414.0 billion. The September figure is 1.5% above the September 2019 estimate. Private construction spending was 0.9% above the revised August estimate at $1,074.9 billion. Public construction spending was 1.7% below the revised August estimate at $344.8 billion.
Recent Economic Data
Links take you to the data source
Personal Income – Released 10/30/2020 – Personal income increased $170.3 billion or 0.9 percent in September according to estimates released today by the Bureau of Economic Analysis. Disposable personal income (DPI) increased $150.3 billion or 0.9 percent and personal consumption expenditures (PCE) increased $201.4 billion or 1.4 percent.
Chicago PMI – Released 10/30/2020 – Chicago PMI declined to 61.1 points in October following a large increase in September. This marks four consecutive months above the 50-mark following a full year under it. New Orders was the only category to increase in October while Production had the largest decline of the five main categories.
Advance Estimate of 3rd Quarter 2020 GDP – Released 10/29/2020 – Real gross domestic product (GDP) increased at an annual rate of 33.1 percent in the third quarter of 2020, according to the advance estimate released by the Bureau of Economic Analysis. This increase follows a 31.4% decline in GDP in the second quarter of 2020. The GDP advance estimate is based on source data that are incomplete or subject to further revision. The increase in real GDP reflected increases in personal consumption expenditures (PCE), private inventory investment, exports, nonresidential fixed investment, and residential fixed investment that were partly offset by decreases in federal government spending (reflecting fewer fees paid to administer the Paycheck Protection Program loans), state and local government spending, and imports.
Consumer Confidence – Released 10/27/2020 – The Consumer confidence index declined 0.4% in October following an increase in September. The Index now shows a reading of 100.9, down from 101.3 in September.
Durable Goods – Released 10/27/2020 – New orders for manufactured durable goods in September increased for the fifth consecutive month up $4.3 billion or 1.9% to $237.1 billion. Transportation equipment led the increase rising $3 billion or 4.1% to $76.8 billion.
New Residential Sales – Released 10/26/2020 – Sales of new single-family homes declined 3.5% to 959k, seasonally adjusted, in September. The median sales price of new homes sold in September was $326,800 with an average sales price of $405,400. At the end of September, the seasonally adjusted estimate of new homes for sale was 284k. This represents a supply of 3.6 months at the current sales rate.
Existing Home Sales – Released 10/22/2020 – Existing home sales increased in September making four consecutive months of sales gains. Sales increased 9.4% to a seasonally adjusted rate of 6.54 million in September. Sales are currently up 20.9% from one year ago. Housing inventory sits at 1.47 million units. Down 1.3% over last month. Down 19.2% over last year. Unsold inventory sits at a 2.7 month supply. The median existing home price for all housing types was $311,800.
Housing Starts – Released 10/20/2020 – New home starts in September were at a seasonally adjusted annual rate of 1.415 million; up 1.9 above August and 11.1% above last September’s rate. Building Permits were at a seasonally adjusted annual rate of 1.553 million, up 5.2% compared to August and up 8.1% over last year.
Retail Sales – Released 10/16/2020 – U.S. retail sales for September increased 1.9% to $549.3 billion. U.S. retail sales are up 5.4% year/y.
Industrial Production and Capacity Utilization – Released 10/16/2020 – In September Industrial production declined 0.6%. Total Industrial production is still 7.1% below its pre-pandemic February level. Manufacturing declined 0.3%. Mining production increased 1.7%. Total industrial production was 101.5% of its 2012 average which is 7.3% lower in September than a year ago. Total capacity utilization declined 0.5% to 71.5% in September which is 8.3% below its long run average.
US Light Vehicle Sales – Released 10/14/2020 – U.S. light vehicle sales were at a seasonally adjusted annual rate (SAAR) of 16.341 million units in September.
Producer Price Index – Released 10/14/2020 – The Producer Price Index for final demand increased 0.4% in September. PPI less food and energy also increased 0.4% in September.
Consumer Price Index – Released 10/13/2020 – The Consumer Price Index increased 0.2% in September. Core CPI, which excludes food and energy also increased 0.2%. The monthly changes left total CPI up 1.4% year-over-year and core CPI up 1.7%.
Next week we get data on CPI, PPI, and JOLTS.