Stimulus – Fed Speak – All-Time Highs – Falling Dollar
After months of back and forth, it looks like there will be a $900 billion coronavirus “stimulus” package signed, possibly Monday. While the language of the bill is being finalized it is expected to include direct payments of $600, and an extra $300 a week of unemployment insurance and funds allocated to businesses for rent and workers.
There was a Federal Reserve meeting this week – Chairman Powell committed to purchasing at least $120 billion of treasury and mortgage-backed securities per month until substantial progress has been made with respect to employment and inflation targets. Among the other highlights from the meeting: Going to need to continue to provide support to the economy for quite a good period of time – Going to be a while before we are back to labor market conditions we had earlier this year and for the past couple of years. Q1 will show significant effects from the virus surge, but Q2 should be showing effects of a significant number of people having been vaccinated – The economy should be performing strongly in the second half of 2021; getting through next 4-6 months is key. Further reading: https://www.federalreserve.gov/monetarypolicy/files/monetary20201216a1.pdf
The Nasdaq, S&P500, 400, 600 and Russell 2000 made new all-time highs this week. LPL has done the research into how all-time highs, tend to come in clusters. 2020 has produced 30 new highs for the S&P 500.
In the last month, the US Dollar index broke beneath its short-term support around $92. It now rests on the bottom of a five-year support around $88.5. The USD index uses a basket of six currencies measured against the US Dollar. The basket doesn’t include the Chinese Yuan, but the US dollar has increased against the Chinese currency since May while falling against others in the basket.
11/5/20 FOMC Statement FOMC Minutes Credit, Liquidity and Balance Sheet Federal Reserve Dot Plots US Debt Measurement US Corporate Debt Tops 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 8 this week. There are 346 oil and gas rigs operating in the US – down 467 over last year.
- Brent Crude Oil gained 4.74% this week closing at $52.37/bbl
- WTI Crude Oil gained 5.73% this week to close at $49.24/bbl
- Heating Oil gained 5.30% this week closing at $1.51/gallon
- Natural Gas gained 4.21% this week closing at $2.70 per million BTUs
- Unleaded Gas gained 6.37% this week closing at $1.39/gallon
- Gold gained 2.46% this week closing at $1888.90/oz
- Silver gained 8.06% on the week closing at $26.03/oz
- Palladium gained 1.67% this week closing at $2372.00/oz
- Platinum gained 2.08% this week closing at $1043.10/oz
- Copper gained 2.96% this week closing at $3.63/lb
Weekly Unemployment Claims – Released Thursday 12/17/2020 – Initial jobless claims for the week ending December 12th increased 23k to 885k. The 4-week moving average was 812.5k, an increase of 34k.
Job Openings & Labor Turnover Survey JOLTS – Released 12/9/2020 – The U.S. Bureau of Labor Statistics reported the number and rate of job openings was little changed at 6.7 million on the last business day of October. Over the month, hires were little changed at 5.8 million and separations increased to 5.1 million. Within separations, the quits rate was unchanged at 2.2%. The layoffs and discharges rates increased to 1.2%.
November Jobs Report – BLS Summary Released 12/4/2020 – The US Economy gained 245k nonfarm jobs in November and the Unemployment rate declined to 6.7%. Average hourly earnings increased 9 cents to $29.58. Hiring highlights include +145k Transportation and Warehousing, +60k Professional and Business Services, and +54k Education and Health Services.
- Average hourly earnings increased 9 cents to $29.58.
- U3 unemployment rate declined to 6.7%. U6 unemployment rate declined to 12.0%.
- The labor force participation rate decreased 0.2% to 61.5%.
- Average work week was unchanged at 34.8 hours.
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.
This Week’s Economic Data
Links take you to the data source
Housing Starts – Released 12/17/2020 – New home starts in November were at a seasonally adjusted annual rate of 1.547 million; up 1.2% above October and 12.8% above last November’s rate. Building Permits were at a seasonally adjusted annual rate of 1.639 million, up 6.2% compared to October and up 8.5% over last year.
Retail Sales – Released 12/16/2020 – U.S. retail sales for November decreased 1.1% to $546.5 billion. U.S. retail sales are up 4.1% year/y.
Industrial Production and Capacity Utilization – Released 12/15/2020 – In November Industrial production increased 0.4%. Total Industrial production is still 5.0% below its pre-pandemic February level. Manufacturing increased 0.8%. Motor vehicles increased 5.3%. Utilities declined 4.3%. Total industrial production was 104.0% of its 2012 average which is 5.5% lower in November than a year ago. Total capacity utilization increased 0.3% to 73.3% in November which is 6.5% below its long run average.
Recent Economic Data
Links take you to the data source
Producer Price Index – Released 12/11/2020 – The Producer Price Index for final demand increased 0.1% in November. PPI less food and energy increased 0.2% in November.
Consumer Price Index – Released 12/10/2020 – The Consumer Price Index increased 0.2% in November. Core CPI, which excludes food and energy was also up 0.2%. The monthly changes left total CPI up 1.2% year-over-year and core CPI up 1.6%.
Consumer Credit – Released 12/7/2020 – In October, consumer credit increased at a seasonally adjusted rate of 2.0%. Revolving credit decreased at an annual rate of 6.75%, while nonrevolving credit increased at an annual rate of 4.75%. Total Outstanding consumer credit is currently at $4.164 trillion.
U.S. Trade Balance – Released 12/4/2020 – According to the U.S. Census Bureau of Economic Analysis the goods and services deficit increased in October by $1.0 billion to $63.1 billion. October exports were $182.0 billion, $4.0 billion more than September exports. October imports were $245.1 billion, $5.0 billion more than September imports. The goods and services deficit increased $46.6 billion or 9.5% year-to-date, from the same period in 2019. Year – over – year exports and imports decreased $345.9 billion or 16.4% and decreased $299.4 billion or 11.5% respectively.
PMI Non-Manufacturing Index (ISM Services) – Released 12/3/2020 – Economic activity in the non-manufacturing sector grew in November for the sixth consecutive month. ISM Non-Manufacturing registered 55.9 percent, which is 0.7 percentage points below the adjusted October reading of 56.6 percent.
PMI Manufacturing ISM Index – Released 12/1/2020 – November PMI declined 1.8% to 57.5% from October’s reading of 59.3%. The New Orders Index was down 2.8% from October’s reading of 67.9% to 65.1%. The Production Index registered 60.8%, down 2.2%.
U.S. Construction Spending – Released 12/1/2020 – Construction spending increased 1.3% in October measuring at a seasonally adjusted annual rate of $1,438.5 billion. The October figure is 3.7% above the October 2019 estimate. Private construction spending was 1.4% above the revised September estimate at $1,078.9 billion. Public construction spending was 1.0% above the revised September estimate at $344.8 billion.
Chicago PMI – Released 11/30/2020 – Chicago PMI declined to 58.2 points in November following a decline in October. This marks five consecutive months above the 50-mark following a full year under it. Supplier Deliveries saw the larges gain while New Orders and Production posted the only declines.
Personal Income – Released 11/25/2020 – Personal income decreased $130.1 billion or 0.7 percent in October according to estimates released today by the Bureau of Economic Analysis. Disposable personal income (DPI) decreased $134.8 billion or 0.8 percent and personal consumption expenditures (PCE) increased $70.9 billion or 0.5 percent.
Second Estimate of 3rd Quarter 2020 GDP – Released 11/25/2020 – Real gross domestic product (GDP) increased at an annual rate of 33.1 percent in the third quarter of 2020, according to the second 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 second estimate is based on source data that are more complete than that of the advance estimate. 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. With the second estimate, upward revisions to nonresidential fixed investment, residential investment, and exports were offset by downward revisions to state and local government spending, private inventory investment, imports, and personal consumption expenditures (PCE).
Durable Goods – Released 11/25/2020 – New orders for manufactured durable goods in October increased for the sixth consecutive month up $3.0 billion or 1.3% to $240.8 billion. Transportation equipment led the increase rising $0.9 billion or 1.2% to $77.1 billion.
New Residential Sales Released 11/25/2020 – Sales of new single-family homes declined 0.3% to 999k, seasonally adjusted, in October. The median sales price of new homes sold in October was $330,600 with an average sales price of $386,200. At the end of October the seasonally adjusted estimate of new homes for sale was 278k. This represents a supply of 3.3 months at the current sales rate.
Consumer Confidence – Released 11/24/2020 – The Consumer confidence index declined 5.3% in November following a minimal change in October. The Index now shows a reading of 96.1, down from 101.4 in October.
Existing Home Sales – Released 11/19/2020 – Existing home sales increased in October making five consecutive months of sales gains. Sales increased 4.3% to a seasonally adjusted rate of 6.85 million in October. Sales are currently up 26.6% from one year ago. Housing inventory sits at 1.42 million units. Down 2.7% over last month. Down 19.8% over last year. Unsold inventory sits at an all-time low 2.5 month supply. The median existing home price for all housing types was $313,000.
US Light Vehicle Sales – Released 11/6/2020 – U.S. light vehicle sales were at a seasonally adjusted annual rate (SAAR) of 16.209 million units in October.
Next week we get data on Existing Home Sales, Consumer Confidence, New Residential Sales, Durable Goods, Personal Income, and the 3rd Estimate of 3rd Quarter GDP.