Week of October 21 - 25, 2019

Maureen Kelliher, CFA

Maureen Kelliher, CFA

October 30, 2019

Weekly Economic Review

Weekly Macro Updates

Initial Jobless Claims (Oct 19) 215k est., 212k actual, 218k prior
Continuing Claims (Oct 12) 1678k est., 1682k actual, 1683k prior
Richmond Federal Reserve Manufacturing Index (Oct) -7 est., 8 actual, -9 prior
Kansas City Federal Reserve Manufacturing Activity (Oct) -3 est., -3 actual, -2 prior
Chicago Federal Reserve National Activity Index (Sep) 0.00 est., -0.45 actual, 0.15 prior: R+
Dallas Federal Reserve Manufacturing Activity (Oct) 1.0 est., -5.1 actual, 1.5 prior
Existing Home Sales MoM (Sep) -0.7% est., -2.2% actual, 1.5% prior: R+
New Homes Sales MoM (Sep) -1.6% est., -0.7% actual, 6.2% prior: R-
FHFA House Price Index MoM (Aug) 0.3% est., 0.2% actual, 0.4% prior
Durable Goods Orders Ex Transportation (Sep P) -0.2% est., -0.3% actual, 0.3% prior: R-
Capital Goods Orders Nondefense Ex Air (Sep P) -0.1% est., -0.5% actual, -0.6% prior: R-
Markit US Manufacturing PMI (Oct P) 50.9 est., 51.5 actual, 51.1 prior
Markit US Services PMI (Oct P) 51.0 est., 51.0 actual, 50.9 prior
Retail Inventories MoM (Sep) 0.2% est., 0.3% actual, -0.2% prior: R+
 

 Strong or Improving
 Inconclusive or lacking trend
 Weak or declining
R+ Revised up
R- Revised down

Directional change based on general
long-term tends.

Capital Market Implications

Given the depth of the global manufacturing slump, industrial activity in the US remains soft and that was evident in a number of last week’s economic releases.  Over the last two months, three out of four regional Federal Reserve manufacturing surveys were negative and weaker than expected while preliminary reports for durable and capital goods orders in September turned down as well.  However, on an encouraging note, output expectations in the manufacturing sector have begun to show some improvement.  October’s flash manufacturing PMI edged higher to 51.5, its best showing since April, while PMIs abroad, especially Germany and France, improved and Japan’s PMI stabilized.  After a strong showing in August, both new home and existing home sales retreated in September.  The demand for entry-level homes continues to outstrip the supply, which in turn has and continues to dampen housing sales.

Last week, as market participants were again encouraged (on average) by third-quarter corporate earnings announcements, stocks rallied.  For the week overall, the S&P 500 Index gained 1.2% while the Dow Jones Industrial Average increased 0.7%.  With their quarterly earnings coming in ahead of expectations, stocks in the energy, technology and industrial sectors all rose more than 2.0% and were the major contributors to the S&P 500’s weekly gain.  International markets outpaced domestic markets again last week and, for the quarter thus far, are now well ahead.  Developed foreign markets climbed 1.3% last week and emerging markets increased 1.2%; for the quarter, they have risen 3.0% and 3.6%, respectively.  Longer dated interest rates climbed higher during the week sending bond prices lower.  For the week, high yield bonds (in sympathy with stocks) rose 0.3%, while US corporate bonds were flat and ten year municipal bonds along with the Barclay’s US Aggregate Index fell slightly.