Week of October 28 - November 1, 2019

Maureen Kelliher, CFA

Maureen Kelliher, CFA

November 6, 2019

Weekly Economic Review

Weekly Macro Updates

Initial Jobless Claims (Oct 26) 215k est., 218k actual, 213k prior
Continuing Claims (Oct 19) 1679k est., 1690k actual, 1683k prior
Conference Board Consumer Confidence (Oct) 128.0 est., 125.1 actual, 126.3 prior: R+
Pending Home Sales MoM (Sep) 0.9% est., 1.5% actual, 1.4% prior: R-
Pending Home Sales NSA YoY (Sep) 3.6% est., 6.5% actual, 1.0% prior: R-
GDP Annualized QoQ (3Q A) 1.6% est., 1.9% actual, 2.0% prior
Personal Consumption (3Q A) 2.6% est., 2.9% actual, 4.6% prior
ADP Employment Change (Oct) 110k est., 125k actual, 93k prior: R-
Change in Nonfarm Payrolls (Oct) 85k est., 128k actual, 180k prior: R+
Unemployment Rate (Oct) 3.6% est., 3.6% actual, 3.5$ prior
Personal Income (Sep) 0.3% est., 0.3% actual, 0.5% prior: R+
Real Personal Spending (Sep) 0.2% est., 0.2% actual, 0.2% prior: R+
PCE Core Deflator YoY (Sep) 1.7% est., 1.7% actual, 1.8% prior
ISM Manufacturing (Oct) 48.9 est., 48.3 actual, 47.8 prior
 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

Last week, the FOMC – the interest-rate setting arm of the government – cut the fed fund’s rate 25 basis points to 1.5%.  As the move was widely expected, there was limited market reaction.  The government released its initial estimate for 3rd quarter GDP last Wednesday and its increase of 1.9% was ahead of estimates.  The most significant contributor to growth during the quarter was personal consumption, which increased 2.9%.  Another positive surprise was last Friday’s nonfarm payrolls report; payrolls came in well ahead of forecasts at 128,000 for October and the revisions for the prior two months added another 95,000 jobs.  The monthly payroll increase over the last 3 months now stands at 176,000, a marked improvement over job growth during the first six months of the year.  This report therefore reverses the notion that the labor market would continue to weaken and bodes well for consumer spending during the upcoming holiday season.  

Market participants reacted positively to last week’s better-than-expected employment report as well as 3rd quarter earnings announcements.  For the week overall, the S&P 500 Index gained 1.2% while the Dow Jones Industrial Average increased 1.4%.  Health care, industrials and technology stocks led the advance while interest-rate sensitive sectors faltered including real estate and utility companies.  International markets also did well last week, as developed foreign markets climbed 1.2% and emerging markets rose 1.3%.  In spite of the strength reflected in the labor reports, interest rates held and bond prices gained for the week.  Both US corporate bonds and the Barclay’s US Aggregate Index increased about 0.5% last week, 10-year municipal bonds gained 0.2% and only high yield bonds lost ground, off -0.1%.