November 6th – Weekly Update

  • U.S. equities crept up during the week while October consumer confidence registered at 125.9, its highest level since December 2000. Oil and gold also finished the period higher and the 10-year U.S. Treasury yield closed at approximately 2.34%.
  • With over 80% of S&P 500 companies reporting third-quarter results, 74% have beaten earnings expectations while 66% have beaten sales expectations. According to FactSet, the third-quarter blended earnings growth rate stood at 5.9%, up from 4.7% last week. Molina Healthcare, Apple and Sprint impressed this week; Pandora, Cheesecake Factory and Pitney Bowes were among the disappointments.
  • The Federal Open Market Committee (FOMC) meeting left interest rates unchanged, as generally expected. The statement contained few notable changes. The economic assessment was somewhat more upbeat, noting that the labor market has continued to strengthen and economic activity has been “rising at a solid rate” despite hurricane-related disruptions. There were also no meaningful changes in inflation language despite another soft CPI print for September.
  • The House GOP released the text of H.R. 1, the Tax Cuts and Jobs Act. In most respects, the bill came in largely as had been expected after the debates of the last several weeks. It proposes a permanent cut to the corporate tax to 20% with no phase-in period, cuts taxes on qualifying pass-through businesses to 25% and lowers individual income-taxes. It also simplifies the bracket structure, increases the standard deduction and begins eliminating the estate tax after 2024.
  • October consumer confidence registered 125.9. This was better than consensus for 121.0 and higher than September’s upwardly revised 120.6 (previously 119.8). The release noted that consumers were considerably more upbeat about the short-term outlook, with improving business conditions the primary driver.
  • Nonfarm payrolls increased 261K in October following an upwardly revised 18K gain in the prior month. This was below the 310K consensus, as the Street expected a bigger post-storm rebound following the hurricanes. However, the 162K average over the last three months was still seen as solid and remained well above levels that Fed officials have said are necessary to hold the unemployment rate.

CPWM Weekly Market Monitor (2017.11.06)