October 16th – Weekly Update

  • U.S. equities inched up for the week and global stocks rallied, with stocks from 23 countries hitting historic highs as measured by the MSCI World Index of large and midcap stocks. Oil and gold finished the period higher and the 10- year U.S. Treasury note yield finished the week at approximately 2.29%.
  • With 6% of S&P 500 companies having reported first quarter results, 81% have beaten earnings expectations while 78% have beaten sales expectations. According to FactSet, the third quarter blended earnings growth rate is 2.1%. Monsanto, General Motors and DCX Technology impressed this week; AT&T, J.Jill, Inc and Hostess Brands were among the disappointments.
  • The release of the minutes from September’s Federal Open Market Committee (FOMC) meeting was fairly uneventful, with the meeting’s debates not differing much from the public statements of Fed officials. As expected, participants noted persistent weaker inflation readings, with many expressing concern this might not only reflect transitory factors, but perhaps some more persistent elements as well. There was little change in rate-hike expectations following the release, with CME’s FedWatch still showing expectations for a December hike remaining near 90%.
  • Headline CPI was up 0.5% month-to month, slightly weaker than consensus for 0.6% but better than August’s 0.4% rise. However, prices were up 2.2% year-to-year, which was the best annual reading since April. The release noted that the gasoline index (up 13.1% month-over-month on hurricane activity) accounted for three-fourths of the increase. Ex-food and energy, core prices notched a 0.1% gain for the month, weaker than August’s 0.2% month-to-month rise, which was also the consensus. Core prices were up 1.7% year-over-year, and have now held that level five months in a row.
  • September Producer Price index (PPI) rose 0.4% month-to-month, matching consensus but coming in better than the prior month’s 0.2% rise and gaining 2.6% year-over-year, which the release noted was the largest rise since the 2.8% gain reported in February 2012. Noted prices for services were up 0.4% (reflecting margins on machinery, equipment, parts, supplies and wholesaling), while the index for goods climbed 0.7%, largely on higher energy prices. Producer prices ex food and energy were up 0.4% month-over-month.

CPWM Weekly Market Monitor (2017.10.16)