October 23rd – Weekly Update

  • Major markets had a mixed week: U.S. and Japanese stocks rallied, whereas Europe and the U.K. declined. U.S. technology and small caps finished roughly flat after choppy sessions. Oil slipped but stayed above $50/barrel. An ounce of gold fell from $1307 to $1282. The yield on the 10-year U.S. Treasury note rose from 2.23% to 2.39%.
  • With 17% of S&P 500 companies reporting third-quarter results, 76% have beaten earnings expectations while 72% have beaten sales expectations. According to FactSet, the third-quarter blended earnings growth rate stood at 1.7%, down from 2.1% last week. Netflix, Goldman Sachs and PayPal impressed this week; Phillip Morris, Proctor and Gamble and Schlumberger N.V. were among the disappointments.
  • The market was on tenterhooks as investors speculated about whom President Trump would nominate as the next chairperson of the Federal Reserve. Treasurys moved on news that Janet Yellen was returning to the White House following her interview Thursday. The consensus is that Trump will nominate Fed Governor Jerome Powell and Stanford economist John Taylor as chair and vice chair, though it’s unclear who would get which role. The president’s press secretary said an announcement is due soon.
  • The Fed’s Beige Book report noted modest to moderate growth across all districts, highlighting an increasingly tight labor market.
  • Industrial production rose 0.3% in September, in line with expectations. Manufacturing output increased 0.1%, capacity utilization was 76.0%; both missed expectations. July production was revised down to 0.1% but August was revised up to 0.7%.
  • The Conference Board’s Leading Economic Index fell 0.2% to 128.6 in September after rising the previous two months. The slight decrease, the first in the past year, was attributed to hurricanes denting economic activity.
  • The NAHB Housing Market Index rose in October to 68 from 64 the prior month, reaching its highest level in six months. By contrast, September existing-home sales dropped 1.5% year-over year, the third consecutive month of disappointing results. The report suggested a chronic shortage of homes for sale is beginning to have a heavier impact on the housing the market.

CPWM Weekly Market Monitor (2017.10.23)