October 24th – Weekly Update

  • Global stocks experienced modest gains for the week; major U.S. equity indexes such as the Nasdaq, S&P 500 and Dow Jones all rose slightly. The 10-year U.S Treasury yield closed at approximately 1.7%. Oil and gold were also slightly up as investors shifted attention toward earnings season.
  • With 23% of S&P 500 companies having reported first quarter results, 78% have beaten earnings expectations while 65% have beaten sales expectations. According to FactSet, the third quarter blended earnings decline stands at -0.3%, a better start than seen in recent quarters. If the index reports negative earnings growth for the quarter, it will mark the first time the index has recorded six consecutive quarters of year-over-year declines in earnings since FactSet began tracking the data in Q3 2008. Hasbro, Netflix and United Health impressed this week; Intel, Rite Aid and eBay were among the disappointments.
  • As expectations of a December Federal Reserve (Fed) rate hike grew during the week the U.S. dollar continued to rally, reaching its highest level since March.
  • Boston Fed President Eric Rosengren stated that it makes little economic difference bypassing November and waiting until December to hike rates. He said that the election should not play a significant part in the timing decision and noted that the market’s current estimate of a 70% chance of a December hike “probably is a reasonable bet.”
  • The European Central Bank (ECB) left its key policy settings unchanged, as was widely expected. The ECB said its monthly quantitative easing (QE) target will remain at €80 billion until March 2017, or beyond, until it sees a sustained adjustment in the path of inflation.
  • U.S. September headline CPI increased 0.3%, in line with consensus and better than August’s 0.2% level. On a year-over-year (YoY) basis, headline CPI rose 1.5%. Gasoline accounted for more than half this increase, rising 5.8% in September.
  • U.S. Manufacturing output rose 0.2% during September compared to 0.5% in August. The New York Fed survey suggested that manufacturing contracted in the NY region during October. Details of the report were mixed. New orders and employment both increased, but remained negative.

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