markets

Summary Of the Markets Today:

• The Dow closed down 647 points or 1.95%,
• Nasdaq closed down 2.48%,
• S&P 500 down 2.08%,
• WTI crude oil settled at $86 down $3.34,
• USD $110.41 up $0.77,
• Gold $1708 up $7.90,
• Bitcoin $16,184 down 11.22% – Session Low 16.129,
• 10-year U.S. Treasury 4.101% down 0.027%

*Stock data, cryptocurrency, and commodity prices at the market closing.

Today’s Economic Releases:

September 2022 sales of merchant wholesalers were up 14.4% year-over-year. Total inventories were up 24.1% year-over-year. The September inventories/sales ratio was 1.31. The September 2021 ratio was 1.21. Inventory/sales ratios are self-adjusting for inflation and are the best way to look at trends. A ratio above 0 generally tells you the economy is slowing as inventories are rising (see graph below).

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A summary of headlines we are reading today:

Summary Of the Markets Today:

• The Dow closed up 334 points or 1.02%,
• Nasdaq closed up 0.49%,
• S&P 500 up 0.56%,
• WTI crude oil settled at $89 down $2.58,
• USD $109.63 down $0.49,
• Gold $1715 up $34.10,
• Bitcoin $18,217 down 12.64% – Session Low 17,608,
• 10-year U.S. Treasury 4.146 down 0.069%

*Stock data, cryptocurrency, and commodity prices at the market closing.

Today’s Economic Releases:

NFIB’s Small Business Optimism Index declined 0.8 points in October 2022 to 91.3 which is the 10^th consecutive month below the 49-year average of 98. Per NFIB Chief Economist Bill Dunkelberg: “Owners continue to show a dismal view about future sales growth and business conditions, but are still looking to hire new workers . Inflation, supply chain disruptions, and labor shortages continue to limit the ability of many small businesses to meet the demand for their products and services.”

In 2022, the deficit was equal to 5.5 percent of the nation’s gross domestic product (GDP), down from 12.3 percent in 2021, but still larger than the 4.6 percent recorded in 2019—the most recent year not affected by the pandemic. The 2022 deficit was the third largest as a percentage of GDP over the past decade and greater than the 50-year average of 3.6 percent.

A summary of headlines we are reading today:

Summary Of the Markets Today:

• The Dow closed up 424 points or 1.31%,
• Nasdaq closed up 0.85%,
• S&P 500 up 0.96%,
• WTI crude oil settled at $92 down $0.67,
• USD $110.81 down $2.16,
• Gold $1678 up $0.062,
• Bitcoin $20,811 down 1.87% – Session Low 20,620,
• 10-year U.S. Treasury 4.218% up 0.049

*Stock data, cryptocurrency, and commodity prices at the market closing.

Today’s Economic Releases:

According to the Federal Reserve, consumer credit increased at an annual rate of 6.4% in September 2022. Revolving credit increased at an annual rate of 8.7%, while nonrevolving credit increased at an annual rate of 5.7%. As we all know inflation is running amok and consumer credit is actually contracting at 1.0% per year (see graph below).

A summary of headlines we are reading today:

Summary Of the Markets Today:

• The Dow closed up 402 points or 1.26%,
• Nasdaq closed up 1.28%,
• S&P 500 up 1.36%,
• WTI crude oil settled at $93 up $4.48,
• USD $110.81 down $2.16,
• Gold $1684 up $53.40,
• Bitcoin $20,258 down 0.92% – Session Low 20,199,
• 10-year U.S. Treasury 4.175% up 0.049%,
• Baker Hughes Rig Count: U.S. +2 to 770 Canada -3 to 209

*Stock data, cryptocurrency, and commodity prices at the market closing.

Today’s Economic Releases:

Headline total nonfarm payroll employment increased by 261,000 in October 2022, and the headline unemployment rate rose to 3.7%. Notable job gains occurred in health care, professional and technical services, and manufacturing. However, there is little correlation between the household and establishment surveys this month with the household survey showing a DECLINE of employment of 328,000 vs the headline establishment survey showing a gain of 261,000. Interestingly, the household survey also shows the labor force declined by 22,000 and the number of unemployed rising 306,000 from the previous month – all this leading to the increase in the headline unemployment rate to 3.7% from 3.5%. These two surveys which comprise the BLS employment report are so different that I would not rely on much analysis of this data. The employment growth has been relatively strong but has a general bias towards moderation of employment gains (see graph below).

A summary of headlines we are reading today:

Summary Of the Markets Today:

• The Dow closed down 147 points or 0.46%,
• Nasdaq closed down 1.73%,
• S&P 500 down 1.06%,
• WTI crude oil settled at $88 down $1.85,
• USD $112.99 up $1.64,
• Gold $1634 down $16.00,
• Bitcoin $20,258 down 0.92% – Session Low 20,199,
• 10-year U.S. Treasury 4.134% down 0.007

*Stock data, cryptocurrency, and commodity prices at the market closing.

Today’s Economic Releases:

Yesterday, the Federal Reserve (FOMC) raised the federal funds rate again and potentially offered some relief from future federal fund rate increases: “…the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments…”. Powell in the press conference later threw cold water on relief saying “We have some ways to go.” The graph below shows answers your questions – showing historically that the federal funds rate usually has to rise higher than the CPI to affect the inflation rate.

According to NFIB’s monthly jobs report, small business owners continue to struggle with labor issues as 23% of owners report labor quality as their top business problem, second to inflation. Ten percent of owners report labor cost as their top business problem, a historically high reading. “The labor shortage remains a challenging problem for small business owners,” said NFIB Chief Economist Bill Dunkelberg. “Because of staffing shortages, small business owners are less able to take full advantage of current sales opportunities and continue to make business adjustments to compensate.”

U.S.-based employers announced 33,843 job cuts in October a 13% increase from the 29,989 cuts in September. It is 48% higher than the 22,822 cuts announced in the same month last year.

In the week ending October 29, the unemployment insurance weekly claims 4-week moving average was 218,750, a decrease of 500 from the previous week’s revised average. The labor market continues strong.

Non-farm business productivity has declined 1.4% year-over-year whilst labor costs have increased 6.1% year-over-year. Not good news for exports.

The U.S. Census Bureau and the U.S. Bureau of Economic Analysis announced today that the goods and services deficit was $73.3 billion in September, up $7.6 billion from $65.7 billion in August, revised. Exports declined 1.1% month-over-month whilst imports increased 1.5%. Most of the decline in exports came from food and the increase in imports came from capital goods.

A summary of headlines we are reading today:

Summary Of the Markets Today:

• The Dow closed down 505 points or 1.55%,
• Nasdaq closed down 3.36%,
• S&P 500 down 2.5%,
• WTI crude oil settled at $89 up $0.98,
• USD $112.11 up $0.63,
• Gold $1638 down $11.80,
• Bitcoin $20,175 down $305,
• 10-year U.S. Treasury 4.082% down 0.063

*Stock data, cryptocurrency, and commodity prices at the market closing.

Today’s Economic Releases:

According to ADP’s Employment Report, employers created 239,000 jobs in October, up from a revised 192,000 in September as restaurants, retailers and the travel sector ramped up hiring in advance of the year-end holidays. This continues to show employment is strong.

The Federal Reserve (FOMC) as expected raised the federal funds rate 75 basis points (3/4%) to the range of 3-3/4 to 4%, and stated in part:

The Committee anticipates that ongoing increases in the target range will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 percent over time. In determining the pace of future increases in the target range, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments. In addition, the Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities, as described in the Plans for Reducing the Size of the Federal Reserve’s Balance Sheet that were issued in May. The Committee is strongly committed to returning inflation to its 2 percent objective.

The bold sentence in the FOMC statement is what many consider as intent to reduce the federal funds rate increases in the future as there is a lag between raising the funds rate and its impact on inflation.

A summary of headlines we are reading today:

Summary Of the Markets Today:

• The Dow closed down 80 points or 0.24%,
• Nasdaq closed down 0.89%,
• S&P 500 down 0.41%,
• WTI crude oil settled at $88 up $1.74,
• USD $111.54 down $0.04,
• Gold $1651 up $10.60,
• Bitcoin $20,442 up 0.28% – Session Low 20,355,
• 10-year U.S. Treasury 4.048% down 0.029%

*Stock data, cryptocurrency, and commodity prices at the market closing.

Today’s Economic Releases:

US Home Prices Drop by 0.5% From August to September 2022. Home prices were up by 11.4% from September 2021, the fifth consecutive month of lower year-over-year growth.

Economic activity in the manufacturing sector grew in October 2022, with the overall economy achieving a 29th consecutive month of growth. The October Manufacturing PMI registered 50.2 percent, 0.7 percentage point lower than the 50.9 percent recorded in September. The New Orders sub-index remained in contraction territory at 49.2 percent, 2.1 percentage points higher than the 47.1 percent recorded in September. Index values below 50 represent contraction. This index is saying the manufacturing portion of the economy is flat.

The number of job openings increased to 10.7 million on the last business day of September 2022. The number of hires edged down to 6.1 million, while total separations decreased to 5.7 million. This data is showing the employment end of the economy is healthy.

Non-inflation adjusted construction spending during September 2022 was up 0.2% month-over-month and 10.9% year-over-year. Private Construction Spending on private construction was up 0.4% month-over-month. Residential construction was unchanged month-over-month. Nonresidential construction was  up 1.0% month-over-month. Public Construction was down 0.4% month-over-month. When you inflation adjust construction spending, it is down 9.9% year-over-year. This sector is deep in recession.

A summary of headlines we are reading today:

Summary Of the Markets Today:

• The Dow closed down 129 points or 0.39%,
• Nasdaq closed down 1.03%,
• S&P 500 down 0.75%,
• WTI crude oil settled at $86 down $1.91,
• USD $111.59 up $0.82,
• Gold $1636 down $9.40,
• Bitcoin $20,358 down 1.38% – Session Low 20,268,
• 10-year U.S. Treasury 4.05% up 0.044%

*Stock data, cryptocurrency, and commodity prices at the market closing.

Today’s Economic Releases:

The Dallas Fed’s Texas Manufacturing Outlook Survey show conditions, edged down three points to 6.0, suggesting a slight deceleration in output growth. Other measures of manufacturing activity also moved down this month. The new orders index slipped to -8.8―its fifth month in a row in negative territory—suggesting a continued decrease in demand. The growth rate of orders index also remained negative and dropped 12 points to -13.2.

The Chicago Business Barometer dipped a further half-point to 45.2 in October 2022, contracting for a second consecutive month. This indicator sponsored by the Institute of Supply Management – Chicago (ISM-Chicago) has a good correlation to the national indicator produced by the ISM mother organization which will be released shortly.

A summary of headlines we are reading today:

Summary Of the Markets Today:

• The Dow closed up 829 points or 2.59%,
• Nasdaq closed up 2.87%,
• S&P 500 up 2.46%,
• WTI crude oil settled at $88 down $0.97,
• USD $110.89 down $0.11,
• Gold $1648 down $17.30,
• Bitcoin $20,620 up $360 – Session Low 20,069,
• 10-year U.S. Treasury 4.014% up 0.057%
• Baker Hughes Rig Count: U.S. -3 to 768 Canada +2 to 212

*Stock data, cryptocurrency, and commodity prices at the market closing.

Today’s Economic Releases:

Inflation-adjusted personal income was little changed whilst inflation-adjusted spending increased month-over-month in September 2022. The better way to look at this situation is to analyze year-over-year growth which shows spending remains fairly steady at 1.9% growth whilst income is an improving NEGATIVE 2.9% (see graph below). This tells me economic growth is holding steady. Inflation too is holding steady at 6.2% which means the federal funds rate increases are yet to have an effect.

The Pending Home Sales Index (PHSI) year-over-year pending transactions slid by 31.0%. According to the National Association of Realtors, the Federal Reserve’s inflation battle which is resulting in higher interest rates is harming the housing market. No question that the housing market is in a recession.

A summary of headlines we are reading today:

Summary Of the Markets Today:

• The Dow closed up 194 points or 0.61%,
• Nasdaq closed down 1.63%,
• S&P 500 down 0.61%,
• WTI crude oil settled at $89 up $0.78,
• USD $110.89 up $0.88,
• Gold $1666 down $3.60,
• Bitcoin $20,404 down 1.57% – Session Low 20,370,
• 10-year U.S. Treasury 3.906% down 0.093%

*Stock data, cryptocurrency, and commodity prices at the market closing.

Today’s Economic Releases:

The number of borrowers classified as seriously delinquent (90 or more days late) on their mortgage payments in August 2022 dropped to the lowest level recorded since April 2020, while the overall delinquency rate remained near a record low. Molly Boesel, Principal Economist for CoreLogic stated:

The share of U.S. borrowers who are six months or more late on their mortgage payments fell to a two-year low in August and was less than one-third of the pandemic high recorded in February 2021. Furthermore, the foreclosure rate remained near an all-time low, which indicates that borrowers who were moving out of late-stage delinquencies found alternatives to defaulting on their mortgages.

In the week ending October 22, the 4-week unemployment insurance weekly initial claims moving average was 217,000, an increase of from the previous week’s unrevised average of 212,250.

New orders for manufactured durable goods in September 2022 increased 11.3% year-over-year. Even after adjusting for inflation, durable goods improved 4.6% year-over-year. At this point it is obvious the economy is modestly improving even with high inflation.

The advance estimate of real gross domestic product (GDP) shows the economy increased at an annual rate of 2.6% in 3Q2022. In the second quarter, real GDP decreased 0.6%. Advance estimates historically have been subject to significant change – but it continues the story line that the economy is modestly improving.

A summary of headlines we are reading today: