What I’m Watching This Week – 30 October 2017

The Markets (as of market close October 27, 2017)

Strong third-quarter corporate earnings and an expanding gross domestic product helped push the S&P 500 and Nasdaq to new record highs last week. The Dow also gained close to 0.50%. While technology stocks led the way, health-care shares didn’t fare as well, pushing the small-cap Russell 2000 to a small end-of-week loss. A fading euro may have impacted the Global Dow, which fell off a bit by last week’s end. Positive economic signs also affected the bond market, which saw the yield on 10-year Treasuries reach its highest level since March.

The price of crude oil (WTI) rose to $54.02 per barrel last Friday, up from the prior week’s closing price of $52.07 per barrel. The price of gold (COMEX) dropped to $1,273.90 by early Friday evening, decreasing from the prior week’s price of $1,281.80. The national average retail regular gasoline price decreased for the sixth week in a row to $2.479 per gallon on October 23, 2017, $0.010 lower than the prior week’s price but $0.236 more than a year ago.

Market/Index 2016 Close Prior Week As of 10/27 Weekly Change YTD Change
DJIA 19762.60 23328.63 23434.19 0.45% 18.58%
Nasdaq 5383.12 6629.05 6701.26 1.09% 24.49%
S&P 500 2238.83 2575.21 2581.07 0.23% 15.29%
Russell 2000 1357.13 1509.25 1508.32 -0.06% 11.14%
Global Dow 2528.21 2969.47 2962.88 -0.22% 17.19%
Fed. Funds target rate 0.50%-0.75% 1.00%-1.25% 1.00%-1.25% 0 bps 50 bps
10-year Treasuries 2.44% 2.39% 2.41% 2 bps -3 bps

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

Last Week’s Economic Headlines

  • The first estimate of the third-quarter gross domestic product showed economic growth at an annual rate of 3.0%. The second quarter grew at an annual rate of 3.1%. Each succeeding estimate (three in all) is based on more complete data. The increase in the GDP in the third quarter reflected positive contributions from personal consumption expenditures (consumer spending), private inventory investment, nonresidential (business) fixed investment, exports, and federal government spending. These increases were partly offset by decreases in residential fixed investment and state and local government spending. Imports, which are a subtraction in the calculation of GDP, decreased.
  • Good news on the manufacturing front as new orders for long-lasting goods (durable goods) gained $5.1 billion, or 2.2%, in September. This increase follows a 2.0% rise in August. Also increasing in September were shipments (1.0%), unfilled orders (0.2%), and inventories (0.6%). More importantly, new orders for durable goods are up 5.2% over the last 12 months.
  • The number of sales and average selling prices of new homes soared in September following a poor August. Sales of new single-family houses were at an annual rate of 667,000, 18.9% above the revised August rate of 561,000 and 17.0% ahead of the September 2016 estimate. The median sales price of new houses sold in September 2017 was $319,700 ($303,800 in August). The average sales price was $385,200 ($364,300 in August). The estimate of new houses for sale at the end of September was 279,000, which represents a supply of 5.0 months at the current sales rate.
  • The trade in goods deficit was $64.1 billion in September, up $0.8 billion from August. Exports of goods were $129.6 billion, $0.9 billion more than August exports. Imports of goods for September were $193.7 billion, $1.7 billion more than August imports.
  • In the week ended October 21, the advance figure for initial claims for unemployment insurance was 233,000, an increase of 10,000 from the previous week’s level, which was revised up by 1,000. The advance insured unemployment rate remained 1.3%. The advance number of those receiving unemployment insurance benefits during the week ended October 14 was 1,893,000, a decrease of 3,000 from the previous week’s level, which was revised up 8,000.

Eye on the Week Ahead

The Federal Open Market Committee is expected to raise interest rates this week as inflation and economic growth seem to be moving upward. The jobs report for October is out at week’s end. September saw the number of new jobs decrease for the first time in several months. That trend is expected to be short-lived.

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