Last week saw Wall Street experience additional lackluster performance. Traders continued to fret over hawkish comments from Federal Reserve officials as inflation remained above the Fed’s target rate of 2.0%. In addition, higher bond yields and unrest in the Middle East also weighed on the market. Major benchmark stock indexes ended the week lower, adding to losses from the previous week. The S&P 500 and the Nasdaq Composite entered correction territory during the week. Each of the market sectors declined, except for utilities, which inched up. Communication services and energy declined more than 7.0%. Crude oil prices fell, although a sharp climb last Friday could be the result of a widening of the Israel-Hamas conflict.
Last Week’s Economic News
- The initial, or advance, estimate of gross domestic product showed the economy accelerated at an annualized rate of 4.9% in the third quarter, well above the 2.1% advance in the second quarter. While the initial estimate is based on incomplete source data, it certainly shows economic strength despite rising interest rates. The largest contributor to the increase in third-quarter GDP was a 4.0% increase in personal consumption expenditures (consumer spending), which ticked up 0.8% in the second quarter. Consumer spending rose on goods and services, with spending on durable goods jumping 7.6%, while spending on services rose 3.6%. Fixed investment advanced 0.8%, driven higher by a 3.9% increase in residential fixed investment. Nonresidential fixed investment moved down 0.1%. Exports increased 6.2%, while imports, which are a negative in the calculation of GDP, advanced 5.7%. The personal consumption expenditures price index increased 2.9%. Excluding food and energy, consumer prices rose 2.4%.
- Consumer prices rose in September, the same increase as in August. Over the last 12 months, overall consumer prices dipped slightly to 3.4%, while core prices decreased from 3.9% to 3.7%. Consumer spending advanced in September, while personal income and disposable (after-tax) personal income increased a bit.
- Sales of new single-family homes rose 12.3% in September and 33.9% from a year ago. The median sales price of new houses sold in September 2023 was $418,800. The average sales price was $503,900. The estimate for new homes for sale at the end of September represented a supply of 6.9 months at the current sales pace.
- The advance report on international trade in goods showed the goods deficit rose $1.1 billion, or 1.3% in September. Exports of goods increased 2.9%, while imports rose 2.4%. Excluding transportation, new orders increased 0.5%. Excluding defense, new orders increased 5.8%. Transportation equipment advanced 12.7% following two consecutive monthly decreases.
- New orders for manufactured durable goods increased 4.7% in September following two consecutive monthly decreases.
- The government budget for September, the last month of fiscal year 2023, had a deficit of $171.0 billion. Receipts totaled $467.0 billion, while government outlays equaled $638.0 billion. For fiscal year 2023, the total government deficit increased to $1.695 billion, up from $1.375 billion for the previous fiscal year. Government outlays totaled $6.134 billion for this fiscal year while receipts were $4.439 billion.
- The national average retail price for regular gasoline was $3.533 per gallon on October 23, $0.043 per gallon lower than the prior week’s price and $0.236 less than a year ago.
- For the week ended October 21, there were 210,000 new claims for unemployment insurance, an increase of 10,000 from the previous week’s level. According to the Department of Labor, the advance rate for insured unemployment claims for the week ended October 14 was 1.2%, unchanged from the previous week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended October 14 was 1,790,000, an increase of 63,000 from the previous week’s level.
Eye on the Week Ahead
November kicks off with a meeting of the Federal Open Market Committee. The FOMC projected one more 25-basis point increase by the end of the year. The Committee did not raise interest rates at its last meeting in September, so it is likely that another interest rate hike is in the offing following the November meeting or the last meeting of the year in December. Also out this week are the employment figures for October. Job hirings have been steady throughout the year, with September’s revised figure coming in at 336,000, well above the monthly average of 267,000.
Have a nice week!
Sincerely,
Robert G. Carpenter