The Markets (as of market close October 28, 2016)

As the presidential election draws near, news about the candidates may be affecting the markets. Word of an FBI investigation into more Clinton emails, coupled with some earnings reports that were weaker than expected, sent equities into the red for the week. Only the Dow posted a gain over the prior week. The NASDAQ and Russell 2000 fell back a bit. Gold climbed slightly, while the price of crude oil, which had been over $50 per barrel, dropped almost 5.0%.
Last Week’s Headlines
  • The first estimate of the third-quarter GDP exceeded expectations – the fastest growth rate in two years.  The biggest driver of the increase in the GDP was personal consumption expenditures, which rose during the second quarter. The increase in real GDP growth in the third quarter reflected an upturn in private inventory investment, acceleration in exports, a smaller decrease in state and local government spending, and an upturn in federal government spending.
  • In the manufacturing sector, the report on durable goods orders is important as it shows the number of new orders placed with U.S. manufacturers. Last week’s advance report for September projects a slight decrease in new orders for manufactured durable goods (expected to last at least three years). A decrease in orders for transportation equipment drove the overall decrease. On the other hand, shipments of durable goods in September increased, led by a jump in shipments of transportation equipment. Overall, the manufacturing sector continues to be relatively flat, with weakness in global demand for domestic products.
  • Employer costs increased for the third straight quarter, according to the latest figures released by the Bureau of Labor Statistics. Growth in wages and salaries has been steady, but certainly not spectacular, over the past couple of years.
  • The Census Bureau’s advance report on international trade in goods for September saw the trade deficit fall roughly $3.1 billion from $59.149 billion in August to $56.083 billion in September. Exports of goods for September were $125.6 billion, $1.1 billion more than August exports. Imports of goods for September were $181.7 billion, $2.0 billion less than August imports.
  • New home sales picked up in September. The Census Bureau reported that sales of new single-family homes were at an annual rate of 593,000, above the August and September 2015 estimates.
  • Consumer confidence in current business and employment conditions waned, as did consumers’ short-term outlook on economic conditions.
Eye on the Week Ahead
Economic news this week focuses on the Federal Open Market Committee meeting and the employment figures for October. While the Committee has hinted that interest rates might be raised by the end of the year, it is not expected to happen at this meeting. Employment figures for October are out this week. The employment sector has been steady, with 156,000 new jobs added in September. Payroll has increased only marginally, while the unemployment rate has remained at about 5.0%