Wall Street ended a two-week bear run as stocks enjoyed their best week of the year. Major benchmark stock indexes posted solid gains, while bond yields declined, dragged lower by escalating bond prices. Traders may have seen slowing job growth as more reason for the Federal Reserve to maintain, if not lower, interest rates in the near future. The Fed kept interest rates at their current levels following last week’s meeting. Third-quarter corporate earnings have been mixed, with about 49% of the companies of the S&P 500 reporting earnings that are 7.7% above estimates, which is below the five-year average of 8.5% but above the 10-year average of 6.6%. Crude oil prices fell for the second straight week as supply concerns driven by tensions in the Middle East waned. The dollar declined to a six-week low, while gold prices advanced.
Last Week’s Economic News
- Employment cooled in October, according to the latest report from the Bureau of Labor Statistics. There were 150,000 new jobs added last month, well below the average monthly gain of 258,000. Since April, the unemployment rate and the number of unemployed persons are up 0.5 percentage point and 849,000, respectively. Both the labor force participation rate and the employment-population ratio edged up from the previous month.
- Last week, the Federal Open Market Committee voted unanimously to keep the Federal Funds target rate at its current range of 5.25%-5.50%. The Committee noted that economic activity expanded at a strong pace in the third quarter and, while job gains moderated since earlier in the year, they remained strong. Inflation continued to be elevated. Moving forward, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals (full employment and inflation at a rate of 2.0% over the longer run). Following the meeting, the Federal Reserve Chairman maintained a hawkish tone, noting that further policy tightening may be necessary despite signs that price pressures may be waning. He stated that, “a few months of good data are only the beginning to build confidence that inflation is moving sustainably to our goal.”
- According to the latest Job Openings and Labor Turnover survey, there were 9.6 million job openings in September, a slight increase from the previous month’s total. The number of hires was essentially unchanged at 5.9 million. Total separations, which include quits, layoffs and discharges, and other separations, decreased by about 150,000 to 5.5 million. Within separations, the number of quits (voluntary separations) was unchanged at 3.7 million.
- Manufacturing expanded in October, ending a five-month period of declines. Note that inflationary pressures picked up, pushing input costs and output charges higher at the fastest rate since April.
- October saw growth in the services sector as business activity rose marginally. Despite a decline in new orders, survey respondents noted a slower rise in costs.
- The national average retail price for regular gasoline was $3.473 per gallon on October 30, a bit lower than a year ago.
- For the week ended October 28, there were 217,000 new claims for unemployment insurance, an increase of 5,000 from the previous week’s level.
Eye on the Week Ahead
This week is a very slow one for economic data. The trade in goods and services deficit report out this week is for September. The Treasury statement is for October, the first month of fiscal year 2024.
Have a nice week!
Sincerely,
Robert G. Carpenter