10-Year Treasury Yield
U.S. Treasury yields were lower on Monday as investors braced for a busy week that will see voters head to the polls for the U.S. presidential election and the Federal Reserve's next interest rate decision. The yield on 10-year Treasury was last down nine basis points, hovering around 4.272%. The yield on the 2-year Treasury was last down more than six basis points to 4.137%.
Factory Orders
US factory orders fall a second straight month in September. Factory orders dropped 0.5% after a downwardly revised 0.8% decrease in August. New orders for US-manufactured goods fell for a second straight month in September, and business spending on equipment appears to have pulled back in the third quarter. Factory orders dropped 0.5 per cent after a downwardly revised 0.8 per cent decrease in August, the Commerce Department’s Census Bureau said on Monday (Nov 4). Economists polled by Reuters had forecast factory orders would fall 0.5 per cent, after a previously reported 0.2 per cent decline in August. Factory orders were unchanged from a year earlier.
Geopolitical Risk
It was a strong week across the board for equities, due in large part to Wednesday’s huge rally following Trump’s victory. The S&P 500 finished up 4.66% for the week, as the Dow was higher by 4.61%. Both indexes notched their best week since November 2023. The Nasdaq outdid even those moves, toting a 5.74% advance, while the small-cap benchmark Russell 2000 surged 8.57%.
Germany’s government is on the brink of collapse.Germany’s ruling coalition has long been on shaky ground, amid increasing divisions over economic and budget policies among its three member parties. Germany narrowly avoided a recession in the third quarter of 2024, but the outlook for the economy appears lackluster.
International Trade - Trade Balance
The U.S. Census Bureau and the U.S. Bureau of Economic Analysis announced today that the goods and services deficit was $84.4 billion in September, up $13.6 billion from $70.8 billion in August, revised. The trade gap increased 19.2% to $84.4 billion, the highest level since April 2022, the Commerce Department's Bureau of Economic Analysis said in a separate report. Economists had forecast the trade deficit would swell to $84.1 billion. Imports jumped 3.0% to a record $352.3 billion.
ISM Services Index
ISM Services Index Up for October 2024. Economic activity in the services sector, which includes construction, expanded for the fourth consecutive month in October, according to the nation’s purchasing and supply executives in the latest Services ISM Report on Business. October's ISM PSI Services Index is up 4.5 percentage points from two months prior. August was 51.5%, September was 54.9% and October's was at 56%. In October, the Services PMI registered 56%, 1.1 percentage points higher than September’s figure of 54.9%,
MBA Purchase Applications
The Market Composite Index, a measure of mortgage loan application volume, decreased 10.8 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 12 percent compared with the previous week. The Refinance Index decreased 19 percent from the previous week and was 48 percent higher than the same week one year ago. The seasonally adjusted Purchase Index decreased 5 percent from one week earlier. The unadjusted Purchase Index decreased 7 percent compared with the previous week and was 2 percent higher than the same week one year ago. The refinance share of mortgage activity decreased to 39.9 percent of total applications from 43.1 percent the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 7.0 percent of total applications.
PMI Services Final
The S&P Global US Composite PMI Output Index ticked up to 54.1 in October from 54.0 in September, registering a further solid increased. US service providers continued to expand their business activity at a marked pace as the final quarter of the year got underway. New orders grew at a solid pace that was broadly in line with that seen in September, despite signs of weaker international demand. Business activity expectations revived from a 23-month low in September. Firms nevertheless continued to scale back staffing levels marginally amid uncertainty over future demand. On the price front, companies raised their charges at the joint-slowest pace in almost four-and-a-half years, in spite of a further sharp increase in input costs. The seasonally adjusted S&P Global US Services PMI® Business Activity Index signaled further strong growth of service sector output in October, ticking down only slightly to 55.0 from 55.2 in September. Activity has now increased in each of the past 21 months.
Oil - Commodity
Despite the OPEC+ group’s recent decision to extend their production cut, weakness continued in global oil markets on faltering demand from China and swelling American supplies. Escalating geopolitical tension also added pressure on the demand outlook of the commodity. Oil has been trading in a tight range since the second half of 2022. It was broadly congested inside $97-$65 per barrel on worries that supplies will exceed demand.
Jobless Claims
The number of Americans filing new applications for unemployment benefits rose slightly last week, suggesting no material change in the labor market and reinforcing views that hurricanes and strikes had resulted in job growth almost stalling in October. Though the labor market is easing, wage pressures are not showing a significant cooling, casting a shadow over the inflation and interest rate outlook. Unit labor costs increased at a solid clip in the third quarter, other data from the Labor Department showed on Thursday. Initial claims for state unemployment benefits increased 3,000 to a seasonally adjusted 221,000 for the week ended Nov. 2, the Labor Department said. Economists polled by Reuters had forecast 221,000 claims for the latest week.
Productivity and Costs
Economists said the strong rise in labor costs, which was accompanied by a sharp upward revision to the second-quarter data, was not compatible with inflation returning and staying at the Federal Reserve's 2% target. The U.S. central bank on Thursday cut interest rates by 25 basis points as expected, lowering its policy rate to the 4.50%-4.75% range. "Unit labor costs growth is the single biggest determinant of labor-intensive core services prices," said Paul Ashworth, chief North America economist at Capital Economics. "Unless unit labor costs growth slows again, it will be a lot harder for Fed officials to claim that inflation can be sustained at 2%."
US worker productivity rises moderately in third quarter; labor costs elevated. U.S. worker productivity increased moderately in the third quarter, resulting in only a gradual slowdown in labor costs that could cast a cloud over the inflation outlook.Nonfarm productivity, which measures hourly output per worker, increased at a 2.2% annualized rate last quarter, the Labor Department's Bureau of Labor Statistics said on Thursday. Data for the second quarter was revised lower to show productivity rising at a 2.1% pace instead of the previously reported 2.5% rate. Economists polled by Reuters had forecast productivity advancing at a 2.3% rate. Productivity increased at a 2.0% pace from a year ago. The moderate pace of productivity does not bode well for the inflation and interest rate outlook. Unit labor costs - the price of labor per single unit of output - rose at a 1.9% rate in the July-September quarter. That followed a 2.4% pace of expansion in the second quarter. Labor costs increased at a 3.4% rate from a year ago.
Whosale Inventories / Trade (Pre)
Wholesale inventory consists of finished good products received from manufacturers or distributors that have not yet been sold to customers. For September 2024 was M/M -0.2% and Prior was 0.1%.
FOMC Meeting
As widely expected, the central bank delivered a 0.25% trimming to the federal funds rate Thursday (Nov. 7), which will take some time to work through the economy and impact the cost of debt, for everything from corporate loans to credit cards. In a widely anticipated move, the Federal Reserve cut interest rates by 25 basis points last Thursday. In a press conference following the announcement, Fed Chair Jerome Powell declined to comment on the central bank's plans for future rate cuts.
Cosnumer Credit
Consumer credit posts small increase as Americans cut back on credit-card purchases. The amount of borrowing by U.S. consumers in September rose a scant 1.4%, but the increase was tied mostly to student loans as Americans scale back on the use of credit cards. Consumer credit increased by $6.0 billion in September, Federal Reserve data showed. Economists had expected a $13 billion increase, according to a Wall Street Journal forecast. In the meantime, the latest stats on consumer credit — known as the G.19 report — showed Thursday that overall consumer credit, across revolving lines (like credit cards) and non-revolving lines (such as fixed-rate loans like auto loans) increased in September at an annualized 1.4% pace. That’s a deceleration from the 1.8% pace seen in August and below the 6.5% annualized leap recorded for July. Overall borrowings across all lending tranches were $6 billion in September, which was lower than estimates for as much as a $14.5 billion boost by several financial sites. The August borrowings were $7.6 billion.
Fed Balance Sheet
The Federal Reserve has cut interest rates by a predicted 25 basis points and also announced that it will continue to decrease its balance sheet, something that CEI senior economist Ryan Young says needs to continue in Trump’s next term if the nation wants to win the fight over inflation. A more important, but less publicized, development is that the Fed will continue to decrease its balance sheet of government bonds by $25 billion per month. It grew that balance sheet by $5 trillion during the pandemic. This was the post-COVID inflation’s key driver. Drawing it back was the key move in bringing inflation back down—moreso than interest rate hikes.
Mortgage Rates
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) increased to 6.81 percent from 6.73 percent, with points decreasing to 0.68 from 0.69 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. The effective rate increased from last week. The average contract interest rate for 15-year fixed-rate mortgages decreased to 6.21 percent from 6.27 percent, with points decreasing to 0.55 from 0.77 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week.
Consumer Sentiment UM
Consumer sentiment gauge better than expected. The University of Michigan’s consumer sentiment gauge came in at 73 in November, rising to the highest level since April. The reading was also better than the consensus expectation of 71 and up from 70.5 in October.
Hedging - Gold
Russia’s gold reserves reached a record high of $207.7 billion in October, according to the country’s central bank. The share of gold in Russia’s international reserves rose from 31.5 per cent last month to 32.9 per cent, marking the highest proportion since November 1999, when it stood at 34 per cent. The highest-ever proportion of gold in the reserves was 56.9 per cent on January 1, 1993, while the lowest was 2.1 per cent in June 2007, reports Xinhua, citing Russia’s RIA Novosti news agency.
Tuesday, November 4, 2024
Nvidia passes Apple as world’s most valuable company. Nvidia passed Apple in market cap on Tuesday, Week 45, to become the most valuable publicly traded company in the world.
The stock price has nearly tripled so far in 2024 as demand continues to swell for the company’s graphics processing units.Nvidia rose nearly 3% to close with a market cap of $3.43 trillion, ahead of Apple at $3.4 trillion. Nvidia shares have almost tripled in 2024, as investors show continued confidence in the company’s ability to maintain a rapid growth rate from its graphics processing units, or GPUs, and a leadership position in the artificial intelligence market.
S&P 500 Index - Week Performance
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