10-Year Treasury Yield
The 10-year Treasury yield, a benchmark for mortgages and car loans, jumped back above 4% on Monday amid stronger labor market readings and despite the start of a Federal Reserve rate-cutting campaign last month. The 10-year yield was up more than 4 basis points to 4.024%, its highest since early August and a big turnaround from its 2024 low of around 3.58% reached a little more than a month ago. The yield on the 2-year Treasury was up nearly 6 basis points to 3.989%. Yields move inversely to prices. One basis point equals 0.01%.
Consumer Credit
Consumer Credit Dips to $8.93B, Falling Short of Forecasts. The latest economic data reveals a dip in Consumer Credit, with the actual figure falling short of forecasted numbers. The total value of outstanding consumer credit requiring installment payments currently stands at $8.93 billion. This number is notably lower than the predicted figure of $11.80 billion, marking a significant deviation from the anticipated trajectory. Economists and market analysts had expected a healthier consumer credit scene, but the actual figures have painted a different picture. In addition to falling short of the forecast, the current consumer credit value also represents a steep decline from the previous figure. Previously, the total value of outstanding consumer credit was recorded at $26.63 billion. The current figure of $8.93 billion marks a significant drop, indicating a slowdown in consumer spending and potentially reflecting a dip in consumer confidence. Consumer Credit is a critical economic indicator that measures the change in the total value of outstanding consumer credit requiring installment payments. It is closely correlated with consumer spending and confidence, offering valuable insights into the health of the economy. The figure can be volatile, often subject to sizable revisions.
US Trade Deficit - Balance
Smaller US trade deficit supports strong economic growth estimates for third quarter. Trade deficit shrinks 10.8% to $70.4 billion in August. Exports increase 2.0% to record high; imports fall 0.9%. The U.S. trade deficit narrowed sharply in August as exports increased to a record high, suggesting trade could have little or no impact on economic growth in the third quarter. The smaller-than-expected trade gap reported by the Commerce Department on Tuesday added to data on the labor market and consumer spending in suggesting that the economy remained on solid footing last quarter. This report says that net trade supports GDP growth in August. U.S. trade deficit drops to 5-month low and could add to GDP. Exports hit record high. Imports of oil and new cars decline. Americans are still buying plenty of imports. The U.S. trade deficit sank almost 11% in August to a five-month low because of lower imports of oil and new cars, potentially giving a boost to the official measure of economic growth in the third quarter.
Geopolitical Risk
Geopolitical events tend to have a larger impact on the stock market when they trigger stagflation. One year after the terrorist attack by Hamas and Israel’s ensuing war in Gaza, the tension in the Middle East has only heightened, drawing the attention of market participants the world over.
Jamie Dimon says geopolitical risks are surging: ‘Conditions are treacherous and getting worse’ JPMorgan Chase CEO Jamie Dimon sees risks climbing around the world amid widening conflicts in the Middle East and with Russia’s invasion of Ukraine showing no signs of abating. “We have been closely monitoring the geopolitical situation for some time, and recent events show that conditions are treacherous and getting worse,” Dimon said Friday in the bank’s third-quarter earnings release. Dimon also said that he remained wary about the future of the economy, despite signs that the Federal Reserve has engineered a soft landing.
MBA Purchase Applications
The MBA’s Market Composite Index, which measures the volume of mortgage applications, dropped by 5.1% on a seasonally adjusted basis from the previous week. Unadjusted, the index decreased 5%. The Refinance Index fell sharply, down 9% from the prior week, though it remained 159% higher compared to the same period last year. The seasonally adjusted Purchase Index edged down 0.1%, while the unadjusted Purchase Index rose slightly, increasing by 0.1%. Compared to the same week a year ago, purchase applications were 8% higher
World Central Banks - India
India central bank holds rates, shifts stance to ‘neutral’ signaling rate cuts ahead. The Reserve Bank of India (RBI) kept its key interest rate unchanged on Wednesday as widely expected, but changed its policy stance to “neutral”, opening the door for rate cuts amid early signs of a slowdown in the economy. The Monetary Policy Committee (MPC), which consists of three RBI and three external members, kept the repo rate unchanged at 6.50% for a tenth straight policy meeting. India’s benchmark 10-year bond yield fell 5 basis points to 6.7392%, on the change in stance. Equity index Nifty 50 was up 0.67% at 25,177.5 points. The central bank expects inflation to average 4.5% in the financial year 2024-25, unchanged from the forecast provided at the August meeting.
Wholesale Trade (Pre)
Wholesale inventories revised to 0.1% in Q3. August wholesale trade sales -0.1% month/month vs. +0.4% est. & +1.1% prior. U.S. wholesale inventories rose less than initially thought in August amid a sharp moderation in the pace of increase in motor vehicle stocks, a trend that if sustained could temper expectations for robust economic growth in the third quarter. The Commerce Department's Census Bureau said on Wednesday that wholesale inventories edged up 0.1%, revised down from the 0.2% gain estimated last month. Stocks at wholesalers rose 0.2% in July. Economists polled by Reuters had expected that the rise in inventories, a key part of gross domestic product, would be unrevised at 0.2%. Inventories climbed 0.6% on a year-on-year basis in August.
Oil - Commodity
U.S. crude oil drifts lower, closes below $74 per barrel after sell-off. The rally spurred by the risk of wider Middle East war has stalled amid uncertainty over how Israel will retaliate against Iran for last week’s ballistic missile strike. West Texas Intermediate November contract: $73.24 per barrel, down 33 cents, or 0.45%. Year to date, U.S. crude oil has gained more than 2%. Brent December contract: $76.58 per barrel, down 60 cents, or 0.78%. Year to date, the global benchmark is little changed. Though prices are falling, Goldman Sachs sees global benchmark Brent jumping by $10 to $20 per barrel if an Israeli strike disrupts Iranian crude oil production, according to a Tuesday research note. U.S. crude inventories rose by 5.8 million barrels for the week ended Oct. 4 while gasoline stockpiles fell by 6.3 million barrels, according to the Energy Information Administration.
FOMC - Minutes for Medeting #6
Fed officials were divided on whether to cut rates by half a point in September, minutes show. Federal Reserve officials at their September meeting agreed to cut interest rates but were unsure how aggressive to get. Minutes released Wednesday indicated that “a substantial majority of participants” favored cutting by half a percentage point, through some expressed misgivings about going that large. Since the meeting, economic indicators have showed that the labor market is perhaps stronger than officials favoring the 50 basis point move had expected. Markets moved little following the release, with major averages continuing on pace for big gains.
The release of the survey on Thursday follows by a day the U.S. central bank's publication of its minutes of the Sept. 17-18 FOMC meeting. In that document, officials offered little fresh guidance about the balance sheet outlook beyond noting the importance of communicating that the ongoing drawdown can continue even when officials are cutting the Fed's interest rate target.
Jobless Claims
Initial filings for unemployment benefits took an unexpected turn higher, hitting as seasonally adjusted 258,000 for the week ending Oct. 5, the highest total since Aug. 5, 2023. Weekly jobless claims hitting a 14-month high, indicating potential softness in the labor market despite the big jump in nonfarm payrolls in September. However, most of the surge could be tied to the hurricane and strike.
Consumer Price Index - CPI
The consumer price index increased a seasonally adjusted 0.2% for the month, putting the annual inflation rate at 2.4%. Both were 0.1 percentage point higher than forecast. Excluding food and energy, core prices rose 0.3% on the month, putting the annual rate at 3.3%. Both core readings also were 0.1 percentage point above forecast. The consumer price index, a broad gauge measuring the costs of goods and services across the U.S. economy, increased a seasonally adjusted 0.2% for the month, putting the annual inflation rate at 2.4%. Both readings were 0.1 percentage point above the Dow Jones consensus. The annual inflation rate was 0.1 percentage point lower than August and is the lowest since February 2021. Excluding food and energy, core prices increased 0.3% on the month, putting the annual rate at 3.3%. Both core readings also were 0.1 percentage point above forecast.
Treasury Budget
U.S. Department of the Treasury Announces Awardees Under Innovative $75 Million Small Business Grant Program. The U.S. Department of the Treasury announced the full list of awardees receiving funding to support small business growth through the Biden-Harris Administration’s State Small Business Credit Initiative (SSBCI) Investing in America Small Business Opportunity Program (SBOP) following recent announcements of several initial awards. SBOP is a $75 million competitive grant program that provides funding to connect underserved and very small businesses to the financing necessary to participate in key Investing in America supply chains, including electric vehicle manufacturing, semiconductor manufacturing, construction, transportation, clean energy generation, and more.
Fed Balance Sheet
Fed's balance sheet drawdown to continue even as central bank cuts rates. Big banks expect balance sheet drawdown to end next April.. Fed officials still see plenty of room to cut balance sheet Wall Street's biggest banks expect the Federal Reserve to end the process of shrinking its balance sheet next April, holding the line relative to what they told the central bank in July. The banks also expect the Fed's balance sheet to bottom out at $6.4 trillion, well above the $4.2 trillion mark seen before the coronavirus pandemic struck in early 2020, according to a survey, opens new tab of so-called primary dealers conducted by the New York Fed ahead of the central bank's rate-setting Federal Open Market Committee meeting, held last month. These banks serve as counterparties to Fed policy operations.
Q3 Earning Season Kicks Off
Third-quarter earnings season kicks off with major banks reporting their quarterly results. JPMorgan Chase (JPM), Wells Fargo (WFC), and Bank of New York Mellon (BK) are among the financial institutions set to release. Additionally, asset management giant BlackRock (BLK) and insurance company Progressive (PGR) will also report.
Top Stocks Earnings - JPM
JPM reported 3rd qtr 2024 earnings of $4.37 per share on 10/11/24. This beat the $4.01 consensus of the 15 analysts covering the company. Finance. JPMorgan Chase shares pop 5% after topping estimates on better-than-expected interest income. JPMorgan Chase posted third-quarter results that topped estimates for profit and revenue as the company generated more interest income than expected. JPMorgan said profit fell 2% from a year earlier to $12.9 billion, while revenue climbed 6% to $43.32 billion. The biggest American bank has thrived in a rising rate environment, posting record net income figures since the Fed started hiking rates in 2022. Here’s what the company reported: Earnings: $4.37 a share vs. $4.01 a share LSEG estimate. Revenue: $43.32 billion, vs. $41.63 billion estimate. JPMorgan said profit fell 2% from a year earlier to $12.9 billion, while revenue climbed 6% to $43.32 billion. Net interest income rose 3% to $23.5 billion, exceeding the $22.73 billion StreetAccount estimate, on gains from investments in securities and loan growth in its credit card business.
Top Stocks Earnings - BLK
Asset management giant BlackRock beat estimates on the top and bottom lines for the third quarter as its asset pile continued to climb. The firm reported $11.46 in adjusted earnings per share on $5.20 billion of revenue. Analysts at LSEG were looking for $10.33 per share on $5.01 billion of revenue. BlackRock’s assets under management rose to $11.5 trillion, up $2.4 trillion year-over-year. Of that increase, $221 billion came from third-quarter inflows, the company said. BlackRock Finance (BLK) reported $5.2 billion in revenue for the quarter ended September 2024, representing a year-over-year increase of 14.9%. EPS of $11.46 for the same period compares to $10.91 a year ago. BlackRock Finance (BLK) Surpasses Q3 Earnings and Revenue Estimates
Fixed Mortgage Rates 30 Year
The 30-year fixed mortgage rate climbed to 6.36%, the highest level since August. Fratantoni added that despite the higher rates, purchase application volumes remained relatively stable, buoyed by increased housing inventory in several markets. However, while mortgage rates have risen, they remain low by historical standards. Fratantoni emphasized that multiple factors, beyond just rates, influence the decision to buy a home.
PPI - Producer Price Index
Wholesale prices were flat in September, below expectations. The producer price index was flat for the month and up 1.8% from a year ago. Economists surveyed by Dow Jones had been looking for a monthly gain of 0.1%. Excluding food and energy, the PPI rose 0.2%, meeting expectations. A 0.2% decline in final demand goods prices offset a 0.2% increase in services. A measure of wholesale prices showed no change in September, pointing to a continued easing in inflation, the Labor Department reported Friday. The producer price index, which measures what producers get for their goods and services, was flat for the month and up 1.8% from a year ago. Economists surveyed by Dow Jones had been looking for a monthly gain of 0.1% after August’s increase of 0.2%. US annual PPI inflation edges lower to 1.8% in September vs. 1.6% expected. Producer inflation in the US rose at a stronger pace than expected in September. US Dollar Index stays slightly below 103.00 following the PPI data. The Producer Price Index (PPI) for final demand in the US rose 1.8% on a yearly basis in September, the data published by the US Bureau of Labor Statistics showed on Friday. This reading followed the 1.9% increase recorded in August and came in above the market expectation of 1.6%. The annual core PPI rose 2.8% in the same period, surpassing analysts' estimate of 2.7%. On a monthly basis, the PPI was unchanged, while the core PPI was up 0.2%.
Consumer Sentiment UM
US consumer sentiment slips in October on frustration over high prices. Americans’ outlook on the economy soured a bit after two months of small gains, according to the University of Michigan’s consumer sentiment index, released Friday. The index slipped to 68.9 in October from 70.1 in September, which had been its highest reading since May. "Consumers continue to express frustration over high prices,” said Joanne Hsu, director of consumer surveys at University of Michigan. Many consumers appear to be reserving judgement about the economy while they wait for the presidential campaign to finish, Hsu added. The survey bottomed out in June 2022, when inflation peaked at 9.1%, and has since risen by about 40%, though it remains significantly below pre-pandemic levels. In October, Republicans reported a much clearer drop in sentiment than Democrats.
Hedging - Gold
Gold price (XAU/USD) turns positive for the third straight day on Monday and climbs to the $2,667 area, or over a one-week top during the early part of the European session on Monday. Expectations that the Federal Reserve (Fed) will continue cutting interest rates amid a favorable inflation outlook turn out to be a key factor driving flows towards the non-yielding yellow metal. Apart from this, escalating geopolitical tensions in the Middle East lend additional support to the safe-haven bullion.
S&P 500 Index - Week Performance
S&P 500 Index finised at 5,815.03 points Week 1.35%, Year 22.55%. |
