Though an abbreviated week, last week’s economic calendar and equity market trading both provided a constructive framework for a continued trade higher in US equities into year-end. We began the week with Fed Chair Powell delivering a solid report on the state of the economy.
The international trade in goods data, released Tuesday morning, was significantly better-than-expected. The monthly trade figures reflected a gap of $-66.53 B, down from September’s revised $-70.55 B. Econoday consensus had been $-70.8 B for October. For October, imports fell 2.4%, while exports fell 0.7%.
New home sales for October were 733K; consensus had been lower at 707 K. The prior month’s figures were revised substantially higher to 738 K from 701 K.
The Conference Board’s Consumer Confidence reading for November was released on Tuesday as well. And again, the reading remained at cycle highs: 125.5 (down fractionally from October’s revised 126.1 reading).
Durable Goods Orders for October were solidly positive. New orders M/M came in at 0.6%, versus the prior reading of -1.4% and an Econoday consensus calling for -0.7%. September’s reading was revised lower to -1.4% from an initial reading of -1.1%. In short, a very solid report.
Q3 GDP (p) came in at 2.1%, versus the prior reading and Econoday consensus call of 1.9%. Again, real consumer spending came in above even elevated expectations at 2.9%.
Weekly jobless claims (213 K) were below both consensus (218 K) and the previous week’s revised reading of 228 K. Personal spending was again highlighted in the Personal Income and Spending report.
Personal Income M/M 0.0%
Consumer Spending M/M 0.3%
Core PCE price index Y/Y 1.6%
The EIA Petroleum Status Report, released late Wednesday, continues to reflect a healthy balance between supply and demand. Increasingly, the supply component of the equation appears to be solidly positioned to address nearly any temporary disruption. For the first time in 70 years, the United States became a net exporter of energy last month. Relative stability aside, WTI crude did take it on the chin Friday, posting its worst one-day decline in months.
We open December’s trading with the market in a “confirmed uptrend.”
We begin the trading week with some very significant economic data being released by the Institute for Supply Management: ISM Mfg. Index. Manufacturing has been a lynchpin of this economic expansion and has, by nearly every measure, surpassed even the rosiest of expectations over the past three years. That said, recent weakness in the space has fueled a degree of concern. This morning the ISM Mfg. Index reading for November is released at 10:00 AM. Econoday consensus is 49.4. October’s reading was 48.3.
Another theme that has been central to the narratives driving markets for much of this year (trade) takes center stage on Thursday at 8:30 AM. Last week’s goods-centric trade figures provided the street with a pleasant surprise in that the deficit for goods contracted nicely. No doubt, those better-than-expected figures will inform this week’s figures. Econoday consensus is $-48.6 B, down from last month’s $-52.5 B.
Lastly, on Friday morning at 8:30 AM, we receive the Employment Report for November. Econoday is calling for:
Nonfarm Payrolls – M/M 180,000
Unemployment Rate – Level 3.6%
Private Payrolls – M/M change 170,000
Manufacturing Payrolls – M/M change 20,000
Participation Rate – Level 63.3%
Average Hourly Earnings – M/M change 0.3%
Average Hourly Earnings – Y/Y change 3.0%
US equity markets posted three consecutive record closes last week. Friday’s price action was out of character for the week in that markets lost ground across the board, while volume, not unexpectedly, dried up. The light volume was a function of an early close (1:00 PM) and the fact that it was the session after Thanksgiving. November was a great month for US equity investors. The S&P 500 gained 3.4%, the Dow Industrials added 3.7%, and the Nasdaq Composite led the way higher, gaining 4.6% for the month.
A Little over a week ago, a dear friend of mine for many years (as well as a mentor for a few of them, and an employer for two), died. Alfred E. Smith IV (NY Times photo) was 68 years young at the time of his death. Most notable for his familial legacy and the Al Smith Dinner, Al was also a champion for the less fortunate, and a force of nature when it came to raising funds for New York Hospitals. He was the most selfless and genuine humanitarian I have ever known. He will be missed by many New Yorkers. Our thoughts and prayers are with Nan, his children, and his extended family.
ALFRED SMITH (1951 – 2019) Published in The New York Times on Nov. 22, 2019
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