The stock market rebounded after substantial market sell-off during the month of October as investors’ worries on rising interest rates and geopolitics subside. However, interest rates did spike as the 10-year treasury yield jumped 13 basis points to 3.21%. The spread between the 10-year treasury yield and the 2-year treasury yield widened by 2 basis points to 0.28%. The price of gold was virtually unchanged at $1,234 an ounce as inflation data for the week was moderate. The price of crude oil dropped 7.80% to $62.58 a barrel as the U.S., Saudi Arabia, and Russia made efforts to increase oil production. The U.S. dollar index was little changed, increasing from 96.40 to 96.48.
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THIS WEEK’S ECONOMIC HIGHLIGHTS
- Consumer spending increased 0.4% in September marking the seventh consecutive increase. However, personal income only rose 0.2% which is the smallest increase in a year.
- The Personal Consumption Expenditures (PCE) index, a measure of inflation, rose a tame 0.1% in September, resulting in a year-over-year increase of 2.0%. Core PCE, which excludes the volatile food and energy components, rose 0.2% in September for a year-over-year change of 2.0%.
- Initial unemployment claims dropped by 2,000 to 214,000 for the week ending October 27th. Continuing unemployment claims dropped by 7,000 to 1.63 million, the lowest it has been since July of 1973.
- The ISM manufacturing index fell to 57.7% in October from 59.8% in September. Much of the decrease in the index came from a drop in new orders and production. Any reading above 50% indicates improving manufacturing conditions.
- October’s jobs report came in strong, adding 250,000 jobs and decreasing the unemployment level to 3.7% (the lowest rate since 1969). Wage growth also increased at a strong 3.1% annual rate, the highest it has been since 2009.
- The U.S. trade deficit widened to $54 billion in September from $53.3 billion August. Imports rose 1.5% to an all-time high of $266.6 billion, despite tariffs, while exports also increased by 1.5% to $212.6 billion.
This week’s recommended reading takes a look at the stock market’s historical trend and what it may indicate for the future of the stock market as it relates to its current trend.
Since 1946, each year following a midterm election, U.S. stocks have experienced a positive return every single time and averaged about 17%.
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