Major stock indices finished the week lower as the heavily weighted technology sector was dragged down by Apple, Amazon, Netflix, and Facebook. Interest rates also moved lower with the 10-year treasury yield dropping 12 basis points to 3.07%. Despite a large drop in the 10-year treasury yield, the spread between the 10-year treasury yield and the 2-year treasury yield was unchanged at 0.26% as short-term rates also dropped. The price of crude oil dropped 7.16% to $56.81 a barrel after President Trump urged OPEC to reject another round of production cuts. The price of gold rose 1.00% to $1,222.40 an ounce while the U.S. dollar index dropped from 96.90 to 96.44 as Morgan Stanley gave a bearish stance on the U.S. dollar.
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THIS WEEK’S ECONOMIC HIGHLIGHTS
- The Consumer Price Index (CPI) rose 0.3% during the month of October, in line with expectations. Core CPI, which excludes the volatile food and energy components, rose 0.2%, also in line with expectations. Year-over-year CPI is up 2.5% while the core rate is up only 2.1%, slightly above the Fed’s 2.0% target.
- This week Federal Reserve Chairman Jerome Powell spoke on Federal Reserve policy and the economy. Powell said he is “very pleased with the state of the economy” and credits it to Federal policy. Powel also cautioned that each Fed meeting will be “live” in relation to the possibility of additional rate hikes.
- Initial unemployment claims increased by a marginal 2,000 for the week ending November 10th to a total of 216,000. Continuing unemployment claims rose a substantial 46,000 to 1.68 million, however continuing claim’s less the volatile 4-week moving average only rose 9,000 to 1.64 million.
- The Philly Fed’s General Business Conditions Index came in at 12.9 in November, much lower than the expected 20. Any reading above zero indicates improving business conditions. Rising input prices have hampered growth. That said, growth in new orders slowed down dramatically, decreasing by 10 points to 9.1 with unfilled orders at -4.8.
- U.S. retail sales increased 0.8% in October, exceeding the expected 0.5% increase. However, the less volatile reading of retail sales, which excludes automobiles and gasoline, rose a more moderate 0.3%.
- Industrial production for the month of October came in at 0.1%, slightly below the expected 0.2%. Manufacturing production volumes rose 0.3%, as expected, resulting in a year-over-year increase of 2.7%.
This week’s recommended reading analyzes the “4% Rule” of making portfolio withdrawals and offers some other alternative portfolio withdrawal strategies.
A new inflation adjustment announced by the IRS on Thursday means the standard deduction for a married couple is $150 less. The changes are estimated to raise an additional $2.1 billion in federal tax revenue in 2019.
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