Investors and analysts spend a lot of time watching the Fed, more accurately referred to as the Federal Reserve, to get their opinion on the economy and see how this might impact short term interest rates, also referred to as monetary policy. However, it was the Feds, as in FBI, that jolted U.S. stock market futures higher Sunday evening, after the announcement from FBI Director Comey. U.S. stocks gapped higher at the opening bell on Monday while making additional gains throughout the day. By the end of the trading day all the major market averages had recovered over two percent with the Standard and Poor’s 500 up 2.22 percent.
To say that investors are getting jittery before the presidential election is an understatement, Monday’s gains have erased all the losses over the past week and then some.
Still some may be trying to determine the outcome off the election based on Monday’s stock markets’ gains, but we only have to look back to June of this year, prior to the U.K.’s “Brexit” vote, to find a time when that strategy failed. In the case of the “Brexit”, market trends, polls, and even odds makers were all indicating that the “Remain” vote would win. However, that clearly is not how things turned out.
In cases like we find ourselves in today, it typically pays to react to the real news instead of trying to anticipate it. Once we know the results of the election, calmer heads usually prevail even if it’s not our preferred candidate.
Laif E. Meidell, CMT
We hope that you have a great week,
Pat Meidell, Laif Meidell and Heidi Foster
Weekly Economic Update
NEW DATA SHOWS BRIGHTER JOBS PICTURE
Unemployment fell to 4.9% in October as firms added 161,000 net new workers, but that was just one positive from the Department of Labor’s latest summary of the U.S. employment situation. Year-over-year wage growth reached 2.8%, the best number seen since June 2009, as average hourly pay rose ten cents last month. The U-6 rate (underemployment + unemployment) fell 0.2% to 9.5%. In addition, hiring totals across August and September were revised higher by 44,000.
CONSUMER SPENDING ROSE IN SEPTEMBER
The ninth month of 2016 saw gains of 0.5% in personal spending and 0.3% in personal incomes, the Commerce Department reported last week. Adjusted for inflation, consumer spending advanced 0.3% for September, as opposed to retreating 0.2% in August.2
MORE EXPANSION AMONG SERVICE & FACTORY FIRMS
The Institute for Supply Management’s twin barometers of the U.S. manufacturing and non-manufacturing sectors were both comfortably above the 50-mark showing growth in October. ISM’s factory purchasing managers index came in at 51.9, up 0.4 points; its service sector PMI declined 2.3 points to 54.8.3
STOCKS PULL BACK
The Federal Reserve left interest rates alone last week, just as many analysts predicted – but investors were more concerned with the upcoming presidential election and earnings, and those anxieties certainly impeded the bulls. Across five days, the Dow Jones Industrial Average fell 1.50% to 17,888.28; the S&P 500, 1.94% to 2,085.18; and the Nasdaq Composite, 2.77% to 5,046.37.1,4
Earnings from AMC Entertainment, Dean Foods, Hertz Global, Marriott International, MGM Resorts, Priceline, Rosetta Stone, and Scripps Networks arrive Monday. Tuesday is Election Day, with CVS Health, D.R. Horton, and TripAdvisor joining the fall earnings parade. Wednesday, Wall Street looks at earnings from AmeriGas, Clear Channel Outdoor, Coty, Energizer, Green Dot, Magellan Health, NetEase, Norwegian Cruise Line, Popeye’s, Viacom, and Wendy’s. A new initial claims report comes out Thursday, plus earnings from Kohl’s, Macy’s, Michael Kors, Nordstrom, Nvidia, Ralph Lauren, Sigma Labs, and Walt Disney Co. This Friday is Veterans Day: the stock market is open, the bond market is closed, November’s initial University of Michigan consumer sentiment index appears, and J.C. Penney and Weibo release Q3 results.