Here is your new weekly economic update from Steve Stanganelli, CFP®, fee-only financial advisor serving Greater Boston to the Merrimack Valley. Inflation remains tame and there’s little I see ahead that could change that view. The economy continues to expand though consumer spending is weak. Home sales have dropped slightly though interest rates are still near historic lows. The big news and early holiday present to consumers continues to be the significant drop in crude oil prices which has been reflected in the drop in oil stocks and gas prices at the pump.
CAUTIOUS SPENDING, BUT IMPRESSIVE GROWTH
Personal income and personal spending both rose 0.2% in October, according to the Commerce Department. Not too impressive? Maybe, but the federal government’s second estimate of Q3 GDP was. Pair the newly revised 3.9% reading with the final 4.6% mark for Q2, and you get the best 6 months for the economy since 2003. The Federal Reserve’s personal consumption expenditure (PCE) price index was only up 1.4% in the past year; the Fed has set its annual consumer inflation target at 2.0%.1
CONSUMER SENTIMENT BAROMETERS RISE & FALL
At 88.7, the Conference Board’s November consumer confidence index slipped badly from October’s 94.5 mark. In better news, the University of Michigan’s consumer sentiment index notched a monthly gain of 1.9 points with an 88.8 final November reading.2
HOUSING MARKET CONTINUES TO NORMALIZE
Last week, September’s 20-city S&P/Case-Shiller home price index showed a 4.9% yearly rise, much less than the double-digit annual gains seen in the March and April editions. Pending home sales, as measured by the National Association of Realtors, were down 1.1% for October; that is the third retreat in five months. October did see a third straight monthly advance in new home buying; sales were up 0.7% according to the Census Bureau.2
MINOR ADVANCE FOR STOCKS, MAJOR RETREAT BY OIL
NYMEX crude closed out the month at $66.15 a barrel, the lowest since September 2009; prices slipped 10.2% on Friday alone after OPEC decided not to cut supply. The S&P 500, on the other hand, gained 0.20% last week to settle at 2,067.56 Friday. The Dow’s weekly advance of 0.10% took it to a close of 17,828.24 Friday afternoon; the Nasdaq rose 1.67% on the week to end November at 4,791.63.3,4
THIS WEEK: Monday, ISM puts out its November manufacturing PMI. Tuesday, Wall Street considers earnings from Radio Shack, Bob Evans and Omnivision. Wednesday sees the release of ISM’s November services sector PMI, a new Fed Beige Book, ADP’s November employment change report and earnings from Guess? and Abercrombie & Fitch. Barnes & Noble, Smith & Wesson, American Eagle, Kroger and Dollar General all announce earnings Thursday, which is also when November’s Challenger job-cut report and the latest initial jobless claims numbers arrive. Friday offers the Labor Department’s November employment report, data on October factory orders and earnings from Big Lots.
|% CHANGE||Y-T-D||1-YR CHG||5-YR AVG||10-YR AVG|
|REAL YIELD||11/28 RATE||1 YR AGO||5 YRS AGO||10 YRS AGO|
|10 YR TIPS||0.39%||0.60%||1.15%||1.74%|
Sources: online.wsj.com, bigcharts.com, treasury.gov – 11/28/145,6,7,8
Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly. These returns do not include dividends. 10-year TIPS real yield = projected return at maturity given expected inflation.
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1 – tinyurl.com/p4asvgk [11/26/14]
2 – investing.com/economic-calendar/ [11/26/14]
3 – tinyurl.com/k2drhcb [11/28/14]
4 – markets.on.nytimes.com/research/markets/usmarkets/usmarkets.asp [11/28/14]
5 – markets.wsj.com/us [11/28/14]
6 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=11%2F29%2F13&x=0&y=0 [11/28/14]
6 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=11%2F29%2F13&x=0&y=0 [11/28/14]
6 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=11%2F29%2F13&x=0&y=0 [11/28/14]
6 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=11%2F27%2F09&x=0&y=0 [11/28/14]
6 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=11%2F27%2F09&x=0&y=0 [11/28/14]
6 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=11%2F27%2F09&x=0&y=0 [11/28/14]
6 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=11%2F29%2F04&x=0&y=0 [11/28/14]
6 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=11%2F29%2F04&x=0&y=0 [11/28/14]
6 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=11%2F29%2F04&x=0&y=0 [11/28/14]
7 – treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyield [11/28/14]
8 – treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyieldAll [11/28/14]