Stocks rose this week as positive numbers on the US gross domestic product, better than expected earnings (on average) and increased stimulus in Japan overshadowed the end of the Federal Reserve’s bond buying. Even data out of Europe was somewhat encouraging. Crude oil and gold prices fell to multi year lows and the dollar rose sharply to a four year high. My outlook is generally positive about the current economic climate in the US, although the strong dollar will hurt US exports in the long run. Weaker oil prices may hurt US drilling activity which has contributed to our economic growth. However, some reports have indicated that oil prices will need to fall another $20 per barrel before drilling stops. A lot will hinge on the November OPEC meeting to see if production is curtailed or if the cartel decides to protect their market share by driving prices lower.
In particular this week:
- The National Association of Realtors reported that pending home sales rose 0.3% in September, less than expected.
- The Commerce Department reported that purchases of durable goods like airplanes, cars and heavy machinery that are designed to last more than three years fell by 1.3% in September. Expectations were for an increase. Durable goods also fell 0.2% excluding transportation and 1.5% excluding defense.
- Standard & Poor’s reported that the Case/Shiller home price index increased 0.2% in August and 5.1% year over year.
- The Commerce Department reported that the US gross domestic product rose at a 3.5% annualized pace in the third quarter faster than the 3.1% forecast. The report also indicated broad based gains even though inventories declined. A decline in inventories usually leads to more increases in production. This comes following a 4.6% annualized rise in the second quarter and a 2.1% annualized contraction in the first quarter.
- The Labor Department reported that initial claims for unemployment rose slightly in the past week to 287,000. Claims in the previous week were revised up to 284,000. The four week moving average fell by 250 to 281,000 the lowest since May 2000.
- The European Commission reported that its Economic Sentiment Indicator rose to 100.7 in October from 99.9 in September.
- Germany reported that the number of jobless fell by 22,000 following a 9,000 increase in September.