The month of September ended with a decline in stocks but October has started, so far, on the plus side. Friday’s session was especially volatile with the Dow being down over 244 points during the day and ending up over 200 points at the close as traders wrestled with disappointing jobs numbers. The sometimes perverse logic of the traders went from slower jobs growth is bad for earnings and the economy but on the plus side increases the likelihood the FED will delay a rate increase.
As we head into the fourth quarter attention will turn to earnings. Factors such as weak energy prices and weak exports may offset the benefits of strong automobile and housing growth. Second quarter earnings were flat. Without earnings growth there may not be much of a catalyst to drive stock prices higher. Never the less, stock prices in the short run are driven more by psychology than by PE ratios. If it was a simple formula, Erik and I would have easy jobs. In addition to earnings this quarter we are faced with the need for Congress to raise the debt limit by November 5th and to approve a budget by December 11th both with the potential to upset the markets.
This week saw interest rates decline and treasury prices rise, especially after the weak jobs numbers. Commodity prices and the dollar declined. In economic news this week:
- The S&P/Case Chiller index of home prices in 20 top cities rose 5% in July from a year ago. This was mainly due to lower inventory of homes for sale.
- The Labor Department reported
- First time claims for unemployment rose 10,000 in the latest week to 277,000. The four week moving average of claims actually fell 1,000 to 270,750.
- 142,000 jobs were created in September, far below the trend of the last year and a half. August’s payroll growth was also revised downward from 173,000 to 136,000. The unemployment rate remained steady at 5.1%.
- The U.S. Energy Information Administration showed a rise in inventory of 4MM barrels last week. S. production of crude continues to decline, albeit slowly. This past week’s decline was 0.4%.
- The Commerce department reported
- Consumer spending rose 0.4% in August.
- Personal income rose 0.3% in August.
- The personal consumption expenditures index (The FED’s preferred inflation index) was flat in August and has risen only 0.3% from a year ago. Core prices (excluding food and energy) rose 0.1% in August and are up 1.3% from a year ago still below the FED’s target of 2.0%.
Please call us if you have any questions,
Loren C. Rex, CFP®, AIF® Erik Smith
Generations Financial Planning & Wealth Management 269-441-4143
77 E. Michigan Ave, Suite 140
Battle Creek, MI 49017
Carrie Fuce, Assistant 269-441-4091
Toll Free: 800-513-8180
Visit our Website: www.genfinplan.com
Registered Representative of and securities offered through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Cambridge and Generations Financial Planning & Wealth Management are separate companies and are not affiliated.
These are the opinions of Loren Rex and Erik Smith and are not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice.