Despite a selloff on Friday, stocks indices had decent gains with the small cap Russell 2000 index posting substantial gains. Stimulus/relief spending talks between Steven Mnuchin and Nancy Pelosi continued through Friday with both parties claiming progress. However, the House, that had delayed a vote pending talks, approved a smaller $2.2TN bill, down from the $3.4TN bill previously passed.
It was a busy week for economic data with global PMI numbers for September and the September jobs numbers being released. While September had a significant gain in employment and a corresponding decline in unemployment, it is uncertain what October will look like. With the expiration of support for the airlines, at the end of September, they have started massive layoffs.
Japan received their first ship of “blue” ammonia from Saudi Aramco. This is a carbon free fuel that was derived from natural gas with the carbon being sequestered. The ammonia can be compressed for shipping. When received it can be used as a fuel itself or converted to hydrogen for hydrogen fuel cell automobiles. We have not seen the economics on this yet but it would be an important step towards curbing greenhouse emissions in the future.
Treasury yields rose with the 30-year bond yield at 1.488% and the 10-Year note at 0.698%. Crude oil fell to $36.99 a barrel and natural gas fell to $2.44 per MMBTUs. The U.S. dollar index fell to 93.51 and gold prices rose to $1904.50 an ounce.
In the economic numbers this week:
- IHS Markit reported the following purchasing managers indexes. Keep in mind that anything below 50 represents contraction and over 50 represents expansion:
- China manufacturing fell from 53.1 in August to 53.0 in September.
- U.S. manufacturing rose from 53.1 in August to 53.2 in September.
- Eurozone manufacturing rose from 51.7 in August to 53.7 in September.
- Japan manufacturing rose from 47.3 in August to 47.7 in September.
- BDO USA LLP reported that 18 retailers filed for bankruptcy in the first half of the year and 11 more from July through mid-August as the trend towards online shopping has accelerated due to Covid.
- The S&P CoreLogic Case-Shiller National Home Price Index rose 0.8% in July and was up 4.8% from a year earlier.
- The Commerce Department
- Issued their third estimate of 2nd quarter gross domestic product. The decline in the 2nd quarter was revised up from -31.7% to -31.4%.
- Consumer spending rose 1.0% in the month of August.
- Incomes fell 2.7% in August mainly due to a decline in unemployment benefits.
- The personal savings rate fell from 14.1% to 17.7%.
- The U.S. trade deficit grew from $81.8BN in July to $82.9BN in August. Both imports and exports grew but imports made a much larger portion of U.S. trade.
- Motor Intelligence reported:
- August light truck sales were at an 11.57 million annual rate, up from 6.71 million annual rate in April but down from 12.52 million pace in February.
- August car sales were at a 3.62 million annual rate, up from 2.03 million pace in April but down from 4.5 million pace in February.
- The Labor Department reported:
- A seasonally adjusted 837,000 workers filed initial claims for unemployment in the prior week, a decrease of 36,000 from the week before.
- The U.S. had a net job increase of 661,000 in September and the unemployment rate fell to 7.9%.
- The EIA weekly oil report is here: wpsrsummary (9). Also, the EIA reported in the past week:
- Field production of crude oil was unchanged at 10.7MM barrels per day.
- Natural gas storage rose by 76BN cubic feet and is above the highest level at this time of year during the past five years.
- Baker Hughes reported the number of active oil rigs rose 6 to 189. The number of active natural gas rigs decreased 1 to 74.
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Loren C. Rex, CFP®, AIF®, MA Erik A Smith AIF®
President Managing Partner
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Battle Creek, MI 49017
Carrie Fuce, Assistant 269-441-4091
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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. The Indices mentioned are unmanaged and cannot be invested into directly.