Stock market investors got a wild ride last week with the DJIA trading in a range of 24,900 to 26,540, but closing the week off the lows at 25,340 Interest rates traded in a range of 3.13 to 3.24% and closed the week at 3.14%. We should see flattish interest rates for this coming week given what we believe will be a absence of data that moves rates much higher or much lower.
Last week we had both the Producer Price Index (PPI) and the Consumer Price Index (CPI) released and neither would show much inflation with the PPI at plus .2% and the CPI at plus .1% versus expectations of plus .2%. Obviously we are not seeing a big bleed through of higher wages or tariffs, but we suspect these are coming in the next 60 days. As we mentioned last week these numbers helped ease the rise in interest rates from the prior week. The University of Michigan Consumer Sentiment number was released on Friday and it dropped off just a bit to a preliminary reading of 99 from 100.1 in September. This is a critical number to us. Watch the various consumer confidence numbers in the months ahead for a hint to further FED moves. On Wednesday last week we had a 10 year treasury auction of $23 billion in notes and it had soft demand–the lowest ‘bid to cover’ since February and of course the interest rate was the highest at 3.223% since April, 2011.
For the coming week we have the Retail Sales and the Empire State Manufacturing index being released on Monday, Industrial Production, Housing Market Index and the JOLTS (job opening and labor turnover) report on Tuesday. Housing Starts on Wednesday and Leading Indicators on Thursday and lastly the Existing Home Sales on Friday. Up until 2 weeks ago none of this data was held to be meaningful–maybe it is now time to start paying attention to the information.
The Fed Balance sheet rose by $2 billion last week after falling $18 billion the week before. Maybe the FED was a tad spooked by the markets recently and held off on run-off—or maybe it was just the luck of the draw as every few weeks there is little to no run off. Who knows for sure–and we will never know.
We had little new issue action last week with the exception of the singular issuance of baby bonds by OFS Capital (NASDAQ:OFS). The issue came with a coupon of 6.50% and a maturity date in 2025. The issue should trade sometime this week under the ticker of OFSSB.
The average price of a $25 preferred fell a bit last week to trade at $24.17 which is 8 cents lower than the previous week as interest rates stabilized. We now have 244 issues trading under $25 which is 9 issues more than the week before.
NOTE–REIT DDR Corp is now Site Centers and the ticker has changed effective Friday to SITC.