Last week was certainly very exciting as the DJIA traded in a range of 24,442 to 25,561 before closing at 24,688 for a loss of near 800 points for the week. The 10 year treasury had plenty of movement as well over the course of the week moving between 3.06% and 3.20%, but on any given day only moved a few basis points. The 10 year closed at 3.08%.
Last week we had a mixed bag of economic news, which has been typical of late, but the important news was contained in the ‘beige book‘ from the Fed being released on Wednesday and the 1st look at GDP was released on Friday. The beige book described most economic issues as being moderately strong–instead of any items being described as very strong or overheating–to read this report one would say that the ground work may be being set for slower rate hikes after December–I believe December is pretty well baked in but after that point we could see a pause or only rate hikes as demanded by very strong data. The 1st look at the GDP data was pretty much as expected being up 3.5%. There were bunches of Fed presidents that spoke last week so as usual we had all sorts of conflicts in points of views–nothing new here.
This week we have Personal Income and Expenditures released on Monday – and they were released at levels expected with wages moderate and spending outpacing wages. Tuesday we have an important long term indicator being released from the Conference Board — Consumer Confidence. This number was last released at the 138 level and is expected at 136 for October. Remember the consumer drives the economy and weak numbers here are meaningful–longer term. The question is if the soft housing market and gyrating stock market are hurting confidence. Wednesday we have the ADP employment report and on Friday the ‘official’ government Employment Situation report. 190,000 jobs are expected to have been created, but of course we have hurricanes to deal with so we wouldn’t be surprised if the projections are more off the mark than normal. The Employment Situation report contains a hourly wage number of some importance as we have waited years for wages to move sharply higher–we likely will be waiting more time.
The Fed balance sheet moved lower by a measly 2 billion last week. That makes 3 weeks in a row that there has been little movement in the balance sheet. This likely means we will get a larger drop this week or next, but one would have to analyze the Feds holdings to know what is maturing soon. But what we do know is these small run offs are helping the longer term interest rates remain low.
We had no new income issues announced last week at all. It has been a long time since we have had now new issues announced.
The average $25 preferred stock fell in price to $24.20 from $24.27 the week before. There are 242 issues trading at $25 or below compared to 234 issues the week before.