Active stock market trading continued last week with the DJIA moving in the range of 24,122 to 25,578–a 1,400 point range. The index closed at a level of 25,270. The 10 year treasury traded in a relatively wide range as well–between 3.09% and 3.22% closing the week right near the high at 3.21%. The previous week had closed at 3.08% so we were up 13 basis points on the week.
Economically speaking we had mentioned on last weeks “Monday Morning Kickoff” that Consumer Confidence, the ADP Employment Report and the Employment Situation Report on Friday would be the telling data for the week and in our opinion they will likely forecast the next 60-90 days pretty good. Consumer confidence remained sky high in spite of the tumbling equity markets. The 137.9 reading was above consensus and above the previous month. The ADP jobs report came in at 227,000 jobs added, which for once, forecast correctly the added 250,000 according to the ‘official’ employment situation report which was released on Friday. Importantly, wages moved up by 3.1% year over year–a relatively strong number.
For the coming week we have the Purchasing Manager Index released today plus the Institute of Supply Management Non Manufacturing Index. These are likely not news and are neutral to markets. On Tuesday we have the JOLTS (job openings and turnover) report and this has been running ‘hot’ with over 7 million jobs open–important to us and our expectation of eventual higher wage inflation. Wednesday gives us Consumer Credit for September–important to us as we like to watch ‘all things consumer’, but all in all not important to markets now. Also on Wednesday the FOMC meeting for November starts and there will be no change in interest rates announced on Thursday when the meeting ends (in our opinion). The balance of the week has minor reports.
Tuesday is a 10 year note auction and these have been somewhat weak lately with reduced demand and this is of interest to us as we watch to see if the 10 year treasury will blast past 3.2%. Additionally there is a 30 year bond auction on Wednesday.
Also we would be remiss if we didn’t mention the election on Tuesday–we make no predictions on the results, but our assumption is is the Democrats take the house and Republicans hold the Senate–what this means to the markets is anyones guess.
The Fed Balance sheet saw a run off of $34 billion last week–we suspected a large number was coming as we had 3 weeks of almost no reduction in assets. They remain in the runoff mode of $40-50 billion a month.
We had 2 new income issues announced last week. Hartford Financial (NYSE:HIG) announced a non cumulative preferred issues with a 6% coupon which is trading now OTC Grey Market under HIGJL and is at $25.15. BDC Gladstone Capital announced a baby bond with a 6.125% coupon–this new issue will pay quarterly interest versus the more typical monthly dividends that most Gladstone family issues pay on ‘term’ preferreds. This will trade under GLADD when it begins to trade in a week or so. We have an interest in this meager coupon because it has a short maturity in 2023.
The average price of a $25 preferred stock remained exactly level week over week at $24.20. The number of issues trading at $25 or below climbed to 250 issues last week, which was a jump of 16 issues.