Third Quarter Recap

Stocks were off a tad for the week, but finished the quarter with a gain of 7.7%, as measured by the S&P 500. This pretty much closed the window on the seasonal correction many expected over the summer. Anticipated double digit third quarter earnings growth along with movement toward resolution of trade disputes seemed to buoy the market in the quarter and should provide tailwind as we move toward the close of 2018.

Interest rates rose (bond prices fell) through the quarter. The yield on the 2-Year Treasury finished the quarter at 2.82%, up from 2.53% at the close of Q2. The 10-Year Treasury yield was 3.06% at Friday’s close, which was up 21 basis points from the June 30th yield of 2.85%. Rates are rising, but have not accelerated at rates which would have a dampening effect on growth. We expect the 10-Year to trade in a range which will yield 3.00% to 3.25% through the balance of the year.

On The One Hand

  1. Consumer Confidence Index increased to 138.4 in September from an upwardly revised 134.7 in August. The September reading is the highest since September 2000.
  2. New single-family home sales increased 3.5% in August to an annual rate of 629,000. Sales are up 12.7% from a year ago. The months’ supply of new homes stands at 6.1 months. The median price of new homes sold was $320,200 in August, up 1.9% from a year ago. The average price of new homes sold was $388,400, up 5.2% versus last year.
  3. Durable goods orders for August increased 4.5% and the report included a revised 1.2% decline from the previously reported 1.7% decline in July. The increase was driven by a jump in nondefense aircraft and parts orders. Excluding transportation, durable goods orders increased 0.1% in the month. Compared to levels one year ago, orders are up 11.8% and orders excluding transportation are up 7.3%.
  4. Initial jobless claims for the week remained at historically low levels, even with the latest increase of 12,000 to 214,000. The four-week moving average for initial claims increased by 250 to 206,250. Continuing claims for the week ending September 15th increased by 16,000 to 1.661 million and both series remain near their lowest levels in almost 50 years.
  5. Personal income for August increased 0.3%, personal spending rose 0.3%, and the PCE Price Index increased 0.1%. On an annual basis, the PCE Price Index was up 2.2% versus 2.3% the previous 12 months.

On The Other Hand

The Chicago PMI, declined for the second consecutive month to 60.4 in September from 63.6 in August. The index is now in the lower half of its range over the last year. On the bright side, any reading above 50 continues to be a sign of expansion.

All Else Being Equal

The Federal Reserve Open Market Committee, believing the economy can continue to grow without the excessive monetary stimulus it has provided for the past ten years, raised its Fed Funds rate range to 2.00% to 2.25%. In addition, it appears  this rate will raise by another 0.25% in December.

The Fed has steadily raised its forecast for GDP growth throughout the year. Its forecast for the full year now stands at 3.1%, up from its June forecast of 2.8%. Its forecast for 2019 inched higher and now stands at 2.50%.

Last Week’s Market

The Week Ahead

The information provided is obtained from sources believed to be reliable. Forecasts cannot be guaranteed. Past performance is not a guarantee of future results.