October 04, 2019
The ISM Manufacturing Index fell further into contraction in September, while the Non-Manufacturing Index slowed (consistent with a continued expansion in the overall economy, but at a slower pace). The Employment Report was a mixed bag. Nonfarm payrolls rose by 136,000 in the initial estimate for September, with a net upward revision of +45,000 to July and August. The gain was a bit less than expected, but not as bad as feared. Private-sector payrolls rose by 114,000 (a +119,000 average for 3Q19 – half of the +236,000 pace seen in 3Q18). Average hourly earnings were unchanged (+2.9%), but rose 0.2% for production workers (+3.5% y/y). The unemployment rate edged down to 3.5%.
We’ve often had contractions in manufacturing without a downturn in the overall economy and strong household sector fundamentals should support consumer spending growth over the near term. However, the weak ISM manufacturing data renewed fears of “recession,” dropping the major stock market indices and sending bond yields lower.
Next week, the economic calendar thins out. There may be some interest in the Consumer Price Index, but the report rarely surprises. More importantly, on Tuesday, Fed Chairman Jerome Powell will speak at the annual conference of the National Association for Business Economics and could provide some clues about future policy decisions. The topic of his speech is “Data Dependence in an Evolving Economy.” At the September 17-18 meeting of the Federal Open Market Committee, officials were divided on the appropriate path for monetary policy. The minutes of that meeting (Wednesday) should delve into the differences.
Indices
| |
Last |
Last Week |
YTD return % |
| DJIA |
26201.04 |
26891.12 |
12.32% |
| NASDAQ |
7872.27 |
8030.66 |
18.64% |
| S&P 500 |
2910.63 |
2977.62 |
16.11% |
| MSCI EAFE |
1849.26 |
1889.93 |
7.52% |
| Russell 2000 |
1486.35 |
1533.33 |
10.22% |
Consumer Money Rates
| |
Last |
1 year ago |
| Prime Rate |
5.00 |
5.25 |
| Fed Funds |
1.85 |
2.16 |
| 30-year mortgage |
3.62 |
4.94 |
Currencies
| |
Last |
1 year ago |
| Dollars per British Pound |
1.230 |
1.294 |
| Dollars per Euro |
1.096 |
1.148 |
| Japanese Yen per Dollar |
107.18 |
114.53 |
| Canadian Dollars per Dollar |
1.333 |
1.287 |
| Mexican Peso per Dollar |
19.795 |
19.045 |
Commodities
| |
Last |
1 year ago |
| Crude Oil |
52.64 |
76.41 |
| Gold |
1507.90 |
1202.90 |
Bond Rates
| |
Last |
1 month ago |
| 2-year treasury |
1.39 |
1.55 |
| 10-year treasury |
1.54 |
1.59 |
| 10-year municipal (TEY) |
2.12 |
2.01 |
Treasury Yield Curve – 10/04/2019
As of close of business 10/03/2019
S&P Sector Performance (YTD) – 10/04/2019
As of close of business 10/03/2019
Economic Calendar
| October 8 |
— |
Small Business Optimism (September) |
| |
— |
Producer Price Index (September) |
| |
— |
Fed Chair Powell Speaks (NABE Conference) |
| October 9 |
— |
FOMC Minutes (September 17-18) |
| October 10 |
— |
Jobless Claims (week ending October 5) |
| |
— |
Consumer Price Index (September) |
| October 11 |
— |
Import Prices (September) |
| |
— |
UM Consumer Sentiment (mid-October) |
| October 14 |
— |
Columbus Day Holiday (bond market closed) |
| October 16 |
— |
Retail Sales (September) |
| |
— |
Fed Beige Book |
| October 30 |
— |
Real GDP (3Q19, advance estimate) |
| |
— |
FOMC Policy Decision |
| December 11 |
— |
FOMC Policy Decision |
All expressions of opinion reflect the judgment of the Research Department of Raymond James & Associates, Inc. and are subject to change. There is no assurance any of the forecasts mentioned will occur or that any trends mentioned will continue in the future. Investing involves risks including the possible loss of capital. Past performance is not a guarantee of future results. International investing is subject to additional risks such as currency fluctuations, different financial accounting standards by country, and possible political and economic risks, which may be greater in emerging markets. While interest on municipal bonds is generally exempt from federal income tax, it may be subject to the federal alternative minimum tax, and state or local taxes. In addition, certain municipal bonds (such as Build America Bonds) are issued without a federal tax exemption, which subjects the related interest income to federal income tax. Municipal bonds may be subject to capital gains taxes if sold or redeemed at a profit. Taxable Equivalent Yield (TEY) assumes a 35% tax rate.
The Dow Jones Industrial Average is an unmanaged index of 30 widely held stocks. The NASDAQ Composite Index is an unmanaged index of all common stocks listed on the NASDAQ National Stock Market. The S&P 500 is an unmanaged index of 500 widely held stocks. The MSCI EAFE (Europe, Australia, Far East) index is an unmanaged index that is generally considered representative of the international stock market. The Russell 2000 index is an unmanaged index of small cap securities which generally involve greater risks. An investment cannot be made directly in these indexes. The performance noted does not include fees or charges, which would reduce an investor's returns. U.S. government bonds and treasury bills are guaranteed by the US government and, if held to maturity, offer a fixed rate of return and guaranteed principal value. U.S. government bonds are issued and guaranteed as to the timely payment of principal and interest by the federal government. Treasury bills are certificates reflecting short-term (less than one year) obligations of the U.S. government.
Commodities trading is generally considered speculative because of the significant potential for investment loss. Markets for commodities are likely to be volatile and there may be sharp price fluctuations even during periods when prices overall are rising. Specific sector investing can be subject to different and greater risks than more diversified investments. Gross Domestic Product (GDP) is the annual total market value of all final goods and services produced domestically by the U.S. The federal funds rate (“Fed Funds”) is the interest rate at which banks and credit unions lend reserve balances to other depository institutions overnight. The prime rate is the underlying index for most credit cards, home equity loans and lines of credit, auto loans, and personal loans. Material prepared by Raymond James for use by financial advisors. Data source: Bloomberg, as of close of business October 3, 2019.
© Raymond James
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