Markets have a bad week. It’s still not a heart-attack, but the heartburn got worse last week. Both the Dow and the S&P have erased all of their gains for year at this point.
What’s your model saying? It has four pieces. When things are good, it has 4 Bull pieces and 0 Bear pieces. For the S&P that changed last week. The earliest piece became a Bear piece, meaning we are at a 3-1 ratio now. This means the short-term view is negative, but the overall Market is still positive, just not as strong. This is true for the Dow and the Nasdaq as well. The Russell 2000 is now in a neutral read at a 2-2 ratio.
The first read on Q3 GDP came in above expectations. We get the GDP numbers in three reads: advanced, revised, and final. Q2 finished at +4.2%. The range for the first Q3 read was +2.6% to +3.8%, with a consensus of +3.3%. The actual number came in at +3.5%. The rolling four-quarter average is +3.2%.
Durable goods orders were expected to drop substantially, and while they did so, it wasn’t as bad as forecasted. The prior number was revised up slightly from +4.5% to +4.6%. Expectations for the new number was -1.5%, but the actual number came in at +0.8%. An increase in orders for defense aircraft is credited for the better number.
New home sales declined -5.5% in September. Sales are down -13.2% year-over-year.
The latest Fed Beige Book showed our economy continues to grow at a moderate to modest pace. The BB is posted twice each quarter or eight times each year. This was the seventh posting this year. The Dallas district posted robust growth, while the New York and St. Louis districts posted slight growth. The other nine districts were in between, with the Cleveland district growing modestly.
The economic focus of the week: It will come on Friday morning when we get the latest jobs and unemployment numbers. Expectations are for 190,000 jobs; and the unemployment rate is expected to stay at 3.7%.
Earnings season continues. Some of the companies reporting this week: Aetna, Alibaba, Anthem, BP, Cedar Fair, Chevron, Coca-Cola, Diebold, Eaton, Exxon Mobil, Facebook, Fiat-Chrysler, GE, GM, Kellogg, Mastercard, Parker Hannifin, Pfizer, Royal Dutch Shell, Timken, Under Armour, (NE Ohio companies bolded).
Indicator focus: October’s ADP payroll report (Wed); October’s ISM manufacturing index (Thu); September’s factory orders, and the October jobs and unemployment numbers (Fri).
Have a great week.
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