Your Weekly Update for Monday, November 20, 2023.
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Mike Elerath
CERTIFIED FINANCIAL PLANNERTM
CERTIFIED IN LONG-TERM CARE
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Bill Roller
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CHARTERED FINANCIAL ANALYST
CERTIFIED FINANCIAL PLANNERTM
CHARTERED MARKET TECHNICIAN
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Summary
Markets were UP last week. The Dow Jones Industrial Average rose 1.94% to 34,947.28 while the S&P500 ended up 2.24% to 4,414.02. The Nasdaq Composite rose 2.37% to 14,125.48. The annual yield on the 30-year Treasury fell 13.6 basis point(s) to 4.597%.
Economic data for the week included producer and consumer inflation readings decelerating far faster than expected, boosting the mood of financial markets. Manufacturing releases were mixed, as was housing data, while retail sales fell back a bit.
Global equities saw gains as consumer price inflation eased, leading to lower interest rates. Bonds gained accordingly as well. Commodities were mixed, with gains in metals offset by a continued drop in crude oil as supplies stayed elevated.
Economic Notes
(0) Retail sales for October fell by -0.1%, ahead of expectations calling for a -0.3% decline, but well under the 0.8% revised gain of the prior month. The headline figure was reduced by declines in gasoline station sales (lower prices), autos (autoworker strike), and building materials. However, on a core/control basis, outside the more volatile components, sales rose 0.2%. Areas of core strength included health/personal care, electronics/appliances, and non-store/online retail; on the downside, furniture/home furnishings, misc. stores, and sporting goods fell back. Year-over-year, retail sales rose 1.6%, so on an inflation-adjusted basis, ‘real’ sales remain generally in the negative.
(-) Industrial production for October fell by -0.6%, a bit below the median forecast calling for -0.4%. Manufacturing production fell by -0.7%, with a large impact from the autoworker strike, seen in the sharp drop in auto assemblies; business equipment also fell a half-percent, while high-tech equipment production increased with likely impact from the CHIPS Act. While mining production rose 0.4%, utilities production fell -1.6%—an area usually affected by monthly weather conditions. Capacity utilization fell by -0.6% to 78.9%.
(+) The New York Fed Empire manufacturing index rose by 13.7 points back to an expansionary 9.1, above the median forecast expectation of -3.0. Underlying components were mixed, with new orders and employment falling back further into contraction; on the other hand, shipments rose further into expansion. Prices paid and prices received both fell but remained solidly in expansionary territory. On the negative side, assessments of business conditions 6 months ahead declined by -24 points to a just-contractionary -1 level.
(0) The Philadelphia Fed manufacturing index rose by 3.1 points, but remained in contractionary territory at -5.9, but above the -8.0 level expected. The underlying components showed weakness, though, with several items declining, including new orders to nearly neutral, employment but remaining positive, and shipments further into contraction. Prices paid fell by -8 points but continued to expand. Expectations for business conditions six months out fell by over -11 points to a contractionary -2 level.
(+) The Producer Price Index for October fell by -0.5% on a headline basis, was unchanged ex-food and energy, and rose 0.1% on a core ex-food, energy, and trade services basis—all weaker than expected. While services prices were flat, goods prices fell -1.4% for the month, accounting for the difference. The headline segment was led by a -6% drop in energy prices, while food prices also fell slightly. Year-over-year PPI decelerated by nearly a percent to 1.3%, while core PPI ex-food, energy, and trade services ticked down a tenth to 2.9%. During the year, services prices rose just short of 3%, while goods prices actually deflated by -1%. The headline was obviously driven by volatile energy prices, while core was ‘not worse,’ continuing to point to disinflationary conditions for input costs.
(+) The Consumer Price Index for October fell slightly (rounded to unchanged) on a headline basis, while core ex-food and energy rose only 0.2%. Each was about a tenth below expectations and was considered the slowest pace in two years. The headline number was held back by a -2.5% drop in energy (-5% in energy commodity prices, led by gasoline), while food prices still rose by 0.3%. Several items in the core category fell back sharply, including lodging (-2.5%), used cars (-0.8%), airline fares (-0.9%), as well as appliances and a variety of other household items, while shelter rose at half the prior month’s pace (0.3%).
On a year-over-year basis, inflation decelerated to 3.2% and 4.0% for headline and core, respectively. This reflects the impact of a 3% rise in food prices, while energy prices have fallen over the year by over -4%. Services rose 5.1% on the year, non-durable goods rose 1.7%, while durable goods saw a -2.1% deflation in prices. Health insurance costs have fallen dramatically, which has been noted as being due to differences in data methodology, as opposed to reality. Accordingly, for the trailing 12 months, all items less food, shelter, and energy rose only 2.0%. While the inflation problem has not been whipped yet, conditions have continued to show improvement towards the ‘normal’ range. This well-received report also appears to have sharply lowered expectations for another Fed rate hike in December, which were already low.
(+) Housing starts rose 1.9% in October to a seasonally-adjusted annualized rate of 1.372 mil units, exceeding the -0.6% decline expected, in addition to downward revisions for the prior month. In Oct., the gain was led by the more volatile multi-family starts segment (up 6%), while single-family starts ticked up slightly. Regionally, the Midwest and West saw double-digit gains, while the Northeast saw double-digit declines. On a year-over-year basis, single-family starts remain up 13% in keeping with building needs, while multi-family are down -30%, as apartment building begins to normalize downward. Building permits rose 1.1% to 1.487 mil. units, in contrast to an expected -1.4% decline. This was also led by multi-family, up 2%, representing two-thirds of the amount, with single-family permits only up a half-percent (although these have risen for nine consecutive months).
(-) The NAHB/Wells Fargo Housing Market Index (HMI) of homebuilder sentiment for November fell by -6 points to 34, the lowest reading of 2023, and despite expectations for an unchanged 40 reading (50 is considered ‘neutral’ in this series). The underlying components also continued their spiral downward by 5-6 points each, as present sales fared a bit better than future sales, while prospective buyer traffic fell to a very low 21 level. No doubt, rising U.S. Treasury yields and accompanying 30-year mortgage rates reaching 8% during the month played a role in the negative expectations.
(-) Initial jobless claims for the Nov. 11 ending week rose by 13k to 231k, above the 220k expected. Continuing claims for the Nov. 4 week rose by 32k to 1.865 mil., above the 1.843 mil. expected. It appeared Veteran’s Day may have caused a bit of a distortion with initial claims, while continuing claims may be seeing ongoing seasonal adjustment issues as well. Aside from this, these continue to hover around fairly low levels pointing to a still-healthy labor market.
Market Notes
| Period ending 11/17/2023 | 1 Week % | YTD % |
| DJIA | 2.06 | 7.46 |
| S&P 500 | 2.31 | 19.29 |
| NASDAQ | 2.42 | 35.98 |
| Russell 2000 | 5.49 | 3.46 |
| MSCI-EAFE | 4.50 | 10.95 |
| MSCI-EM | 2.99 | 4.47 |
| Bloomberg U.S. Aggregate | 1.37 | 0.54 |
| U.S. Treasury Yields | 3 Mo. | 2 Yr. | 5 Yr. | 10 Yr. | 30 Yr. |
| 12/31/2022 | 4.42 | 4.41 | 3.99 | 3.88 | 3.97 |
| 11/10/2023 | 5.53 | 5.04 | 4.65 | 4.61 | 4.73 |
| 11/17/2023 | 5.50 | 4.88 | 4.45 | 4.44 | 4.59 |
U.S. stocks fared positively last week, with a sharp recovery in small cap outgaining large cap. This was despite starting the week negatively, as markets took notice of Moody’s ‘downgrade’ of its U.S. debt outlook from ‘stable’ to ‘negative’ as the prospect of another U.S. government shutdown loomed (deadline being Friday). However, the long-awaited consumer price inflation report showed strong improvement, with positive sentiment carrying over to much of the rest of the week. Congress passed a continuing resolution bill to extend government funding at current levels until late January 2024, using a ‘staggered’ approach. This brought some relief as well, although the risk of a government shutdown next year remains high as both sides have found little to agree upon. Perhaps there was also a bit of positive sentiment from the President Biden-President Xi meeting in San Francisco, if only as it perhaps lowered geopolitical surface tensions between the U.S. and China somewhat.
Every sector ended in the positive, led by materials and consumer discretionary, and financials, all up over 3%, while defensives consumer staples and health care lagged, as did energy due to a continued drop in crude oil prices. News was mixed, however, with firms such as Target surging upon a positive earnings surprise and guidance, as did a few other consumer firms, while Walmart fared negatively after noting falling prices and some caution on the consumer. Real estate saw sharp gains as interest rates continued to pull back with the encouraging inflation report.
Foreign stocks saw gains as well, with Europe up 5%, outshining the U.K., Japan, and emerging markets. In Europe, high recession odds and rising chances of central banks cutting rates sooner than later (despite ECB arguments to the contrary—toward a longer pause) raised sentiment. This was in addition to positive disinflationary news from both the U.S. and U.K. Chinese data remains mixed, with the government injecting additional stimulus.
Bonds fared positively, due to interest rates pulling back as the chances of another Fed rate hike continued to erode, causing the 10-year Treasury to fall back below the 4.5% level. Investment-grade corporates outperformed Treasuries, as spreads tightened, while bank loans lagged with flattish results. Foreign bonds fared positively as the U.S. dollar weakened by over a percent, again tied to interest rate differentials.
Commodities were mixed with gains in precious and industrial metals offset by a decline in energy. Crude oil fell by over a percent last week to $76/barrel. From a price peak in late September, oil prices are down over -20% into bear market territory, as higher-than-expected supplies from non-OPEC countries (including the U.S.) have offset OPEC+ production cut worries, in addition to renewed concerns over potential 2024 demand.
Mortgage Rates
“For the third straight week, mortgage rates trended down, as new data indicates that inflationary pressures are receding,” said Sam Khater, Freddie Mac’s Chief Economist. “The combination of continued economic strength, lower inflation and lower mortgage rates should likely bring more potential homebuyers into the market.”
The 30-year fixed-rate mortgage averaged 7.44 percent as of November 16, 2023, down from last week when it averaged 7.5 percent. A year ago at this time, the 30-year FRM averaged 6.61 percent.
The 15-year fixed-rate mortgage averaged 6.76 percent, down from last week when it averaged 6.81 percent. A year ago at this time, the 15-year FRM averaged 5.98 percent.
Freddie Mac’s Primary Mortgage Market Survey® is focused on conventional, conforming, fully amortizing home purchase loans for borrowers who put 20% down and have excellent credit. Average commitment rates should be reported along with average fees and points to reflect the total upfront cost of obtaining the mortgage. Borrowers may still pay closing costs which are not included in the survey.
Through our relationship with Mortgage Window, Inc. (NMLS#2485156) in Vancouver, Washington we originate residential and reverse mortgages.
Selected Cryptocurrencies
| Symbol | Name | Price | 24h % | 7d % | Market Cap | Volume(24h) |
| BTC | Bitcoin | 36830.58 | 0.69% | 5.27% | $719,714,906,575 | $14,504,945,377 |
| ETH | Ethereum | 2047.96 | 0.02% | -8.06% | $246,288,028,148 | $9,828,556,838 |
| BNB | BNB | 245.3 | 1.34% | 1.83% | $37,212,468,983 | $765,881,844 |
| XRP | XRP | 0.651 | 1.79% | -8.41% | $34,929,891,513 | $1,027,339,164 |
| SOL | Solana | 57.12 | 3.07% | 42.09% | $24,075,860,946 | $2,326,725,015 |
| ADA | Cardano | 0.369 | 3.74% | 4.29% | $13,013,959,239 | $368,692,264 |
| DOGE | Dogecoin | 0.07748 | 1.35% | 7.04% | $10,987,828,944 | $655,153,620 |
| TRX | TRON | 0.1099 | 1.91% | -11.57% | $9,745,285,661 | $265,473,272 |
| LINK | Chainlink | 15.08 | 4.33% | -21.36% | $8,398,773,202 | $772,734,727 |
| TON | Toncoin | 2.43 | -0.74% | -5.55% | $8,346,567,420 | $58,047,718 |
| MATIC | Polygon | 0.8734 | 4.92% | -23.63% | $8,079,117,816 | $938,681,058 |
| DOT | Polkadot | 5.55 | 3.19% | -14.96% | $6,913,102,594 | $319,802,318 |
| AVAX | Avalanche | 17.45 | 2.19% | 35.08% | $6,201,748,368 | $877,060,754 |
| WBTC | Wrapped Bitcoin | 36869.38 | 0.48% | 4.96% | $6,040,748,311 | $188,424,648 |
| LTC | Litecoin | 73.1 | 2.68% | -1.13% | $5,399,795,319 | $328,780,476 |
| SHIB | Shiba Inu | 8.864E-06 | 1.10% | -8.07% | $5,223,965,763 | $188,749,028 |
| BCH | Bitcoin Cash | 235.13 | 0.68% | -1.35% | $4,598,613,749 | $153,956,592 |
Information current as of 5:30 AM PST, Monday, November 20, 2023. Source: https://coinmarketcap.com
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Sources: Ryan Long, CFA, FocusPoint Solutions, American Association for Individual Investors (AAII), Associated Press, Barclays Capital, Bloomberg, Citigroup, Deutsche Bank, FactSet, Financial Times, Goldman Sachs, JPMorgan Asset Management, Marketfield
Asset Management, Morgan Stanley, MSCI, Morningstar, Northern Trust, Oppenheimer Funds, PIMCO, Standard & Poor’s, StockCharts.com, The Conference Board, Thomson Reuters, T. Rowe Price, U.S. Bureau of Economic Analysis, U.S. Federal Reserve, Wall Street Journal, The Washington Post. Index performance is shown as total return, which includes dividends, with the exception of MSCI-EM, which is quoted as price return/excluding dividends. Performance for the MSCI-EAFE and MSCI-EM indexes is quoted in U.S. Dollar investor terms.
The information above has been obtained from sources considered reliable, but no representation is made as to its completeness, accuracy or timeliness. All information and opinions expressed are subject to change without notice. Information provided in this report is not intended to be, and should not be construed as, investment, legal or tax advice; and does not constitute an offer, or a solicitation of any offer, to buy or sell any security, investment or other product. FocusPoint Solutions, Inc. is a registered investment advisor.
Notes key: (+) positive/encouraging development, (0) neutral/inconclusive/no net effect, (-) negative/discouraging development.