U.S. and World News
- A court in Milan has banned former Italian Prime Minister Silvio Berlusconi from holding public office for two years following his conviction for tax fraud in August. The country’s Senate has to approve of the decision but this just adds to the political instability in Italy over the last few months.
- Shares in China have been under pressure this week as the People’s Bank of China has again refrained from stepping in and providing liquidity for a market that they feel might be overheating. Short term rates in the country have shot up as a result. Experts are divided over whether the bank’s strategy is seasonal or it signals a long term attempt to keep inflation under control and tame the growth in credit.
- Stock markets set new record highs again this week as the S&P 500 Index increased by 0.88%, closing at 1,760. The Dow Jones Industrial Average was up 1.11% to close at 15,570. The S&P and the Dow respectively are up 23.39% and 18.82% year to date.
- Treasury yields continued to fall this week with the 5 year and 10 year treasury yielding 1.29% and 2.51% respectively.
- The spot price of WTI Crude Oil continued to fall this week, dropping by 3.17%, closing at $97.91 per barrel. Year to date, oil is still up 4.68%.
- The spot price of Gold continued to rally this week, rising by 2.67% this week and closing at $1351.43/ounce. Gold is now down 19.33% this year.
- Weekly Initial Jobless Claims remained elevated this week, coming in at 350,000 vs. expectations of 340,000. The Labor Department again attributed the high claims number to issues with California’s processing issues and the government shutdown. As a result, not much can be taken from the report.
- The Labor Department retroactively released the September payrolls number this week and it was weaker than expected, causing many economists to question when the Fed will begin its tapering process in light of sub-par jobs growth. There were 148,000 jobs added in the month of September which was lower than consensus estimates of 180,000. The unemployment rate did tick down to 7.2% but this was mostly due to rounding and another small drop in the labor force participation rate which remains at very low historical levels.
- Third quarter earnings season is well underway with 198 of 500 S&P index member having reported. So far the majority of companies (69%) have beat earnings expectations but that percentage drops down to 50% when looking at top line sales vs. expectations. Consumer discretionary, health care and technology stocks have performed the best on an earnings basis with consumer staples and financials being the most disappointing.
- Existing home sales declined by less than expected in September, falling by 1.9% vs. consensus expectations of a 3.3% drop. This decline follows several months of weaker pending home sales numbers, potentially reflecting the impact of higher mortgage rates since the spring.
Fact of the Week
- With 1 in 9 U.S. bridges structurally deficient and 42% of major urban highways congested, many companies, including those hauling fully loaded trucks are being forced to take detours to avoid unsafe bridges or congested highways. The American Society of Civil Engineers forecasts that the poor infrastructure could cost companies an extra $430 billion in operating expenses by 2020 and result in over $1.7 trillion in lost sales opportunities.
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