Hello, I’m Greg Curvall, Senior Portfolio Manager with Fifth Third Bank.
Despite a downbeat finish to the week, all three major U.S. equity indexes recorded their third weekly gain in a row. The U.S. 10-year Treasury rose to 1.64 percent, gold gained 1.6 percent and WTI crude was up 2.6 percent, its ninth straight weekly gain.
U.S. stocks were able to finish the week at or near all-time highs, benefiting from another five days of better-than-expected corporate earnings. Earnings season will be firing on all cylinders this week as about 30 percent of the S&P 500 will be reporting.
COVID-19 cases have slowed in recent months and the likelihood of another economic shutdown is becoming increasingly unlikely. Fifty seven percent of the total population is fully vaccinated according to the CDC website as of October 22, with the most at-risk group, those 65 years of age and older, reaching at least 84 percent fully vaccinated.
Last week, at a virtual event, Fed Chair Jerome Powell said he expects job levels to return but supply constraints to persist longer than expected into 2022. The Fed has signaled it will likely begin to taper its $120 billion monthly bond purchase program as early as next month. About half of Fed policymakers believe a rate hike will likely be warranted in 2022.
We received several major U.S. economic releases last week. Industrial production in the U.S. dropped in September, worse than expected. Factory output fell the most since February as backlogs and shortages are holding back manufacturing. Housing starts unexpectedly dropped in September, while building permits plunged almost 8 percent. Both readings came in below estimates. On a positive note, Initial Jobless Claims and Continuing Claims, for the week ending Oct 16, were better than expected. Moreover, this was the lowest level of initial jobless claims since March 2020, the beginning of the pandemic.
There are plenty of good data releases coming up this week that have market-moving potential, in addition to the continuation of earnings season. On Tuesday, we get New Home Sales. Mid-week we get Durable Goods Orders and Capital Goods Orders. The biggest number of the week, third quarter GDP, comes out on Thursday. Economists expect to see a slowdown in growth. Then we finish the week with Personal Income and Personal Spending on Friday. Also worth noting, this week the Food and Drug Administration will hold a meeting to decide if children ages 5-11 could get a vaccine in the United States.
As always, will be watching and reporting back to you next week. Thank you.