Market News – November 4, 2019

NOW IT IS ABOUT THE EARNINGS:  There have been times this year when I feel like I can just cut and paste my comments from the past week about what moved the markets.  Generally, it has been the Fed and U.S./China.  Although the Fed played a role last week, the markets were primarily moved by U.S. quarterly earnings reports beating estimates.  The S&P 500 hit some new highs last week.  For the last five years, when companies top forecasts, they increase on average 1%.  This quarter, company’s have jumped on average 2% when beating earnings.  358 of the S&P 500 companies have reported their third quarter earnings, and about three quarters have beaten estimates.

U.S. ECONOMIC GROWTH AT 1.9%:  In the third quarter, the U.S. economy grew at an annualized rate of 1.9%.  This follows the second quarter where the number was 2.0%.  It was a small decrease, and a better quarter than most expected.  Consumer spending rose at a 2.9% rate, but that follows the second quarter that was 4.6%.  All this points to a healthy economy, but one in which the rate of growth has slowed.

THE FED DID IT AGAIN:  On Wednesday, the Federal Reserve lowered its benchmark interest rate by a quarter point.  This was the second cut in two months.  The announcement indicated that the Fed is open to another cut this year.

LABOR MARKET REMAINS A POSITIVE:  The U.S. economy added 128,000 jobs in October.  The unemployment rate increased to 3.6% due to more people entering the job market (the Labor Force Participation Rate increased to 63.3%).  October was challenged by the General Motors strike and the federal government’s layoff of temporary census workers, and yet it continued the record-setting streak of positive employment months.  Average hourly earnings were up by 6 cents an hour and are 3.0% higher than a year ago.  These are all healthy numbers.

MUCH LESS TURNOVER:  In 2010, the average U.S. homeowner stayed in their home for eight years before moving.  Currently, that number has risen dramatically to 13 years.  This creates a situation where there are not as many homes available to purchase when people are in the market.  Available housing inventory, adjusted for population, is at its lowest level since 1982.  The biggest culprits, aging baby boomers who are staying healthier later in life and are not choosing to downsize.  In addition, those empty-nesters who want to downsize are not finding a plethora of smaller, less expensive homes on the market.

REFERENCES:

NOW IT IS ABOUT THE EARNINGS:    https://www.wsj.com/articles/earnings-tide-lifts-most-stocks-11572773400
THE FED DID IT AGAIN:  https://www.marketwatch.com/story/fed-lowers-interest-rate-by-a-quarter-point-many-on-panel-see-another-cut-this-year-2019-09-18
LABOR MARKET REMAINS A POSITIVE: https://www.bls.gov/news.release/empsit.nr0.htm; https://www.calculatedriskblog.com/2019/11/comments-on-october-employment-report.html; https://www.wsj.com/articles/u-s-payrolls-grew-by-128-000-in-october-despite-the-gm-strike-11572611632
MUCH LESS TURNOVER: https://www.wsj.com/articles/people-are-staying-in-their-homes-longera-big-reason-for-slower-sales-11572777001?mod=hp_lead_pos5
U.S. ECONOMIC GROWTH AT 1.9%: https://news.yahoo.com/u-q3-gdp-better-expected-180006241.html