10-Year Treasury Yield
The U.S. 10-year Treasury yield dipped below 4.10% on Friday as investors assessed the latest inflation data that came in cooler than expected. The yield on the 10-year Treasury slipped less than a basis point to 4.088%, after having ended last week at 3.97%. The yield on the 2-year Treasury was down about 5 basis points to 3.949%. Yields and prices move in opposite directions. One basis point equals 0.01%.
Empire Estate Mfg Index
Empire State Manufacturing Index Turns Negative. The October empire state manufacturing index was -11.9 when 2.7 was expected. Business activity contracted modestly in New York State, according to firms responding to the October 2024 Empire State Manufacturing Survey. After climbing into positive territory last month, the headline general business conditions index retreated twenty-three points to -11.9. New orders fell, and shipments edged lower. Delivery times were slightly shorter, while supply availability deteriorated somewhat. Inventories shrank.
Geopolitical Risk
Israeli strike rocks Beirut after US says it opposes scope of air assault. Israel is opposed to a “unilateral ceasefire” in its war with Hezbollah in Lebanon, Netanyahu said. Hezbollah has called on Israelis to accept a ceasefire or face “pain,” suggesting it would ramp up attacks further south in Israel. Israel has struck Beirut’s southern suburbs for the first time in several days. The Israeli military said it struck Hezbollah weapons in an underground storage facility. The number of Israeli attacks in Lebanon has topped 10,000.
MBA Purchase Applications
US MBA mortgage applications w.e. 11 October -17.0% vs -5.1% prior. Purchase index 138.4 vs 149.2 prior. Refinance index 734.6 vs 997.3 prior. Amid a jump in rates, mortgage applications dropped hard in the past week with both purchase and refinancing activity slumping hard. The latter in particular fell by 26% to its softest number since the first week of August. A sign of a false dawn for the US housing market in after the brief recovery in recent weeks.
Import and Export Prices
Import prices drop 0.4% in September; dip 0.1% year/year. Energy products account for much of the drop in prices. Export prices fall 0.7%; decrease 2.1% year-on-year. U.S. import prices fell by the most in nine months in September amid a sharp decrease in the cost of energy products, pointing to a benign inflation outlook that keeps the Federal Reserve on course to continue cutting interest rates. The report from the Labor Department on Wednesday also showed import prices excluding fuel barely rising over the past three months. The report followed data last week showing slightly firmer consumer prices in September. While producer prices were unchanged last month, some components showed strength, which was expected to translate into a higher monthly readings in the key inflation measures tracked by the U.S. central bank for its 2% target. Import prices do not feed through directly to producer and consumer prices but are a signal inflationary pressures remain muted and adds some support to another rate cut in factory gates, import price gains will be modest. Import prices slipped 0.4% last month, the biggest drop since December 2023, after a revised 0.2% decrease in August, the Labor Department's Bureau of Labor Statistics said. Import prices were previously reported to have declined 0.3% in August.
World Central Banks - ECB
The European Central Bank on Thursday cut its key interest rate to 3.25%, in its third quarter-percentage-point reduction of the year.. The move at the October meeting had been fully priced by markets after policymakers flagged reduced inflation risks and a weakening growth outlook. The ECB once again forecast that inflation would “rise in the coming months, before declining to target in the course of next year.” The European Central Bank cut interest rates for the third time this year on Thursday, saying inflation in the euro zone was increasingly under control while the outlook for the wider economy was worsening. Third rate cut this year, first back-to-back cut in 13 years. Recent economic data supports case for ECB rate cut. High interest rates have hurt investment, economic growth. Lagarde says still on track for "soft landing". The first back-to-back rate cut in 13 years marks a shift in focus for the euro zone's central bank from bringing down inflation to protecting economic growth, which has lagged far behind that of the United States for two years straight.
Jobless Claims
Weekly jobless claims, meanwhile, fell to 241,000, according to separate data released Thursday. Taken together, both data points paint a picture of a resilient economy. Labor Department showed that new applications for unemployment benefits fell by 19,000 last week, the steepest weekly decline since June 2023.
Retail Sales
American shoppers continue to power the US economy. Spending at US retailers climbed 0.4% in September from the prior month, according to fresh government data released Thursday. That was much stronger than August’s 0.1% gain and was in line with what economists projected in a FactSet poll. Consumer spending makes up about 70% of the US economy, with retail sales comprising a sizable chunk of that. Thursday’s report shows that Americans are still opening their wallets despite years of elevated inflation and interest rates that have only recently begun to come down from a bruising two-decade high. The latest figures on retail spending represent another reassuring sign that America’s economy is nowhere near a recession.
Philadelphia
Philadelphia Fed’s factory gauge jumps in October 2024. The Federal Reserve Bank of Philadelphia released a report on Thursday showing regional manufacturing activity has expanded overall in the month of October. The Philly Fed said its diffusion index for current general activity jumped to 10.3 in October from 1.7 in September, with a positive reading indicating growth. Economists had expected the index to inch up to 3.0. Looking ahead, the Philly Fed said expectations for growth over the next six months were more widespread this month, as the diffusion index for future general activity surged to 36.7 in October from 15.8 in September.
Industrial Production
Industrial production decreased in September, reversing output growth in August. Last month, U.S. industrial output declined by 0.3%, according to statistics published by the Federal Reserve Thursday. Economists surveyed by The Wall Street Journal had expected production to fall by 0.2%. August's industrial-production growth also was revised lower, to 0.3% growth, from a previous estimate of 0.8% growth. The Fed now estimates that industrial production has declined by 0.6% overall during the past 12 months.
Business Invenrories
US business inventories rise in August on retail stocks. U.S. business inventories increased in August, lifted by stocks at retailers, government data showed on Thursday. Inventories rose 0.3% after a similar gain in July, the Commerce Department's Census Bureau said. The increase in inventories, a key component of gross domestic product, was in line with economists' expectations. Inventories advanced 2.4% on a year-on-year basis in August. Private inventory investment contributed to the economy's 3.0% annualized growth rate in the second quarter. Inventories and trade are the most volatile components of gross domestic product. August's trade data last week suggested that trade could be a small drag on economic growth in the third quarter.
Housing Market Index
Homebuilder confidence rises in October despite mortgage rates increasing. Homebuilders are feeling more confident about the housing market despite a recent sharp rise in mortgage rates. The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index rose two points to 43 in October from the previous month, marking the second consecutive monthly gain. October’s reading was higher than economists’ estimates of 42, per Bloomberg data.Still, any reading under 50 indicates more builders view conditions as poor rather than good.
OIL - Commodity
U.S. crude futures edged lower Wednesday to trade below $71 per barrel, after selling off steeply in the previous session on reports that Israel will not attack Iran’s oil facilities. The U.S. benchmark tumbled more than 4% on Tuesday after Israel told the U.S. that it will limit its retaliatory strikes to military targets in Iran, senior Biden administration officials told NBC News. Crude oil prices have given up most of the gains made in the wake of Iran’s Oct. 1 ballistic missile attack on Israel, as fears of an oil supply disruption in the Middle East have eased.
Treasury International Capital
The U.S. Department of the Treasury today released Treasury International Capital (TIC) data for August 2024. The next release, which will report on data for September 2024, is scheduled for November 18, 2024. The sum total in August of all net foreign acquisitions of long-term securities, short-term U.S. securities, and banking flows was a net TIC inflow of $79.2 billion. Of this, net foreign private inflows were $79.7 billion, and net foreign official outflows were $0.6 billion. Foreign residents increased their holdings of long-term U.S. securities in August; their net purchases were $129.8 billion. Net purchases by private foreign investors were $158.1 billion, while net sales by foreign official institutions were $28.3 billion. U.S. residents increased their holdings of long-term foreign securities, with net purchases of $18.4 billion. After including adjustments, such as estimated foreign portfolio acquisitions of U.S. stocks through stock swaps, overall net foreign purchases of long-term securities are estimated to have been $111.4 billion in August.
Fed Balance Sheet
The Federal Reserve faces no imminent market liquidity challenges that could stop the ongoing contraction of its balance sheet, according to a new tool launched Thursday by the Federal Reserve Bank of New York. The new gauge, which the bank calls Reserve Demand Elasticity, opens new tab, seeks to measure how liquid bank reserves, a key aspect of financial sector liquidity, are. The bank said the new measure will help Fed officials better manage the uncertain process of cutting their holdings of bonds, in a process called quantitative tightening, or QT. New NY Fed tool suggests balance sheet drawdown has more room to run.
Fixed Mortgage Rates 30 Year
The 30-year home loan rate. According to Freddie Mac, that rate rose to an average of 6.32% as of Oct. 10, from a low of 6.08% two weeks earlier. The MBA estimated mortgage rates as reaching 6.52% over roughly the same timeframe, the highest level since August.
Housing Starts
US Housing Starts Ease on Decline in Multifamily Construction. Construction slipped 0.5% in September to 1.35 million rate. Starts of one-family houses climbed to highest in five months. US housing starts eased in September as a drop in multifamily projects outweighed a pickup in construction of single-family dwellings. Housing starts decreased 0.5% last month to a 1.35 million annualized rate, according to government data released Friday, after a big rebound in August. The September figure was in line with the median projection in a Bloomberg survey of economists. Starts of single-family homes climbed 2.7% to an annualized 1.03 million, the strongest in five months. Construction of multifamily homes slumped 9.4% to a four-month low.
Building Permits
The number of overall building permits, a proxy for future construction, fell 2.9% to a 1.43 million annualized rate. Permit applications for single-family home construction rose 0.3% to a 970,000 pace. Even with the rise in single-family home construction, the rate is down from the furious pace seen in late 2021 and early 2022, when mortgage rates were close to 3% and a historic dearth of existing homes for sale propelled demand for new houses. Home construction is seen shaving the most from third-quarter gross domestic product since 2022. Before the figures, the Atlanta Fed’s GDPNow forecast saw residential investment subtracting 0.43 percentage point after a 0.11 point reduction in the second quarter.
Hedging - Gold
October 17, gold reached a new all-time high. Gold is kind of a surrogate for the real economy and it represents commodities, but also that traditional role of money you can trust. Gold touches new all-time high.
Treasury Budget
The U.S. Treasury releases a monthly account of the surplus or deficit of the federal government. Changes in the budget balance reflect Federal policy on spending and taxation. The government's fiscal year begins in October
S&P 500 Index - Week Performance
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