The U.S. stock market ended the week higher after receiving a late-week boost from a better than expected jobs report. Interest rates moved lower on the week as the 10-year treasury yield dropped from 1.80% to 1.73% after the Federal reserve cut interest rates for the third consecutive month. The price of gold was little changed over the week, rising only 0.57% to $1,517 an ounce. The price of crude oil was also little changed after dropping only 0.84% to $56.23 a barrel.
This Week's Economic Highlights
The U.S. economy, as measured by Gross Domestic Product (GDP), grew at a stable annualized rate of 1.9% in the third quarter of 2019. Much of the rise in GDP was supported by a 4.6% increase in consumer spending, which accounts for nearly 70% of GDP. Meanwhile government spending increased by just 2.0% and investment expenditures decreased by 1.5%.
The Federal Reserve Open Market Committee (FOMC) announced their third consecutive rate cut, lowering the target range by a quarter of a percent to 1.50%-1.75%. The FOMC sited that “the implications of global developments for the economic outlook as well as muted inflation pressures” were the justifications for cutting rates again. Meanwhile Fed Chairman Jerome Powell stated that the current monetary policy “is in a good place”, and it will take a “material” change in economic outlook to justify further rate cuts.
Initial unemployment claims rose by 5,000 to 218,000 for the week ending October 26th, while its more stable four-week average fell by 500 to 214,750. Continuing unemployment claims, which lags initial claims by a week, rose by a very marginal 7,000 for a total of 1.69 million.
U.S. consumer spending rose by 0.2% in September, marking its seventh consecutive monthly rise. The rise in consumer spending was supported by a 0.3% rise in personal income.
Personal Consumption Expenditures (PCE) price index, the Fed’s preferred inflation indicator, was unchanged for the month of September both at the headline and core level (which excludes volatile food and energy prices). Over the past year PCE has risen at a relatively slow pace of 1.3%, and is well below the Fed’s 2.0% target.
The U.S. added 128,000 jobs in October, far exceeding the 75,000 expected by forecasters. Meanwhile the unemployment rate edged higher as it rises from 3.5% to 3.6%, yet still remains near historic lows. Wage growth also continue to rise as it increased by 0.2% in October and a strong 3.0% over the past year.
“Bull-markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria.”
– John Templeton
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