In this week’s recap: stocks slump as the 10-year Treasury yield spikes, an ISM index hits a historic peak, job creation weakens, and oil extends its winning streak.
10-YEAR TREASURY YIELD HITS A 7-YEAR PEAK
Friday, the yield on the 10-year note reached 3.23%, its highest level since 2011. Its yield rose dramatically last week, influenced by hawkish comments from Federal Reserve chair Jerome Powell and reports showing minimal unemployment and a swiftly expanding business sector. All this strengthened investor perception that the U.S. economy has hit its stride. It also suggested a near future with recurring interest rate hikes, costlier borrowing, and subdued spending. That possibility weighed on equities. For the week, the Nasdaq Composite fell 3.21% to 7,788.45, and the S&P 500, 0.97% to 2,885.57; the Dow Industrials retreated just 0.04% to 26,447.05.1,2
LESS HIRING IN SEPTEMBER
A look at the Department of Labor’s latest jobs report reveals good news and bad news. The good news? Unemployment declined further to 3.7%, annualized wage growth improved to 3.4% in the third quarter, and monthly net hiring averaged 190,000 in Q3. The bad news? Payrolls expanded with just 134,000 net new jobs last month, as underemployment ticked up 0.1% to 7.5% and year-over-year wage growth slowed to 2.8%. Some economists feel that Hurricane Florence significantly impacted the September data.3
SERVICE SECTOR EXPANDS AT A HISTORIC PACE
The Institute for Supply Management said its non-manufacturing purchasing manager index rose 3.1 points in September to 61.6. It has never been that high in its decade-long history. ISM’s PMI for the factory sector took a slight dip in September, slipping from 61.3 to 59.8 but still showing fast expansion.4
OIL MAKES ANOTHER WEEKLY ADVANCE
Crude is on a 4-week winning streak. At Friday’s closing bell, the price stood at $74.34 a barrel on the NYMEX, reflecting a 1.5% rise in five days. Again, worries over upcoming U.S. sanctions against Iran helped to send prices higher. WTI crude settled at $76.41 Wednesday, which approached a 4-year peak for the commodity.5
TIP OF THE WEEK
Yes, clipping coupons can save you money at the grocery store – but keep in mind, coupon deals may lead you to buy unneeded items. The cost of the extra purchases could cancel out any coupon savings.
While the U.S. bond market is closed Monday in observance of Columbus Day, U.S. stock exchanges are open for business; no major economic or earnings releases are scheduled. | Nothing major is slated for Tuesday, either. | Wednesday, investors consider the September Producer Price Index and earnings from Fastenal. | On Thursday, the September Consumer Price Index appears, along with the latest initial jobless claims report and earnings news from Delta Air Lines and Walgreens Boots Alliance. | The fall earnings season begins Friday, with announcements from Citigroup, JPMorgan Chase, PNC Financial Services Group, and Wells Fargo; in addition, the University of Michigan’s preliminary October consumer sentiment index arrives.
QUOTE OF THE WEEK
“Success is the maximum utilization of the ability that you have.” – Zig Ziglar
|% CHANGE||Y-T-D||1-YR CHG||5-YR AVG||10-YR AVG|
|REAL YIELD||10/5 RATE||1 YR AGO||5 YRS AGO||10 YRS AGO|
|10 YR TIPS||1.07||0.49||0.46||2.21|
Sources: wsj.com, bigcharts.com, treasury.gov – 10/5/182,6,7,8
Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly. These returns do not include dividends. 10-year TIPS real yield = projected return at maturity given expected inflation.
THE WEEKLY RIDDLE
They can pass through state after state, all while never moving. What are they?
LAST WEEK’S RIDDLE
What can be broken, but should not be forgotten?
Greg R. Solis, AIF®
President and CEO
Bob Medler, CRPC®, CMFC®, AIF®
Wealth Advisor / Investment Analyst
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La Quinta, CA 92253
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1 – thestreet.com/markets/stocks-rise-slightly-on-friday-after-september-jobs-report-14735092 [10/5/18]
2 – markets.wsj.com/us [10/5/18]
3 – bloomberg.com/news/articles/2018-10-05/u-s-payrolls-and-wages-cool-while-jobless-rate-hits-48-year-low [10/5/18]
4 – instituteforsupplymanagement.org/ISMReport/NonMfgROB.cfm?navItemNumber=30177 [9/26/18]
5 – marketwatch.com/story/us-oil-benchmark-ends-nearly-flat-but-tallies-a-4th-straight-weekly-rise-2018-10-05 [10/5/18]
6 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=10%2F5%2F17&x=0&y=0 [10/5/18]
6 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=10%2F5%2F17&x=0&y=0 [10/5/18]
6 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=10%2F5%2F17&x=0&y=0 [10/5/18]
6 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=10%2F4%2F13&x=0&y=0 [10/5/18]
6 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=10%2F4%2F13&x=0&y=0 [10/5/18]
6 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=10%2F4%2F13&x=0&y=0 [10/5/18]
6 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=10%2F6%2F08&x=0&y=0 [10/5/18]
6 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=10%2F6%2F08&x=0&y=0 [10/5/18]
6 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=10%2F6%2F08&x=0&y=0 [10/5/18]
7 – treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyield [10/5/18]
8 – treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyieldAll [10/5/18]